Horizontal integration
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In microeconomics and strategic management, the term horizontal integration describes a type of ownership and control. It is a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. To get this market coverage, several small subsidiary companies are created. Each markets the product to a different market segment or to a different geographical area. This is sometimes referred to as the horizontal integration of marketing. The horizontal integration of production exists when a firm has plants in several locations producing similar products. Horizontal integration in marketing is much more common than horizontal integration in production. It is contrasted with vertical integration.
A monopoly created through horizontal integration is called a horizontal monopoly[citation needed].
Usually a monopoly is created through both horizontal and vertical integration. The situation in which a company takes over another in the same business, thus eliminating a competitor (competition) and achieving both a broader market, and greater economies of scale, but also takes over its upstream suppliers and its downstream buyers, therefore reducing production costs.
A term that is closely related with horizontal integration is horizontal expansion. This is the expansion of a firm within an industry which it is already active, the purpose is to increase its share of the market for a particular product or service.
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[edit] Benefits of horizontal integration
Horizontal integration allows:
- Economies of scale
- Economies of scope
- Strong presence in the reference market
[edit] Media terms
Media critics, such as Robert McChesney, have noted that the current trend within the entertainment industry has been toward the increased concentration of media ownership into the hands of a smaller number of transmedia and transnational conglomerates. [1] Media nowadays tend to be in the hands of those who are rich enough to buy the media such as Rupert Murdoch.
Horizontal integration, that is, the consolidation of holdings across multiple industries, has displaced the old vertical integration of the Hollywood studios. [2] The idea of owning many media outlets, which run almost the same content, is considered to be very productive, since it requires only minor changes of format and information to use in multiple media forms. For example, within a conglomerate, the content used in broadcasting television would be used in broadcasting radio as well, or the content used in hard copy of the newspaper would also be used in online newspaper website.
What emerged are new strategies of content development and distribution designed to increase the “synergy’ between the different divisions of the same company. Studios seek content that can move fluidly across media channels. [3]
[edit] See also
- Horizontal market
- Vertical integration
- Economies of scale
- List of management topics
- List of marketing topics
- List of economics topics
- Monopoly
- Strategic management
- Target marketde:Horizontale Integration
es:Integración horizontal he:אינטגרציה אופקית nl:Horizontale integratie
[edit] References
- ^ Thorburn, David and Jenkins, Henry (eds)(2003) Rethinking Media Change, MIT Press, Cambridge, Massachusetts, pp.283.
- ^ Thorburn, David and Jenkins, Henry (eds)(2003) Rethinking Media Change, MIT Press, Cambridge, Massachusetts, pp.283.
- ^ Thorburn, David and Jenkins, Henry (eds)(2003) Rethinking Media Change, MIT Press, Cambridge, Massachusetts, pp.284.
