Top 3 Examples Of Horizontal Integration

Horizontal Integration is a process in which a company increases its production of goods and services to strengthen its position in the market place. It is done by expanding through acquisitions or mergers in the same level of the supply chain.

The expansion can be done in the same market or in different markets depending upon the company.

Horizontal Integration is the opposite of Vertical Integration in which the company expands upwards or downwards in its production stream I.e. Different levels of production.

In simple words, According to the Horizontal Integration strategy, a company acquires another company or merges with another company on the same level of the supply chain.

The prime intention of adaptation of the horizontal integration strategy by a company is to gain more market share in the industry and expand to new market space.

It can also benefit the company by creating an economy of scope, the economy of scale, and increase product differentiation.

It is very essential for a company that wants to acquire different markets.

By merger or acquisition, the companies can create synergies and take advantage of existing knowledge and experience rather than starting from level zero.

In this way, they will able to generate more revenue than they would have done independently.

In this story, we gonna discuss 3 examples of Horizontal Integration.

Facebook — Instagram

In April 2012, Facebook acquired Instagram for $1 Billion. Both Facebook and Instagram operated in the same part of their supply chain in the social media industry. They also shared similar production stages in their photo-sharing services.

Instagram was becoming a competitor to Facebook in the social media space with its increase in popularity.

Through the acquisition of Instagram, Facebook reduced its competition in the social media market space. As a whole, it increased its market share in the industry and gained access to a new audience.

The advertisement revenue from Instagram also increased and so the value of the parent company.

Due to all the above reasons, Facebook acquired Instagram.

Instagram’s present worth is $102 Billion and it was acquired at just a mere $1 Billion.

This acquisition is one of the most successful acquisitions in history. Instagram is owned by Facebook, but still operates as an independent platform

Vodafone — Idea

Vodafone and Idea are the telecommunication giants in India.

Before Jio came into the market, both were operating independently as individual companies. But after the entrance of Jio, in the Indian Telecommunication sector, things changed.

All the telecommunication companies took a big hit.

Jio provided very affordable plans and offered many features as compared to its competitors. Slowly, the consumers started to shift from their existing telecommunication operator to Jio.

By observing the condition of the market and its future, Both the Telecomm Giants i.e. Vodafone and Idea decided for a merger.

Post Vodafone — Idea merger, the company operated as a single entity.

With the combined resources, the newly merged entity was able to serve a larger customer base with its relatively lower assets. They gained the market share and created a synergy.

The cost savings from equipment, employees, operations, and other departments led to an estimated annual synergy of $2 Billion for the new combined company.

Disney — Pixar

Another notable example of a horizontal integration was Disney’s $7.4 billion acquisition of Pixar in 2006.

Disney started off as an animation studio that targeted the families and majorly children. But with time, they faced market and creative saturation.

Pixar operated in the same animation space as Disney, but its animated movies used better technology and were innovative.

Earlier in 2001 and 2004, both Pixar and Disney had conflicts among them regarding the production and distribution of the movies.

Pixar wanted Disney only to distribute its movies and not interfere in its production process.

Problems continued within them and they finally broke off in 2004.

In 2005, Disney’s new president Robert Iger proposed the acquisition of Pixar to Disney’s board members and shareholders. The proposal was made by Robert Iger after analyzing the market properly.

Finally, In 2006, the acquisition was successful. The acquisition did not involve the merger of names but the Walt Disney studious was made a subsidiary of Walt Disney Company.

Through this horizontal integration, Disney benefited from the synergy, increase its market share, and reduced its competition.

Here, In this story, we discussed Horizontal Integration and its examples.

Want to know What is Horizontal Integration? What is its definition? What are the advantages and disadvantages of it? How it is different from Vertical integration?

Then, you can visit my blog and read an article about it. I have discussed all of these in a very precise manner along with proper examples. Click here to visit the article.

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