Legal Definitions - horizontal integration

Horizontal integration is a business strategy where a company expands its operations by acquiring or merging with another company that operates at the same level of the value chain in the same industry. In simpler terms, it involves combining with a competitor that offers similar products or services. The primary goals are often to increase market share, reduce competition, achieve economies of scale (cost savings from increased production), or gain access to new markets or technologies.

Here are some examples to illustrate horizontal integration:

• Example 1: Software Development

  Imagine "CodeCraft Solutions," a company specializing in project management software for businesses. CodeCraft decides to acquire "TaskFlow Inc.," another company that also develops project management software, but perhaps with a slightly different feature set or target audience. Both companies operate in the same software industry, creating similar products for the same type of customer. By integrating horizontally, CodeCraft Solutions can eliminate a competitor, expand its customer base, and potentially combine the best features from both software platforms into a more robust offering.

• Example 2: Retail Grocery Stores

  Consider "FreshFoods Market," a large national chain of grocery stores. FreshFoods acquires "Neighborhood Grocer," a smaller regional chain with a strong presence in several states. Both FreshFoods Market and Neighborhood Grocer are in the business of selling food and household goods directly to consumers. This horizontal integration allows FreshFoods Market to quickly expand its geographic footprint, gain access to Neighborhood Grocer's established customer loyalty in those regions, and increase its overall market share in the retail grocery sector.

• Example 3: Media and Entertainment

  Think of "Global Streaming," a major online video streaming service known for its extensive library of movies and TV shows. Global Streaming acquires "WatchNow TV," another popular streaming service that focuses heavily on live sports and news content. Both companies provide subscription-based digital entertainment directly to consumers. Through this horizontal integration, Global Streaming can broaden its content offerings to include live sports and news, attract WatchNow TV's subscriber base, and strengthen its position against other streaming competitors by becoming a more comprehensive entertainment platform.