Horizontal Integration Definition

Horizontal integration means that a company contains control over one part of the production process by controlling the majority or all of the resources at that particular junction of production.

Explanation of Horizontal Integration

Horizontal integration’s control over one process during production means that a company has established a dominance in the manufacturing, selling and distribution, or even the production of raw materials. If a company owns every bit of a production process then it is known as a horizontal monopoly. Although this is much more difficult to achieve than a vertical monopoly. Horizontal Integration was made famous by John D. Rockefeller’s Standard Oil company.

Horizontal Integration Example

For example, Baskey Energy is an oil company, in West Texas. They specialize in well servicing or common maintenance on wells dug. Furthermore, to keep the wells producing over the years, you need this service. Baskey has grown in size over the years because it has been aggressively pursuing other companies that are in the same market. The company has been doing this solely through acquisition work. Sometimes the company will buy another well servicing company even if it is not profitable just to put them out of business. This way Baskey can make money on the parts of a company through salvaging, and therefore, it means that there is less competition.
Before venturing into a horizontal integration, assess all sides of the situation. Your CEO needs you to be their trusted advisor or wingman. Learn how you can be the best wingman with our free How to be a Wingman guide!

[box]Strategic CFO Lab Member Extra
Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]

ARTICLES YOU MIGHT LIKE

Is Mexico the New China?

June 1, 2023

In the wake of the COVID-19 pandemic and escalating tensions with China, American companies are actively seeking alternatives to mitigate their supply chain risks and reduce dependence on Chinese manufacturing. Nearshoring, the process of relocating operations closer to home, has emerged as an explosive opportunity for American and Mexican companies to collaborate like never before.

IP Valuation & Monetization For The C-Suite

April 26, 2023

Intellectual Property (IP) defines and protects the sources of goods and services in the marketplace, the products and services offered for sale and the content surrounding such offerings. Whether trademarks, patents, copyrights, or other IP, it is critical that C-Suite strategy drives and shapes the creation, valuation use and monetization of all its intellectual property.

The Accounting Gap Between Large and Small Companies

March 8, 2023

The Accounting Gap: It’s unfortunate, but true. A large gap exists between the accounting departments of large or publicly traded companies and smaller or private companies. In our past 25 years of consulting we’ve noticed that more often than not, these smaller/private companies will fill the gap with Bookkeepers, rather than the degreed Accountants/CPAs they

MARCH 28TH-31ST 2022

Days

Hours

Min

August 7-10th, 2023

Days

Hours

Min

SHARE THIS ARTICLE