Difference of Vertical Integration & Horizontal Integration

Difference between Vertical Integration & Horizontal Integration

The difference between Vertical Integration & Horizontal Integration is explained in the below table,

Vertical IntegrationHorizontal Integration
The company obtains the ownership and control of more than one stage of the supply chainTwo companies in the same industry and same stage of the supply chain merge
Used to move forward to the end consumer, or else, move backward to raw materials production.Used to strengthen its position in the industry and increase market share.
The goal of vertical integration is to expand and gain control of the entire supply chain.The goal of horizontal integration is that the entities involved can enhance their competencies together.
Successful synergies depend on the company’s mutual understanding of how will both companies need to progress through their share of the supply chain.Successful synergies depend on the consolidated strategic business activities and processes of companies
Can result in a lack of flexibility to respond when market trends change. This is due to the dependency of the value chain, which is strongly linked together.Can result in reduced flexibility because the consolidated company had become a larger organization and never materialized synergies.
Vertical Integration vs Horizontal Integration

Comparison of Vertical Integration vs Horizontal Integration,

1) In Vertical Integration, the company obtains the ownership and control of more than one stage of the supply chain.
But in Horizontal Integration, two companies in the same industry and same stage of the supply chain merge.

2) Vertical Integration can be to move forward to the end consumer, or else, move backward to raw materials production.
Horizontal Integration used to strengthen its position in the industry and increase market share.

3) The goal of vertical integration is to expand and gain control of the entire supply chain.
The goal of horizontal integration is that the entities involved can enhance their competencies together.

4) Successful synergies of vertical integration depend on the company’s mutual understanding of how will both companies need to progress through their share of the supply chain.
Successful synergies of horizontal integration depend on the consolidated strategic business activities and processes of companies

5) Vertical Integration can result in a lack of flexibility to respond when market trends change. This is due to the dependency of the value chain, which is strongly linked together.
Horizontal Integration can result in reduced flexibility because the consolidated company had become a larger organization and never materialized synergies.

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