Integration

Horizontal

• Buying a company in the same industry and stage of the supply change

• Economies of scale

• Diversification

• Synergy benefit

Vertical

• Buying a company in the same industry but at a different stage

Forward and vertical - Acquiring a business further up in the supply chain Backward and vertical - Acquiring a business operating earlier in the supply chain Horizontal - Acquiring a business at the same stage of the supply chain Conglomerate - Where the acquisition has no clear connection to the business buying it

Potential benefits of Horizontal Integration

• Achieve economies of scale
• Cost synergies (savings) from the rationalisation of the business
• Potential to secure revenue synergies
• Wider range of products (diversification)
• Reduces competition by removing key rivals - this increases market share and long-run pricing power
• Buying an existing and well-known brand can be cheaper than organically growing a brand - this can then make the entry barriers higher for potential rivals

Potential benefits of Vertical Integration

• Enables a business to capture a greater share of the profit on each sale
• Secures important sources of supply or distribution
• Creates a barrier to entry to potential new competitors
• Gain greater insights into customer needs and wants at each stage of the supply chain