Vertical and horizontal integration

Author: Amanda Biernat

I will try to briefly explain the difference between vertical integration and horizontal integration.

Vertical integration – this type of integration occurs when a company is producing a certain product without any help of external businesses.

Following vertical integration rules can help a business to build a stronger, more valuable position in a market.

Example: Company producing pastries is responsible for creating recipe, pastry itself but also a packaging.

Packaging from different company (focusing mainly on providing boxes, bags etc.) could be easily provided but pastry company is trying to develop the whole product themselves, starting from the actual recipe finishing on packaging, labeling etc.

Horizontal integration- is a strategy that helps to increase a market share of certain company by buying or gradually taking over a similar business selling similar goods.

Example: Facebook and WhatsApp are both providing messaging services.

Facebook buying a WhatsApp is a great example of horizontal integration when one company buys another one that is strongly focusing on the same product/service.