There are two types of supply chain integration:
*Horizontal integration
*Vertical integration
A horizontal acquisition is a business strategy where one company takes over another companies at similar levels in the production supply chain. For example, a manufacturer may acquiring a competing manufacturing firm to better enhance its process, labor force, and equipment.
Supply chain integration benefits suppliers as well as customers, since increased cooperation means steady, reliable business and fewer uncertainties for everyone involved. The transaction allows companies to expand their market share and cut costs with synergies.
As opposed to a vertical integration which helps a company shift to earlier or later in the supply chain, horizontal integration further solidifies a company's current position along a manufacturing process.
Horizontal integration occurs when a company aims to remain within its current part of the supply chain. The company often wants to enhance its existing product or get a larger share of the market.
Horizontal integrations help companies expand in size, diversify product offerings, reduce competition, and expand into new markets. Horizontal integration also reduces the level of competition in the market while boosting the revenue of the participants who otherwise may not have prevailed in a fierce market environment independently.
There is less competition for suppliers or customers. The company can cut costs by sharing R&D, marketing and advertising, and distribution channels. When the company integrate horizontally, it may gain access to new products made by other companies or new markets they have already penetrated. As the company grow, it may be able to dictate terms to their suppliers.
Horizontal integration supply chain
