Benefits Of Horizontal Integration
When two or more companies at the same level and at the same time of operations decide to unite with each other, it is called horizontal integration. This is done by the businesses to be bigger and to cut the competition, after weighing all the anticipated advantages and disadvantages by both of them.
There are many advantages of horizontal integration and they are listed below;
1, It helps the companies to cut the costs at various levels and sail through the competition. In addition, the two parties do so to acquire the large share in the market. Further, it helps the companies to have a large base of customers.
2, The horizontal integration also helps the businesses in increasing the revenue at various levels. After synergising their energies, they are able to cater to a very large audience at lower costs.
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3, It also helps the businesses in creating economies of scale, which in turns helps them produce goods and services at cheaper costs. It gives them a leverage over others.
However, horizontal integration also has some disadvantages, which are;
- Development of conflicts among the two parties on account differences of opinion regarding various matters.
- It takes away the flexibility, both in terms of operation as well as management. This often takes a heavy toll on the performance.
- It often takes away the value from the business.
- Sometimes one of the two has to compromise on their ethics and values.
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