Sociology Index

Lateral Integration

Vertical Integration

Lateral integration is an alternative term for horizontal integration, defining an enterprise pursuing a diversification strategy which is in different production stages and industries under a uniform management in the economy. Lateral integration takes place when two businesses integrate that have related goods but they do not compete directly with each other.

Lateral Integration is the act of joining similar companies or taking over a company in the same line of business. In a lateral integration, The Hong Kong Telephone Co., Ltd. combined with the cable and wireless (HK) Co., Ltd. and formed the Hong Kong Telecommunications Ltd. in 1988. Integration of unrelated industries is known as risk diversification.

Organizations vary in terms of their needs for integration, and emphasis on complex lateral integration mechanisms is needed only when the requirements for lateral integration are significant. Lateral integration refers to the combination of firms producing related but not competitive products.

Lateral integration also occurs when the firms that combine provide different products but these products still have some common feature. Convergent lateral integration implies a combination of different industrial units whose finished product is the raw material for one large firm.