Sociology Index -

Lateral Integration

Vertical Integration, Vertical and Horizontal 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. Organizations vary in terms of their needs for integration, and emphasis on complex lateral integration mechanisms is needed only when the requirements for integration are significant.

Lateral integration refers to the combination of firms producing related but not competitive products. The Hong Kong Telephone Co., Ltd. combined with the cable and wireless (HK) Co., Ltd. and formed the Hong Kong Telecommunications Ltd. in 1988.

Lateral integration also occurs when the firms that combine provide different products but these products still have some common feature.

Same industry, but different stages = lateral integration

Investments in natural resources = vertical integration

Same core industry = horizontal integration

Unrelated industries = risk diversification

Horizontal integration is the expansion of a corporation to include other previously competitive enterprises within the same sector of goods or service production.

Horizontal integration takes place when one candy maker takes over another candy maker.

This process of horizontal integration is characteristic of capitalist economies which have a marked tendency to sectoral concentration into fewer and fewer enterprises and business conglomerates.

Horizontal integration is a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. To get this market coverage, several small subsidiary companies are created. Each markets the product to a different market segment or to a different geographical area. This is sometimes referred to as the horizontal integration of marketing.

The horizontal integration of production exists when a firm has plants in several locations producing similar products. Where the products of both firms are similar, it is a merger of competitors. Where all producers of a good or service in a market merge, it is the creation of a monopoly. If there are only a few competitors, it is termed an oligopoly.

Horizontal integration in marketing is much more common than horizontal integration in production.

Vertical integration is the integration of firms engaged in successive stages in the production of goods.