Vertical & Horizontal Integration

BY HASEEB PATEL

Vertical Integration

Vertical Integration means the degree to a firm which is normally operated by separate firms.

This means when the production company has the right of the production, distribution and exhibition of the film by the same company, because of this they receive all of the profit.

Advantage of vertical Integration

It allows you to invest in greatly specialized assets Has lower Costs of Transaction High confidences when it comes to quality

Disadvantage of vertical integration

Capacity Balancing Problems Decreases Flexibility Can Create Some Barriers to Market Entry

Horizontal Integration

Horizontal integration is the process of a company increasing production of goods or a service.

This is where a production company expands into other areas of one industry. This means that the company can develop in a particular area of production or they can buy out another company that deals with these areas.

Advantage of horizontal integration

Advantages of horizontal integration is the low of costs. The higher output leads to greater economies of scale and higher efficiency.

Increased diversity. The combined company can offer more product or service features.

Reduced competition. The result of industry alliance is fewer companies operating in the industry and less competition.

Disadvantage of horizontal integration

Reduced flexibility. Large groups are harder to manage and they are also less flexible in introducing innovations to the market.