Horizontal integration

Horizontal integration

Horizontal integration refers to a situation where by a company merges with its competitors resulting to industry consolidation, or a company takes over another company in the same industry chain. Horizontal integration is not predictable with boosting stockholder riches when there are no fitting planned targets. Horizontal intergration may be inconsistent in maximizing goal of  profitability due to the following conditions. When the there is poor attitude towards the partners may lead to loss in the company .When two merged companies disagree they affect the organizational structure and all activities within the company may change .The company becomes inconsistent with goal of maximizing profitability.

Lack of capital if stakeholders are unable to raise enough capital for purchasing inputs and paying the workers. Low production in the company makes it fail to meet its set goals and objectives. Emergency like risk such as fires or terrorist attack leads to loss of products and property .The Company close down due to lack of resources.

Horizontal integration works with value chain if a person in the value chain becomes uncooperative, the whole chain is affected and this results to low production and at the end of it all no profits achieved. Lack of trust within the partners in Horizontal chain makes some stakeholders feel that some people are e benefitting from the company than others. This lead to disagreements .Partners may separate and dissolve or sell the company. Mean while there are less or no profits gained contrary to the company goals.

Qstn2: Company internal value chain refers to all activities within the company that are involved in production of goods and services. It has primary activities that improve the standard value of goods and services directly as well as indirectly through improving supportive activities. On the other hand industry value chain is interlinked value adding activities which convert inputs topr oducts. This results to creating competitive advantage with other companies for instance lowering the cost of products to attract customers.

Value Chain, the more vertically integrated it is.  Below is an industry value chain and its relation to In business price change may result to vertical integration we also have a situation when there is Expansion of activities upstream .This is as forward integration.  In assembly industry the end products are made by assembling and we have backward integration then exploit those advantages better than other companies in the industry. Meaning there is intermediate manufacturing.

 Company’s value chain is a part of a larger industry. The more activities a company does compare to industry internal company’s value chain. This will make us understand the difference  between internal company value chain and industrial value chain.