The Likely Benefits of Integration
The Likely Benefits of Integration
Horizontal Integration
The merger reduces the number of competitors in the industry.
It allows the business to achieve economies of scale.
The combined business gains a larger share of the total market compared to before.
Forward Vertical Integration
(Example: a car manufacturer takes over a car retailer)
The business gains an assured outlet for its products.
The profit that was previously earned by the retailer now stays within the expanded business.
The retailer can be stopped from selling competing brands.
The manufacturer can get direct information about customer needs and preferences.
Backward Vertical Integration
(Example: a car manufacturer takes over a supplier of car body panels)
The business gains an assured supply of essential components.
Supplier profits are now kept within the merged business.
The supplier can be prevented from supplying rival manufacturers.
The manufacturer can better control the cost of components and supplies.