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Explain horizontal integration in strategic management
Horizontal integration is a process when a company acquires/merges/takes over another company, who are in the same product line or its competitor.
Company will go for horizontal integration to increase its size and capacity, to reduce its risk and competition, increase its market share and to expand its geographical area.
The reasons to opt for horizontal integration are as follows −
- Growth in industry.
- Due to lack of expertise.
- To manage operations effectively.
The advantages of horizontal integration are as follows −
- Increase in product features and market reach.
- Increase its global presence.
- Cost reduction.
The disadvantages of horizontal integration are as follows −
- Legal restrictions (depends on country legal laws).
- No competition.
- Too rigid.
- Sometimes, product change is not according to the market conditions.
- Sometimes, expected value is not reached.
- Flexibility is reduced.
- May be responsible for the rise in the organization's culture problems.
- Leadership problems may arise in an organization.
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