3.1 - Integration: Horizontal

Question 1

What are the 4 forms of integration?

Answer 1

Horizontal
Vertical forwards
Vertical Backwards
Conglomerate

Question 2

What does horizontal integration entail?

Answer 2

Firm merges with another in the same industry at the same stage of production

Question 3

What are the specific advantages of horizontal integration?

Answer 3

Economies of scale
Lower LRAC
Larger market influence
Reduced competition
Economies of Scope (Synergies)

Question 4

What are the specific disadvantages of horizontal integration?

Answer 4

Total Costs
Increased workloads
Increasing responsibilities
Legal issues, monopolies etc

Question 5

How can horizontal integration achieve economies of scale?

Answer 5

Internal economies of scale
Technical + financial reinforcement
Bulk purchasing

Question 6

How does horizontal integration reduce LRAC?

Answer 6

EoS, productivity etc.
Savings made by rationalisation of costs
However, often involves job losses

Question 7

How can horizontal integration achieve economies of scope?

Answer 7

Separate firms make different products
Mergers incentivise synergies

Question 8

How can horizontal integration further the risk of diseconomies of scale?

Answer 8

Disagreements regarding management, pricing, expenditure, investment etc.