Horizontal integration’s control over one process during production means that a company has established a dominance in the manufacturing, selling and distribution, or even the production of raw materials. If a company owns every bit of a production process then it is known as a horizontal monopoly. Although this is much more difficult to achieve than a vertical monopoly. Horizontal Integration was made famous by John D. Rockefeller’s Standard Oil company.
For example, Baskey Energy is an oil company, in West Texas. They specialize in well servicing or common maintenance on wells dug. Furthermore, to keep the wells producing over the years, you need this service. Baskey has grown in size over the years because it has been aggressively pursuing other companies that are in the same market. The company has been doing this solely through acquisition work. Sometimes the company will buy another well servicing company even if it is not profitable just to put them out of business. This way Baskey can make money on the parts of a company through salvaging, and therefore, it means that there is less competition.
Before venturing into a horizontal integration, assess all sides of the situation. Your CEO needs you to be their trusted advisor or wingman. Learn how you can be the best wingman with our free How to be a Wingman guide!
[box]Strategic CFO Lab Member Extra
Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]