Undergoing horizontal integration can be very beneficial for two companies. Typically, this happens when two companies competing in the same industry at the same stage of production decide to unify. But before considering it, businesses should weigh the pros and cons of the strategy and how becoming one large organisation would play out for their bottom line.
When it is done correctly, there are many advantages to horizontal integration. These include (but are not limited to) an increase of market power or market share, reduced competition, and increases in other synergies.
But as with anything else, there are also downsides. Among them are antitrust issues and legalities, a reduction in flexibility, and destroying value rather than creating it.
Undergoing horizontal integration can benefit companies and typically takes place when they are competing in the same industry.
Pros & Cons – More Dominant in Aviation Sector
The advantages include increasing market share, reducing competition, and creating economies of scale.
Disadvantages include regulatory scrutiny, less flexibility, and the potential to destroy value rather than create it.