Horizontal and Vertical Integration in Companies

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Facebook is an example of a company that practices horizontal integration (HI). Essentially, HI refers to the union of two or more businesses engaged in the same types of production (Smyth, 2019). Facebook’s HI structure mainly involves the acquisition of competitors’ talent. They usually take over the firm and absorb their experience workforce before shutting down the product. Generally, this style has been evident in most of its operations except Instagram which still works independently but is headed by Facebook. Instagram was purchased by Facebook in 2012 for a reported USD 1 billion (Smyth, 2019). Although there are several social media platforms and publishing options, Instagram was a real rival to Facebook for younger audiences and advertisements. Through the transaction, Facebook improved its dominance in the digital space and eliminated Instagram as a rival.

Amazon is an example of a firm that adheres to vertical integration (VI). VI is where two companies at different phases of the supply chain merge (Boyce, 2021). Amazon has a large portion of its operation vertically integrated. In addition to serving as a marketplace for consumers and sellers, it provides its goods and services and has a separate delivery channel. Essentially, the distribution network for Amazon is divided into steps (Boyce, 2021). Generally, after obtaining the products, it markets them before distributing and selling online.

If I owed a business venture, a horizontal merger would be more advantageous because it can provide the firm with significant pricing power as the sole leader in a segment. Essentially, in this case, the company’s and the employee’s interests are in line. One of the main issues with horizontal integration is that, if done in a way that prevents competition, it might lead to a monopoly (Smyth, 2019). Nonetheless, many enterprises have been integrated into a bigger, more prosperous organization through HI creating opportunities for workers. Additionally, it means that there will be less rivalry and thus room to be more profitable.