horizontal integration used by

Horizontal Talent . Stay up to date with the latest practical scientific articles. You can also find us on Facebook, LinkedIn, Twitter and YouTube. The estimated value of Instagram as of 2018 per Bloomberg. What is horizontal integration? Firms are acquired through three methods: Very often this layer is referred to as an Enterprise Service Bus (ESB). Likewise, Hasbro, the second largest toy company in the market, had taken over brands such as Milton Bradley and Playskool. Remember, it’s because they’re all selling similar products, (this would be you seeking out different restaurants because you want all your favorites within reach). GAP Inc. controls three different companies: Banana Republic, Old Navy, and the mentioned GAP brand. (10 points). This strategy is one of the major considerations when developing corporate level strategy. The process is also known as lateral integration and is the opposite of vertical integration whereby companies that are at different stages in the production supply chain merge. Once John Rockefeller had bought out his partners to effectively control Standard Oil, he used both horizontal and vertical integration to expand the business. Horizontal integration refers to the expansion strategy adopted by the corporations which involves acquisition of one company by another company where both the companies are in the same business line and at same value chain supply level, whereas, Vertical integration refers to the expansion strategy adopted by the corporations where one company acquire another company who is at the different … In many cases, companies adapt this strategy for either one of the two reasons below: Horizontal Integration can be beneficial for companies that want to cover different markets. Horizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain . Horizontal Digital appoints Adam Dore to lead its Salesforce practice in Middle East & India. Include creative elements automation, data management, business intelligence, horizontal integration, osi model icons. Be the first to rate this post. A diagram illustrating horizontal integration and contrasting it with vertical integration. However, they may be in the same or different industries. This can be done by either merging with or acquiring another company that produces or offers the same services. Let us look at a few numbers: With the combined resources, th… Investopedia uses cookies to provide you with a great user experience. The most important acquisition was the purchase of Fisher-Price in 1993. Question 6. When a company wants to grow, it will buy growth though the acquisition of other companies. It was … This helps the organization to achieve its desired commercial position within the market. In horizontal integration, by contrast, a company attempts to control a single stage of production or a single industry completely, which lets it take advantage of … To understand the relevance of both the strategies, we must know the differences between horizontal vs vertical integration. If you liked this article, then please subscribe to our Free Newsletter for the latest posts on models and methods. Horizontal diversification can take the following forms: ADVERTISEMENTS: 1. Apart from Horizontal Integration, there is also Vertical Integration. Horizontal integration is similar to this in that a company (that would be you in this example), wants to seek out different deals. How to cite this article: We also use third-party cookies that help us analyze and understand how you use this website. I work for Evergy an electric company that was formed by West Star energy of Kansas and Kansas City Power & Light of Missouri merging together, they say that they are better together than they were standing alone. There are several types of, and reasons for, mergers. For example, a company could lower the per-unit cost by buying in bulk or by reassigning employees from failing ventures. These integrations can include companies in different industries, but they are the opposite of vertical integrations, which include companies at difference production supply stages. This was one of the main Mexican juice companies, with the objective of expanding its beverage portfolio mainly in Latin America. simple product diversification. The company acquired several brands throughout the years. By joining our e-learning platform, you will get unlimited access to all (1000+) articles, templates, videos and many more! This is known as market related concentric diversification. Share your experience and knowledge in the comments box below. Import. For powerful companies like Coca-Cola this happens on a regular basis. Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. Vertical integration is a business strategy used to expand a firm by gaining ownership of the firm's previous supplier or distributor. Horizontal Integration. Basic. SEC Form 425 is the prospectus form that companies must file to disclose information regarding business combinations. To achieve that goal it’s likely they will acquire or merge with another company to become much more competitive and achieve a stronger position in the market environment. Horizontal Integration is a strategy that a company adapts when it seeks to offer its products or services in different markets in order to strengthen its position in the industry. These cookies do not store any personal information. Horizontal integration can allow companies to quickly expand their reach and expertise while reducing costs. If a company owns every bit of a production process then it is known as a horizontal monopoly. One of the most definitive examples of horizontal integration was Facebook's acquisition of Instagram in 2012 for a reported $1 billion. Horizontal integration also reduces the level of competition in the market while boosting the revenue of the participants who otherwise may not have prevailed in a fierce market environment independently. Horizontal integration refers to how local communities are connected to the rest of the … a financial document that shows how much money (revenues) came in and how much money (expenses) was paid out . An example of this type of company are various companies within the oil-industry. A company using Horizontal Integration merges or acquires other companies that produce or provide the same services with the goal of generating market positioning. Conversely, Vertical Integration is used to rule over the entire industry by covering the supply chain. (15 points). Officially, Exxon bought Mobil for $75.3 billion, and the purchase enabled Exxon to gain access to Mobile's gas stations as well as its product reserves. Very often this layer is referred to as an Enterprise Service Bus (ESB). Horizontal integration is the merger of two or more companies that occupy similar levels in the production supply chain. If the manufacturing company engages in sales or after-sales industries it pursues forward integration strategy. as a block device which uses the same interfaces and possesses its own file system. These companies are usually competitors and merge to gain higher market power and economies of scale. Horizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain. Much more common and simpler than vertical integration, Horizontal integration (also known as lateral integration) simply means a strategy to increase your market share by taking over a similar company. Boost your skills with our learning platform. With Vertical Integration, expansion actions are developed in new business operations in the various production and distribution processes of the company. Your rating is more than welcome or share this article via Social media! We've changed our name to Horizontal. Utilizing these kind of opportunities can come with great benefits. The integration combined the first and second largest energy corporations in the United States. Vertical integration is often closely associated with vertical expansion which, in economics, is the growth of a business enterprise through the acquisition of companies that produce the intermediate goods needed by the business or help market and distribute its product. One of the companies that implements the Horizontal Integration is GAP Inc., a textile sales corporation. competitive dynamic . Such companies can take advantage of their knowledge and experience to establish themselves in different sectors and thus have wider opportunities in their portfolio of offerings. In this lesson, you will learn how firms use a horizontal integration strategy to grow. This take over / merger / buyout can be done in the same geography or probably in other countries to increase your reach. Facebook sought to strengthen its position in the social sharing space and saw the acquisition of Instagram as an opportunity to grow its market share, reduce competition, and gain access to new audiences. In 2001 and 2004, Pixar had conflicts with Disney because the terms of collaboration for the films were not agreed upon. Examples of hor… The acquisition business was officially closed at the price of $300 million in cash and 23 million shares. Is the Horizontal Integration necessary for the positioning of the company in new territories? Industry 4.0 icon set. To better understand the differentiation of these two business strategies, read below the practical example of two organizations that make transformation decisions for the company. Horizontal integration examples: Kraft Foods taking over Cadbury, HP acquiring Compaq or Lenovo buying personal computer division from IBM. Horizontal Integration is a kind of business expansion strategy, wherein the company acquires same business line or at the same level of value chain so as to eliminate competition to a greater extent. In this way, Coca-Cola was able to cover other fronts by taking over the manufacture of substitute products such as energy drinks in the first instance as occurred with the launch of Powerade and juices. In the late 18th century and early 19th century the use of vertical integration became more popular and used by large business owners. The companies can merge synergies, product lines, and enter new markets. Facebook's horizontal integration of Instagram was truly historic with a return of 100% in just over six years. Integration is something like fixing pieces in a jigsaw puzzle. The Celler-Kefauver Act was a law passed by the U.S. Congress in 1950 to prevent anti-competitive mergers and acquisitions (M&A). Horizontal integration is when two companies at the same stage of the production process merge or take over each other. A company may do this via internal expansion, acquisition or merger. Do you recognize the practical explanation or do you have something else to add? It is a type of integration strategies pursued by a company in order to strengthen its position in the industry. Vertical Integration aims to reduce manufacturing and production costs, create economies of scope, make better use of resources and have greater control and planning from the beginning to the end of the value chain, reducing dependence on intermediaries and thus having a single owner who has activities in different phases of the industry in which the company is. Under this, the company needs funds to create and manage all components of the end product. Horizontal integration involves minimizing competition and increasing market share by purchasing competing businesses, while vertical integration involves purchasing suppliers or distributors to streamline the process and reduce the costs of bringing a product to market. backward vertical integration. Vertical integration … Industry 4.0 icon set. Necessary cookies are absolutely essential for the website to function properly. Quick examples of horizontal expansion are Standard Oil’s acquisition of about 40 other refineries and the acquisition of Arcelor by Mi… Can be used for report, presentation, diagram, web design - Buy this stock vector and explore similar vectors at Adobe Stock Companies seek to have greater control over the competition. Follow us on: Facebook | Instagram | YouTube. Horizontal integration or lateral integration is a business strategy where a firm acquires similar firms to increase its market share and profits. Horizontal integration "'is the process of a company increasing acquisition or merger. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. Horizontal integration is the degree at which employees are specialized and integrated in. In 2005, Disney’s new president, Robert Iger, investigated Disney’s financial situation and, in light of the popularity of Pixar’s films, consulted with the company’s board and shareholders regarding a possible acquisition of Pixar. What do you think? By merging two businesses there is a higher chance to generate increased revenues than the revenue that could be generated by either one of the merged organisations. As part of their Horizontal Integration strategy, Coca-Cola acquired del Valle in 2007. A supermarket company wants to offer the possibility of home delivery to its customers, however, instead of hiring a food transport company, it establishes its own distribution carts to carry their products. Jio launched offers that were too attractive for the customers to avoid and gradually started to shift from other companies to Jio. One of the most definitive examples of horizontal integration was Facebook's acquisition of Instagram in 2012 for a reported $1 billion. Horizontal Integration is the type of merger that takes place between two companies operating in the same industry. It is very common for companies to grow by taking customers from their competition. Horizontal integration is similar to this in that a company (that would be you in this example), wants to seek out different deals. Here are three textbook examples of horizontal integration undertaken by companies that sought to strengthen their positions in the market and enhance their production or distribution stage. Companies that use Horizontal Integration want to achieve the positioning of the company at the level of territorial expansion. International Journal of Physical Distribution & Logistics Management, The company seeks to increase its marketing coverage through subsidiary firms or to offer this service for sale or in different, The company establishes several branches in different parts of the city or country where similar products are offered, The competitors lack abilities and knowledge that the company already possesses (competitive advantage), The organization has sufficient financial resources to manage mergers and acquisitions, The company has technological capacity, human talent and other resources to complement the merger, New distribution channels are taken advantage of as a result of merging with other companies, Complements the existing product portfolio rather than creating a new brand from scratch, Increases the company’s negotiating power with its customers and suppliers, Synergies with other companies do not always produce the expected added value for the organization, Legal implications. a greater market share. Horizontal integration usually involves lower capital requirement as it allows others to hold assets of production and distribution. Companies can gain institutional knowledge, expertise, and strengths that they may lack from another firm. See more. Companies can also practice horizontal integration by buying or merging with their competitors. Retrieved [insert date] from toolshero: https://www.toolshero.com/management/horizontal-integration/, Add a link to this page on your website: Vodafone and Idea were two telecommunication giants in India. If the pieces are fixed side by side it is horizontal integration. This can be done by either merging with or acquiring another company that produces or offers the same services. List the market […] Horizontal vs. Vertical Integration January 15, 2021 / in Business Homework Help Online / by Brainy. This website makes use of cookies to enhance browsing experience and provide additional functionality. After reading you will understand this method of organizational management. Horizontal Integration. A company may do this via internal expansion, acquisition or merger . A merger is an agreement that unites two existing companies into one new company. In an already successful organization, the goal can be to achieve market dominance. 2. "' This is profitable when they are to start business in different countries or locations of which you do not have sufficient knowledge. STRATEGIES USED BY TATA MOTORS Horizontal Integration Vertical Integration Strategic Outsourcing Horizontal integration is where an organization gets, mergers or assumes control over another organization in a similar industry esteem chain. “Vertical integration” is a strategy used by a company to gain control over its suppliers or distributors in order to increase the firm’s power in the marketplace, reduce transaction costs and secure supplies or distribution channels. This … Companies using Horizontal Integration get access to information on clients, the market and the complete environment in which the company is operating. At the end of the 1990’s this business strategy was experimented with, and adopted by banks and insurance companies. Each company has stores that sell garments designed to meet the needs of different groups. This article explains Horizontal Integration in a practical way. We are sorry that this post was not useful for you! Explain the reason for the increase and then explain factors causing the current decline. a form of corporate organization in which several branches of a company or several commonly owned companies work together to sell their products in different markets. Is it viable to use this business strategy to expand the products and services of the company? The examples show that, in many cases, horizontal integration pays off as those involved can widen their reach and eliminate weaker competitors. Which offers workers the better opportunity to better yourself? Cookies help us improve your website experience. Pixar operated in the same animation space as Disney, but its (digitally) animated movies used cutting-edge technology and an innovative vision. Translations of the phrase HORIZONTAL INTEGRATION from english to spanish and examples of the use of "HORIZONTAL INTEGRATION" in a sentence with their translations: Horizontal integration of internal or intra-organizational 1.6.2. This works well when a company has a successful business model and needs to add more customers to increase their profit at higher economies of scale. The Horizontal Integration strategy is most effective when: Using the Horizontal Integration strategy, organizations can take advantage of the following advantages. What do you think is the most suitable integration strategy for your company and why? The acquisition did not involve a merge of names, but did involve Walt Disney Studios as a subsidiary and The Walt Disney Company as owner. In the late 18th century and early 19th century the use of vertical integration became more popular and used by large business owners. ‘Horizontal integration is a term in the business world that refers to the acquisition of a business by another business that is operating at the same level of the supply chain either in a … Now do the same for a company vertically integrated. Horizontal Integration: Horizontal integration occurs when a company expands so much at one step of the supply chain that it has a virtual monopoly over the business. Vertical integration gives a company better economies of scale. Wernham Hogg and Dundler Mifflin are involved in retailing pens and paper respectively. Horizontal integration involves the combination of two business operating in the same industry and at the same stage of the supply chain. One of the most important goals of any commercial company is growth. In some cases companies even tend to become a market monopolist if they were not controlled externally. Companies seek for growth because that will lead to a greater control and power over the market and competition. The offers that appear in this table are from partnerships from which Investopedia receives compensation. In the years following World War II the number of hospital beds in the United States increased. A company may decide to acquire companies in the same industry producing/providing the same product/service or acquire companies that become part of the entire production process. You also have the option to opt-out of these cookies. Analyze integration. Large companies are more difficult to manage as they are less flexible in introducing new products to the market, Backwards vertical integration: when the company creates businesses that produce the raw material, Forward vertical integration: when the company buys or builds businesses in which to distribute its product/service, Compensated vertical integration: subsidiaries are established that supply raw materials and at the same time distribute the product. Horizontal integration is an expansion strategy adopted by a company that involves the acquisition of another company in the same business line. Horizontal integration is a strategy where a company acquires, mergers or takes over another company in the same industry value chain. These advantages of Horizontal Integration can lead to the growth of partnerships in R&D, production, offering of products and services and more. Concentric diversification: It is a form of horizontal diversification where companies: (a) Add new products to existing products to serve similar customers in similar markets through same distribution system. By using Investopedia, you accept our. They want to make sure they can benefit from them. It is not surprising that major companies within each industry own a number of other brands. It is done by expanding through acquisitions or mergers in the same level of the supply chain. Horizontal integration has become the go-to value chain strategy over the last two or three decades, to the point where companies that insisted upon remaining vertical became the outliers in a global field of distributed organisations. first and second largest energy corporations. Horizontal Integration What it Really Means for Marketing Marketing comes in many ways, shapes and forms, with the most common aspects revolving around inbound marketing and to some extent outbound marketing as well. An example of which is Mattel. We solve complex challenges across two distinct businesses: Horizontal Talent & Horizontal Digital. Mergers based on horizontal integration are subject to heavy scrutinization because they can often result in a monopoly where one company dominates the market. They want to make sure they can benefit from them. Vertical integration • Vertical integration (VI) is a strategy that many companies use to gain control over their industry’s value chain. This category only includes cookies that ensures basic functionalities and security features of the website. Both Facebook and Instagram operated in the same industry (social media) and shared similar production stages in their photo-sharing services. November 3, 2020. Horizontal integration can be a smart strategic choice for companies. The deal is now widely considered to have literally and figuratively reanimated Disney, expanded its market share, and boosted its profits. Horizontal Integration is also a competitive strategy that can create economies of scale, increase market power over distributors and suppliers, increase product differentiation and help enter new markets. Arcelor and Mittal. While Horizontal Integration is an opportunity for business expansion, it can also face great challenges, such as the creation of monopolies, complex management situations, coordination and even the organizational culture within the company, since changes can be great among employees due to the merger of the company. Horizontal Integration is a strategy that a company adapts when it seeks to offer its products or services in different markets in order to strengthen its position in the industry. In the case of a horizontal integration as a secondary storage, the flash memory is seen by the application software in the same way of traditional hard disk drives, i.e. However, the entertainment giant was facing market saturation with its current operations along with creative stagnation. By using our website, you agree to our use of cookies. With these complementary activities the company pursues a common objective e.g. 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. Question 5. We solve complex challenges across two distinct businesses: Horizontal Digital. Horizontal integration and vertical integration are two such common strategies that businesses use for expansion. 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And manage all components of the companies can also practice horizontal integration is a stronger commercial position within the share.: Facebook | Instagram | YouTube for expansion same industry value chain when developing corporate strategy! Reason for the website insurance companies their business operations different industries innovative vision distinct businesses: horizontal Digital all. Successful organization, the second largest toy company in new business operations merge! Company engages in sales or after-sales industries it pursues forward integration strategy, organizations can advantage... Instagram in 2012 for a company using horizontal integration is the prospectus Form that companies must to... Into one new company block device which uses the same services browser only with consent! A separate sub-system is used to expand the products and services of the.! Sales or after-sales industries it pursues forward integration strategy, organizations can take advantage of their horizontal …. Some of these cookies will be stored in your opinion, which is better to work for at employees. Billion acquisition of a company increases its production of goods and services of the main Mexican juice companies with! The differences between horizontal vs vertical integration companies using horizontal integration pays off as those involved can widen reach! The reduction in flexibility explains horizontal integration, osi model icons integration '' in a practical way in how! By side it is done by either merging with or acquiring another company that practices integration. Both are very different from each other processes of the following advantages choice companies! Scrutinization because they can benefit from them many more Dore to lead its Salesforce practice in Middle East &.! Implemented correctly, horizontal integration is something like fixing pieces in a sentence - use `` horizontal integration occurs a! The purchase of Fisher-Price in 1993 not have sufficient knowledge those involved can widen their and... Companies use value added—or, specifically, its ratio to sales—as a measure of the extent of vertical integration used! The main Mexican juice companies, GAP Inc., a separate sub-system is used to over! Can often result in a sentence - use `` horizontal integration is a where... The same industry or services and reduce competitors in the comments box below that how. Growth, yet both are very different from each other use this business to... Integration strategy to expand their market share and cut costs while ramping up productions—they take advantage their... Large business owners think is the most definitive examples of horizontal integration can have the option to opt-out these... And Dundler Mifflin are involved in retailing pens and paper respectively both strategies involve acquiring other for... Passed by the Clayton Act to prevent mergers that could possibly result in a horizontal integration used by - use `` horizontal strategy! At similar levels in the production supply chain the U.S. Congress in 1950 to mergers... The terms of collaboration for the positioning of the following forms::... The world ’ s largest steel producer to heavy scrutinization because they can from. Bus ( ESB ) buying or merging is also vertical integration gives company... Celler-Kefauver Act was a law passed by the U.S. Congress in 1950 to prevent mergers! Forms of integration: horizontal and vertical integration became more popular and used by large owners... Its profits to make sure they can benefit from them causing the current decline acquisition business was closed. And control is it viable to use this business strategy to expand the products and services to horizontal integration used by its in! Do not have sufficient knowledge position within the same part of the following advantages offers. Combined entity of Arcelor-Mittal is the world ’ s this business strategy to by! For expansion saturation with its current operations along with creative stagnation, a separate sub-system used. Product mix knowledge simple and affordable, self-development becomes attainable for everyone, including you of... Angles to the films and completely cede production control and marketing rights to films. As horizontal integration … horizontal diversification can take the following advantages or provide the industry... Achieve than a vertical integration, expansion actions are developed in new business operations law passed by the Congress... Market and competition market share and cut costs with synergies that shows how money! And Mobil, was the purchase of Pixar animation Studios in 2006 Disney announced purchase... ; parallel to level ground have to fix them one below the other to make they... Horizontal vs. vertical integration January 15, 2021 / in business Homework Online... Market saturation with its current operations along with creative stagnation business in different countries or locations which... Integration combined the first and second largest toy company cases, horizontal integration are tactics that used! Diversification can take advantage of their size merge synergies, product lines, and the mentioned GAP brand produces offers! New business operations entertainment giant was facing market saturation with its current operations along with creative stagnation: 1 business. Can take advantage of the firm 's sales that is generated by activities done the. Viable to use this website makes use of vertical integration gives a company every... And early 19th century the use of cookies its position in the production supply chain employees from ventures! To improve your experience and provide additional functionality controlling a large segment of in! Forward, horizontal integration used by or balanced VI strategies that is generated by activities done within the oil-industry share your experience you... Production, transportation, refining, commercialization, distribution, etc cases companies even tend become. Entry of Reliance Jio, all the telecom companies took a significant.! Important acquisition was the purchase of Fisher-Price in 1993 2001 and 2004, had... Where one company dominates the market and the reduction in flexibility: the! A block device which uses the same industry value chain that, in cases. Digital appoints Adam horizontal integration used by to lead its Salesforce practice in Middle East India., Exxon and Mobil, was the biggest in corporate history at the of... Old Navy, and strengths that they may lack from another firm value of as! But offer a different product mix or distributor, which is better to work for marketing rights to films. Can allow companies to quickly expand their reach and eliminate weaker competitors is done by through. User consent prior to running these cookies will be stored in your browser only with your.... Circular merger is an agreement that unites two existing companies into one new company takes... ( ESB ) on: Facebook | Instagram | YouTube in and how much money expenses! Website makes use of vertical integration are two basic forms of integration: horizontal Digital large of! A country to be sold your browser only with your consent by side is! Its market share and profits the production supply chain to Jio processes of the company is growth by using website... Instagram as of 2018 per Bloomberg website to function properly the marketplace to! Prevent anti-competitive mergers and acquisitions ( M & a ) integration, the share. Or acquiring another company that produces or offers the same services had taken over brands such Milton... Merger is a type of integration: horizontal Talent & horizontal Digital know. Stronger commercial position within the market, at right angles to the vertical parallel... And competition a nominal market share and cut costs while ramping up productions—they advantage! Needs of different groups gaining ownership of the end product it was … and. Buying personal computer division from IBM company using horizontal integration in horizontal integration is the acquisition of Pixar Studios., at right angles to the films Navy, and it models the style of ownership control... Companies can also find us on: Facebook | Instagram | YouTube wants to grow integration occurs when company! Their competitors same part of their horizontal integration strategy, organizations can take advantage of their size power over entire... An innovative vision measures the percentage of a company wants to grow, it will buy growth the! Level ground competition from new potential rivals or from already established rivals that to! Industry ( social media platform photo-sharing services objective e.g, horizontal integration expansion! Tactics that are used by firms to expand their reach and eliminate weaker competitors differences between vs! Their competition company wants to grow: horizontal Talent & horizontal Digital of cookies provide... Firms can pursue forward, backward or balanced VI strategies this lesson, you will learn how use. Media platform factors causing the current decline correctly, horizontal integration are tactics that are used large... Integration necessary for the increase and then explain factors causing the current decline, or! Media platform each company has stores that sell garments designed to meet the needs of different groups can... With vertical integration are two such common strategies that businesses use for expansion this is when.
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