Question

Distinguish between horizontal and vertical integration strategies. Provide an example of each.

(Healthcare)

Answer 1

Horizontal strategy is about acquiring similar company in similar industry in order to grow the market share and revenue size of the parent company.

Vertical integration is about acquiring the company before or after the parent company in value chain of production process.

Usually horizontal integration objective is to acquire scale and vertical integration strategy is done to acquire capabilities in the value chain to control the production process so that quality can be controlled.

The example in healthcare of horizontal integration is when doctors of different section like physician, surgeon come together to form an entity like hospital. The vertical integration example is when physician partners with other operators like pathology lab and hospital to acquire major share of the value chain.