Types of company integration

[Mimaktsa10]

In order to increase potential, large enterprises can resort to one of five types of economic integration:

Vertical integration
With this method, the holding is united with enterprises whose activities generally correspond to the production chain carried out within the holding, which ensures the creation of a closed production cycle.

The positive effect of vertical integration is manifested in a noticeable reduction in costs, mainly due to profits included in the cost of supplies of raw materials, materials and components from which the holding's main products are manufactured.

If a company takes over malta email list existing suppliers or organizations that will replace them, it retains the profit and overheads that were previously included in the cost of purchases. In addition, savings are achieved through effective management, optimization, standardization and strict control over the use of resources in the process of functioning of companies that are part of the holding.

Horizontal integration
Horizontal integration of companies is observed when, during the creation of a holding or during its operation, enterprises engaged in the production of similar products are included in its composition.

Horizontal integration

Source: shutterstock.com

The positive effect of horizontal integration is manifested in the increase of the holding's share of the market segment. In other words, a holding with horizontal integration is created, first of all, with the purpose of counteracting competition. In such conditions, it becomes easier to set market prices, and therefore, to receive higher profits.

At the same time, it is necessary to take into account the requirements of the Federal Law of 26.07.2006 No. 135-FZ "On the Protection of Competition". Also, in the case of horizontal integration, the holding has access to purchases of raw materials and materials at reduced prices due to the increase in the scale of transactions.