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jeudi 13 août 2020

Horizontal and Vertical Integration in Industry 4.0

Industry 4.0 has further amplified the importance of horizontal and vertical integration, making them the very backbone on which the Smart Factory is built.

The terms “horizontal integration” and “vertical integration” are familiar from a number of contexts. From the operational perspective, a horizontally integrated company focuses its activities around its core competencies and establishes partnerships to build out an end-to-end value chain. A vertically integrated company, on the other hand, keeps as much of its value chain in-house as it can—from product development to manufacturing, marketing, sales, and distribution.

In the world of business growth strategy, horizontal integration refers to the acquisition of companies that address the same customer base with different but complementary products or services. In this way, the acquiring company can increase market share, diversify their product offerings, and so on. A vertical growth strategy, on the other hand, involves acquiring companies that bring new capabilities to the table in order to reduce manufacturing costs, secure access to important supplies, respond faster to new market opportunities, and more.

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