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From my understanding, vertical integration is when a company has control of or expands their business into each step of a process, like different points of the same production
A horizontal integration consists of companies that acquire a similar company in the same industry, while a vertical integration consists of companies that acquire a company that operates either before or after the acquiring company in the production process.
When a company wishes to grow through a horizontal integration, it is seeking to increase its size, diversify its product or service, achieve economies of scale, reduce competition, or gain access to new customers or markets. To do this, one company acquires another company of similar size and operations, in the same industry. Two great examples of a horizontal integration are the acquisition of Pixar by Disney or the acquisition of Instagram by Facebook.
When a company wishes to grow through a vertical integration, it is seeking to strengthen its supply chain, reduce its production costs, capture upstream or downstream profits, or access downstream distribution channels. To do this, one company acquires another company that is either before or after it in the supply chain process. A great example of a vertical integration is when Verizon and AT&T opened their own retail locations through acquisition.
When it comes to a vertical integration, a company can either integrate forward in a forward integration or backward in a backward integration. A backward integration occurs when a company decides to own another company that makes an input product to the acquiring company's product. An example of this is if a car manufacturer acquires a tire manufacturing company. A forward integration occurs when a company decides to take control of the post-production process. An example of this is if the same car manufacturer acquires an automotive dealership. The vertical integration examples above with Verizon and AT&T are also forward integrations.
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