Horizontal integration refers to the strategy by which businesses grow by expanding outward. Many different tactics can be employed when choosing a growth strategy and as in all business ventures the same decision making process will be employed such as risk vs. reward and return on investment. Some alternatives may require significantly higher investment thus greater risk but may result in greater reward. And as in any other strategy formulation – all possible alternatives should be considered, evaluated and the best option chosen. Following are possible horizontal business growth strategies:
- Start Up – This strategy involves starting up another business identical or similar to the company’s existing one. Standardized processes can be employed and similar markets can be served. For example if a shop is primarily a tire shop but provides mechanical repairs another shop can be opened using the same format. Employing the same business model in multiple locations can be trickier than it sounds. For example, a shop that’s located in a suburb of a major city will likely service a lot of commuters that live nearby. Employing the same processes and model in a different type of area will likely not be as effective. So all aspects of the business model should be taken into account.
- Acquisition – Purchasing existing businesses can be an effective method of employing a horizontal growth strategy. Care must be taken that the environment and market served are similar to those at the original business. If not the same processes and business model may not be effective.
- Product Expansion – Growing horizontally can refer to offering similar products at different prices and lower or higher quality. For example a shop that specializes in BMW repair may opt to begin providing service for the Mini or vice versa.
