How to Grow a Business Through Horizontal Integration
There are 7 proven strategies for business growth. In this seven series blog post, we’ll share anecdotes and assets needed to execute. Here, we are kicking it off sharing the horizontal integration strategy.
When we talk about horizontal integration, we suggest that the simplest way to understand it is to think about the supply chain of milk. Let’s take it all the way back to the farm. Everything starts on the farm where there are brow cows, eating green grass, and producing white milk (every farm is different but let’s just go with that). That milk has to go through the process of pasteurization, so people don’t die of harmful bacteria (such as E. coli). After the milk is pasteurized, it makes its way to the local supermarket. That is known as a three-tier sales process. There’s the
Horizontal integration is what happens when one tier goes into the others. There are some manufacturers that say, "I can distribute my own product" or "I can open my own supermarket". This allows them to produce cheaper costs and control the customer experience.
Business Growth with Horizontal Integration
A prime example of horizontal integration. Why? Well, if we think about it, Ikea owns many forests (including 125,000 acres in the USA and about 450,000 acres in Europe). Because they own forests (manufacturing and distribution), they can chop down trees and have access to the wood commodities as a significantly detailed price. As our founder, Rayce, insists: “money really grows on trees, pun intended”.
A little small background on Apple - they used to be solely sold in Best Buy. However, as time went by and the brand grew, they decided it was time to make the change of opening up their own store (this is where distribution and realtor mixes). This gives them the chance and freedom to control their customers’ experiences. Here's a blog where we further explain the geography aspect in order for a business to grow.
Here's a video with further explanation of not only the horizontal integration strategy but the other six, in order to expand the growth of a business.