How direct costs are distributed differently than indirect costs?


Horizontal integration also known as lateral integration describes the merger of two or more companies, in this part of the supply chain of products. They may be the same or different industries. Here are three examples from a textbook horizontal integration made by companies who seek to strengthen their market position and enhance their current production and/or sale.

One of the clearest examples of horizontal integration is the acquisition of Instagram to Facebook in 2012 for $ 1 billion. As Facebook and Instagram have acted in the same industry (social media) and were in similar stages of production in connection with their photo services. Facebook, seeking to strengthen its position in the social space sharing, check Instagram as an opportunity to increase their market share, reduce competition and access to new audiences. All this came to pass, as a result of high level of synergy.

Another key example of horizontal integration is the acquisition of Walt Disney company’s animated film Studio Pixar in 2006 for 7.4 billion dollars. Disney started as an animation Studio that is designed for families and children. But it faces market saturation with current operations, along with a sense of creative stagnation. Pixar acted in the same space of animation like Disney, but it is more advanced technology when it came to digital animated films, along with a more innovative vision. A decade later, the deal was widely known how to revive Disney, not to mention expanding their market share and increase profits.

Finally appeared in 1998 in the merger of two major oil companies Exxon and Mobil – the largest in history at that time, combining the first and second largest energy corporations in the United States officially, Exxon bought Mobil for $73.7 billion, and the purchase allowed Exxon to get access to the Mobile gas station, and its products reserves. By combining resources, increase efficiency and simplify procedures, to date, ExxonMobil is the largest oil producer in the world, and one of the 10 largest by revenue. Shareholders have four times your money.

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