Horizontal and vertical acquisitions are competitive strategies and integration methodologies that companies adopt in order to strengthen their competitive positions and advantages within the market. According to Markovska (2020), Horizontal acquisition refers to the acquisition or buying of a company that produces and trades in the same products and services at almost the same level of production. It refers to the merging of two similar companies to increase production and gain more advantage in the market. On the other hand, vertical acquisition highlights the acquisition or buying of a company in the same industry or line of production of products and services but within a different level of production. In vertical acquisition, a company takes over all aspects of production of a smaller company within the same industry, leading to the enhancement of production to increase competitive advantage.
Companies can use both vertical and horizontal acquisitions to increase their competitive power by increasing the production of products and services or increasing the market base of the products being provided. One practical example of a company adopting this competitive strategy includes Facebook's acquisition of Instagram and WhatsApp. In 2012 Facebook, which operated in the same industry as Instagram, bought Instagram in a horizontal acquisition strategy. Facebook further bought WhatsApp, a relatively smaller company within the same social media sector, message and photo-sharing services on the internet in 2014 in a vertical acquisition strategy to enhance its market power further. By acquiring the two companies, Facebook sought to strengthen its market power and position by increasing the number of users in the combination of users of all the three Applications. The horizontal and vertical acquisition of Instagram and WhatsApp further enhanced reduced competition and a wider platform for accessing new audiences, thereby impacting the strengthening of Facebook's market power in the social media industry.
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References
Markovska, M. (2020). Horizontal vs. Vertical Acquisition: Know the Difference. Retrieved 26 April 2021, from www.blog.careerminds.com/horizontal-vs.-vertical-acquisition
Tarver, E. (2019). Horizontal Integration Definition and Examples. Retrieved 26 April 2021, from www.investopedia.com/ask/answers/051315/what-are-some-examples-horizontal-integration.asp
