Horizontal and Vertical intergration

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The Meaning of Vertical and Horizontal Integration

Horizontal integration is where an organisation owns two or more companies, on the same level of the buying chain. An example of this is the First Choice Group; they own First Choice Travel Agency and
First Choice Hypermarket, both of which are on the same level of the buying chain. The advantage of horizontal integration is that it can increase the company’s market share. Another good example of this type of integration is when EasyJet purchased the airline Go from British
Airways. Now EasyJet and Go both operate under the company
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If the travel agent doesn’t wish to accept the offer, they may lose a lot of business, as they are not selling as many products, to cater for the customers needs. Independent travel agents are being seriously affected by integration, big companies such as First Choice, are controlling the amount of commission travel agents receive. They are also losing commission as tour operators and airlines are selling their products and services direct on the Internet. Older customers still prefer to use high street travel agents as they may not know how to use the Internet or would like the reassurance of booking in person. Travel agents are having to change to meet the needs of the customer, and are turning to the ‘niche’ market to make commission.

Airlines have also been affected by integration, British Airways wanted to merge with American Airlines, but IATA declined their proposal, as they would be able to dominate the pricing of transatlantic flights from the UK.

Horizontal and vertical integration has reduced competition within the industry, as more organisations are buying each other out to expand due to the demand that is being received from the public for their products and services. Companies that are integrating are able to set the price, and smaller companies such as Collette Worldwide Holidays, will be unable to compete. The risk that larger

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