A firm integrates with a firm which
produces the same products and
services.
( Horizontal integration refers to the
combination of firms at the same
stage of production of firms
producing the same product. )
1. The firm becomes larger . It can
enjoy the economics of scale.
2. It can reduce the competition in
the market.
3. It can reduce the duplication of
facilities.
4. It can increase the turnover (營業
額) of business.
. Cathay Pacific Airway Ltd took
over Hong Kong Dragon Airlines
Ltd .
This is an example of
Horizontal Integration.
• Hong Kong Bank combined
with the Hung Seng Bank,
this is also an example of
Horizontal integration.
Park’n Shop takeover
Wellcome supermarket . Is
it an example of Horizontal
Integration?
• If Pizza Hut integrate with a
flour making firm, is it an
example of horizontal
integration?
Then, what is this
integration called?
A firm integrates with another firm
which operates in different stages of
production for a certain good.
( Vertical Integration refers to the
combination of firms engaging in
different stages of production of the
same product. )
• Motive: It can ensure a steady
supply of raw materials.( Backward
vertical integration)
• Motive: It can ensure a steady
market for its products. (Forward
vertical integration)
Refers to the last questions.
Pizza Hut integrate with a flour
making firm, it is backward vertical
integration.
Remark: Vertical integration is
“backward” when a firm combines with
another in a preceding stage in the
production process.
A car manufacturing
corporation takes over a
car selling agent.
In this case , it is forward
integration.
Remark of Forward
Integration
Forward Integration occurs
when a firm combines with
another one which is in a latter
stage in the production process.
1. It can have a co-ordinated overall planning for
the production.
2. It is easier to collect information about the
customer tastes ( or raw materials)
forward
backward
A garment integrate
with a boutique , what
integration do it call?
If Sassoon integrate
with a firm which
produce soaps, is it a
vertical integration?
Then, what is this
integration called?
A firm integrates with another firm
which produces the related but not
competitive products.
(It refers to the combination of
firms producing related but not
competitive products. )
1. It can reduce risk by product
diversification.
2. This can extend the brand-name
to other products.
3. This can have greater flexibility
in the use of raw materials.
Refers to the last question.
Sassoon integrate with a soap
firm , it is not a vertical
integration . It’s called
Lateral Integration.
Remark on Lateral Integration
It occurs when firms producing
related but not competitive
products combine together.
E.g. A firm producing Microcomputers combines with a firm
which produces TV sets.
City Bus combined with a bus
making firm , is it an example
of lateral integration?
If Café De coral integrate
with KMB, does this kind of
integration called lateral
integration?
Then, what is this
integration called?
• A firm integrates with another firm
which produces the unrelated
products.
• ( Conglomerate integration refers to
the combination of firms engaging in
different types of production. )
• This can reduce the risk by
diversification.
• This can extend the brand-name to
other products.
• The resources of the firm involved
may be re-developed in a more
profitable way.
The Hong Kong Land Ltd took
over the Dairy Farm Co, Ltd and
developed the estate Chi Fu Fa
Yuen in Pokfulum area of Hong
Kong island.
Remark on Conglomerate
Integration
It occurs when firms
producing unrelated products
combined together.
E.g.Hutchison International Ltd
combined with the Whampoa
Dockuyard Ltd
• A travel agent takes over a
real estate firm. What kind of
integration is this?
A fast-food shop took over a
noodle shop. What type of
integration is this ?
Citic Pacific Ltd (a holding
company with different lines of
business such as trading, airlines,
telecommunications and
construction ) takes over Tai
Cheong Hong ( a food wholesaler
and retailer ). Which type of
integration does this case belong
to?
PLHKS 2000-2001
S.4A students
•
•
•
•
Chao Ngai
4A ( 3 )
Cheung Ming Chu 4A ( 7 )
Lam Oi Kwan
4A (17)
Lam Wing Yan
4A (18)