Difference between Horizontal Combination and Vertical Combination

Difference between Horizontal and vertical combination can be discussed under the following points :

(i) Competition in the raw material market: In case of horizontal combination, there is a close competition  for the raw materials among the business units.
           But, in case of vertical combination, there is no competitions in the raw materials market. It assures greater security with regard to the supply and cost or raw materials as well as disposal of intermediate products. It has self sufficient units as far as supply of raw material is concerned.

(ii) Specialisation: In case of horizontal combination every member produces the same final product. There is no specialisation as such. Every business unit is equally developed. They have to depend on outside firms.
      But, in case of vertical combination, every member is to devotes to particular section and specialises in that production. It can produce bettrer articles at cheaper prices.

(iii) Competition in marketing: Horizontal combination is the best solution to eliminate unhealthy competition in the process of marketing through common plans of marketing, advertising and distribution.
     But vertical combination cannot get rid of competition in distribution as fast as ultimate products are concerned.

(iv) Monopoly over supply: Horizontal combination is the best instrument to secure greater and greater control over the market. It can lead to monopoly prices which are fixed to suit high cost producers. Combining units can have maximum profit on sale.
     But, vertical combination cannot secure monopoly over market supply.

(v) Dependence on intermediate for final articles: In case of horizontal combination, firms either produce all the required things or get them from different sources. As they have alternative sources of supply, the stoppage of supply, the stoppage of supply in one case cannot affect the working of others and others units in the combination can continue their production.
    But, in case of vertical combination, if firms producing intermediate articles fail or their suppliers are finished, all successive stages of production are at stand still. No production of final article is possible and production will suffer.

(vi) Autonomy: In horizontal combination, there is centralisation only in the branch of marketing and not necessarily in the branch of production. Member units under horizontal combination are free in their internal affairs. They enjoy full internal autonomy and independence.
    But, in case of verticle combination, member units loss their independence. They have to look to the central body and they are guided by such a body even in routine matters. A member units has no internal autonomy. There is complete centralization and the member units is not free to deal with the local problems in its own way.


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