What is horizontal integration?

• A. Occurs when two businesses from the same sector become one
• B. Acquisition of a firm in a different sector
• C. A franchising agreement across borders
• D. A licensing arrangement

Answer: (A)

Horizontal integration happens when two companies in the same industry merge or one buys the other, creating a larger business that operates at the same level of the value chain. The main aim is to increase market share, reduce competition, and achieve economies of scale—lowering average costs through things like bigger purchasing power and spreading fixed costs over a larger output. The other growth paths described are different: acquiring a firm in a different sector is diversification into new markets or products; franchising across borders is expanding via a franchise model; licensing involves letting another firm use your intellectual property in exchange for fees.