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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 Hyperma

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Introduction

Task 2A Explain what the term's vertical and horizontal integration mean. 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 name of EasyJet. Vertical integration is when an organisation own companies on two or more levels of the buying chain. Examples of this can be found within "The Big 4," all of them own an airline, travel agent and a tour operator. The companies have until recently used different names for their travel agency, airlines and tour operators, but now they are power branding their companies so that customers can see whom they are booking with. ...read more.

Middle

An example of this is shown above, Thomson brought the airline, Britannia Airways and also Lunn Poly, a travel agent. This shows how Thomson has been vertically integrated. As Thomson brought Britannia Airways it has allowed them to offer customers lower fares. This means that the tour operator is making more profit. The same is not true for travel agents, they are paid a low rate of commission, and therefore most of profit will go to the tour operator. Integration is good as it allows the organisation to control their pricing and communicate well with companies on all levels of the chain. Horizontal integration is when an organisation buys another organisation on the same level of the buying chain. A good example of this, when "Go" a budget airline owned by British Airways was taken over by EasyJet in 2002. When the companies merged EasyJet "power branded" this means that all of the logos and names that Go had used previously where replaced by the EasyJet name and logo. ...read more.

Conclusion

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 companies take when integrating, is small compared to independent organisations. Larger organisations, such as Travelcare make a bigger profit and therefore it will not affect the organisation, if the merge doesn't work. Smaller companies like Southall Travel may have their business ruined if it doesn't work. ?? ?? ?? ?? Tim Miskelly - 30069489 Task 2 Unit 1 ...read more.

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