By definition, a horizontal market is a wider market, serving various customer types, needs and bringing to market various product lines. Or a product that indeed can serve various buyers across different verticals. Take the case of Google, as a search engine that can serve various verticals and industries (education, publishing, e-commerce, travel, and much more).
Aspect
Explanation
1. Concept Overview
– A Horizontal Market, also known as a Horizontal Industry or Horizontal Sector, is a market segment or industry that spans across various verticals or specific niches. It involves the sale of products or services that have broad applications and appeal to a wide range of businesses or consumers.
2. Versatility
– The hallmark of a Horizontal Market is its versatility. It offers products or services that can be applied horizontally, meaning they are not limited to a single industry but can be relevant and beneficial across diverse sectors.
3. Broad Customer Base
– Businesses operating in Horizontal Markets often target a broad customer base, including companies from various industries, government organizations, and even individual consumers. They cater to a diverse set of needs and requirements.
4. Product/Service Scope
– The offerings in a Horizontal Market can vary widely, encompassing everything from software applications, IT infrastructure, and office supplies to marketing services, financial solutions, and management consulting. The scope is expansive and adaptable.
5. Economies of Scale
– Companies in Horizontal Markets often benefit from economies of scale due to their ability to serve a large and diverse customer base. They can spread development and marketing costs over a wider audience, potentially reducing the cost per customer.
6. Competition
– Horizontal Markets are typically characterized by intense competition, as numerous providers vie for a slice of the broad market. Competition can lead to innovation, cost-cutting, and a focus on customer service and differentiation.
7. Examples
– Examples of Horizontal Markets include companies that offer office productivity software like Microsoft, cloud computing services like Amazon Web Services (AWS), and online payment platforms like PayPal. These products and services have widespread applications.
8. Marketing Strategy
– Marketing in Horizontal Markets often involves targeting a wide audience through various channels. Companies may emphasize the adaptability, versatility, and ease of integration of their products or services to appeal to a broad range of potential customers.
9. Challenges
– Despite their advantages, companies in Horizontal Markets face challenges in maintaining relevance across multiple industries. They must continually innovate and adapt to changing customer needs and technological advancements.
10. Growth Potential
– Horizontal Markets offer significant growth potential due to their expansive customer base. Successful companies in this space can experience rapid expansion and scalability, provided they effectively address the diverse needs of their customers.
11. Vertical Integration
– Some companies in Horizontal Markets may pursue vertical integration by offering specialized solutions or customization services to cater to specific vertical industries. This approach allows them to capture additional market segments.
12. Market Dynamics
– Market dynamics in Horizontal Markets are influenced by macroeconomic factors, technological advancements, and industry trends. Understanding these dynamics is crucial for companies looking to thrive in this space.
13. Industry Resilience
– Horizontal Markets can exhibit resilience during economic downturns because they serve diverse industries. While specific verticals may experience fluctuations, a broad customer base can provide stability and opportunities for growth.
In business, vertical integration means a whole supply chain of the company is controlled and owned by the organization. Thus, making it possible to control each step through customers. in the digital world, vertical integration happens when a company can control the primary access points to acquire data from consumers.Horizontal integration refers to the process of increasing market shares or expanding by integrating at the same level of the supply chain, and within the same industry. Perhaps, a manufacturer who buys or merges with another manufacturer, in the same industry, is an example of horizontal integration. Horizontal integration refers to the process of increasing market shares or expanding by integrating at the same level of the supply chain, and within the same industry. Vertical integration happens when a company takes control of more parts of the supply chain, thus covering more parts of it.
To understand the concept of a horizontal market, we can look at vertical integration and horizontal integration. In the case of vertical integration, a player moves along the supply chain to either get closer and control more and more the manufacturing process (backward chaining) or by moving downstream to get closer to the final customers.
Key Highlights
Vertical Integration:
Vertical integration involves a company controlling and owning the entire supply chain, from raw materials to the end consumer.
This approach allows the company to have control over each step of the process, providing potential advantages in terms of efficiency, quality, and cost management.
In the digital world, vertical integration includes having primary access points to gather consumer data.
Horizontal Integration:
Horizontal integration focuses on expanding within the same industry and at the same level of the supply chain.
Companies engage in horizontal integration to increase market share or broaden their reach within their industry.
An example is when a manufacturer merges or acquires another manufacturer in the same industry.
Google as an Example:
Google serves as an example of horizontal integration in the digital space.
It offers a search engine that caters to various industries and verticals such as education, e-commerce, travel, publishing, and more.
This wide applicability demonstrates how a single product can serve diverse market segments.
Vertical vs. Horizontal Integration:
Vertical integration involves covering more parts of the supply chain, while horizontal integration focuses on expanding within the same industry.
Vertical integration can be either backward (moving closer to manufacturing) or forward (getting closer to customers).
Horizontal Market:
The concept of a horizontal market is illustrated through both vertical and horizontal integration.
Vertical integration involves moving along the supply chain to control different stages, while horizontal integration expands within the same industry.
Related Concepts
Description
When to Apply
Horizontal Market
A Horizontal Market targets diverse industries or sectors with common needs. Unlike vertical markets, it offers solutions applicable across sectors, making it versatile and scalable.
– Product Development: Identify opportunities in horizontal markets to develop versatile products with broad appeal. – Market Expansion: Target horizontal markets for business diversification. – Competitive Advantage: Leverage expertise to gain edge in diverse sectors. – Risk Mitigation: Explore horizontal markets for resilience. – Partnership Opportunities: Collaborate for effective market penetration.
Market Segmentation
It divides a market into segments based on characteristics like demographics or behavior. In horizontal markets, this helps tailor offerings to diverse customer groups.
– Targeted Marketing: Tailor campaigns for diverse segments. – Product Customization: Align products with varied segment needs. – Market Analysis: Understand trends and dynamics for strategy. – Customer Relationship: Engage with personalized offerings. – Market Expansion: Identify untapped segments for growth.
Scalability
Scalable solutions accommodate growth without sacrificing performance. In horizontal markets, they offer flexibility across sectors, adapting to changing demands efficiently.
– Business Growth: Develop adaptable solutions for market expansion. – Resource Optimization: Invest in scalable infrastructure for efficiency. – Market Penetration: Offer versatile solutions for broad adoption. – Competitive Advantage: Differentiate with consistent performance. – Innovation: Foster scalable innovations for long-term relevance.
Cross-Selling
It offers additional products or services to existing customers based on their preferences or past purchases. In horizontal markets, cross-selling expands offerings across diverse segments, maximizing revenue and customer value.
– Customer Relationship: Deepen connections with relevant offerings. – Revenue Diversification: Expand revenue streams with complementary products. – Upselling: Increase sales value through related offerings. – Data Analysis: Identify opportunities for personalized recommendations. – Sales Optimization: Enhance effectiveness through targeted offerings.
Channel Partnerships
Collaborating with distributors or alliances expands market reach and enhances offerings. In horizontal markets, these partnerships facilitate access to diverse sectors, driving growth and market presence.
– Market Expansion: Partner for access to new sectors or regions. – Distribution Reach: Enhance accessibility with strategic alliances. – Product Portfolio: Augment offerings for broader appeal. – Resource Optimization: Utilize partner resources for efficiency. – Strategic Alliances: Form synergistic partnerships for mutual benefit.
Market Research
Comprehensive data analysis informs strategies tailored to diverse customer segments. In horizontal markets, research identifies opportunities and trends, guiding effective decision-making and market entry.
– Opportunity Identification: Uncover growth potential and trends. – Competitive Analysis: Understand market dynamics and rivals. – Customer Insights: Personalize offerings for varied segments. – Risk Assessment: Mitigate challenges through data-driven strategies. – Strategic Planning: Align objectives with market opportunities for success.
Product Differentiation
It highlights unique features or value propositions to distinguish products from competitors. In horizontal markets, differentiation attracts diverse segments, enhancing competitiveness and market share.
– Value Proposition: Emphasize unique benefits for customer appeal. – Innovation: Drive differentiation through product advancement. – Brand Positioning: Establish distinct market presence for recognition. – Customer Segmentation: Tailor offerings for varied segment needs. – Competitive Advantage: Stand out with superior value and innovation.
The supply chain is the set of steps between the sourcing, manufacturing, distribution of a product up to the steps it takes to reach the final customer. It’s the set of step it takes to bring a product from raw material (for physical products) to final customers and how companies manage those processes.
A classic supply chain moves from upstream to downstream, where the raw material is transformed into products, moved through logistics and distribution to final customers. A data supply chain moves in the opposite direction. The raw data is “sourced” from the customer/user. As it moves downstream, it gets processed and refined by proprietary algorithms and stored in data centers.
Distribution represents the set of tactics, deals, and strategies that enable a company to make a product and service easily reachable and reached by its potential customers. It also serves as the bridge between product and marketing to create a controlled journey of how potential customers perceive a product before buying it.
A distribution channel is the set of steps it takes for a product to get in the hands of the key customer or consumer. Distribution channels can be direct or indirect. Distribution can also be physical or digital, depending on the kind of business and industry.
In business, vertical integration means a whole supply chain of the company is controlled and owned by the organization. Thus, making it possible to control each step through customers. in the digital world, vertical integration happens when a company can control the primary access points to acquire data from consumers.
Horizontal integration refers to the process of increasing market shares or expanding by integrating at the same level of the supply chain, and within the same industry. Vertical integration happens when a company takes control of more parts of the supply chain, thus covering more parts of it.
By definition, a horizontal market is a wider market, serving various customer types, needs and bringing to market various product lines. Or a product that indeed can serve various buyers across different verticals. Take the case of Google, as a search engine that can serve various verticals and industries (education, publishing, e-commerce, travel, and much more).
A vertical or vertical market usually refers to a business that services a specific niche or group of people in a market. In short, a vertical market is smaller by definition, and it serves a group of customers/products that can be identified as part of the same group. A search engine like Google is a horizontal player, while a travel engine like Airbnb is a vertical player.
When entering the market, as a startup you can use different approaches. Some of them can be based on the product, distribution, or value. A product approach takes existing alternatives and it offers only the most valuable part of that product. A distribution approach cuts out intermediaries from the market. A value approach offers only the most valuable part of the experience.
Backward chaining, also called backward integration, describes a process where a company expands to fulfill roles previously held by other businesses further up the supply chain. It is a form of vertical integration where a company owns or controls its suppliers, distributors, or retail locations.
A market type is a way a given group of consumers and producers interact, based on the context determined by the readiness of consumers to understand the product, the complexity of the product; how big is the existing market and how much it can potentially expand in the future.
Psychosizing is a form of market analysis where the size of the market is guessed based on the targeted segments’ psychographics. In that respect, according to psychosizing analysis, we have five types of markets: microniches, niches, markets, vertical markets, and horizontal markets. Each will be shaped by the characteristics of the underlying main customer type.
According to the book, Unlocking The Value Chain, Harvard professor Thales Teixeira identified three waves of disruption (unbundling, disintermediation, and decoupling). Decoupling is the third wave (2006-still ongoing) where companies break apart the customer value chain to deliver part of the value, without bearing the costs to sustain the whole value chain.
Disintermediation is the process in which intermediaries are removed from the supply chain, so that the middlemen who get cut out, make the market overall more accessible and transparent to the final customers. Therefore, in theory, the supply chain gets more efficient and, all in all, can produce products that customers want.
Reintermediation consists in the process of introducing again an intermediary that had previously been cut out from the supply chain. Or perhaps by creating a new intermediary that once didn’t exist. Usually, as a market is redefined, old players get cut out, and new players within the supply chain are born as a result.
As startups gain control of new markets. They expand in adjacent areas in disparate and different industries by coupling the new activities to benefits customers. Thus, even though the adjunct activities might see far from the core businessmodel, they are tied to the way customers experience the whole businessmodel.
The bullwhip effect describes the increasing fluctuations in inventory in response to changing consumer demand as one moves up the supply chain. Observing, analyzing, and understanding how the bullwhip effect influences the whole supply chain can unlock important insights into various parts of it.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Consumer-to-manufacturer (C2M) is a model connecting manufacturers with consumers. The model removes logistics, inventory, sales, distribution, and other intermediaries enabling consumers to buy higher quality products at lower prices. C2M is useful in any scenario where the manufacturer can react to proven, consolidated, consumer-driven niche demand.
Transloading is the process of moving freight from one form of transportation to another as a shipment moves down the supply chain. Transloading facilities are staged areas where freight is swapped from one mode of transportation to another. This may be indoors or outdoors, depending on the transportation modes involved. Deconsolidation and reconsolidation are two key concepts in transloading, where larger freight units are broken down into smaller pieces and vice versa. These processes attract fees that a company pays to maintain the smooth operation of its supply chain and avoid per diem fees.
Break bulk is a form of shipping where cargo is bundled into bales, boxes, drums, or crates that must be loaded individually. Common break bulk items include wool, steel, cement, construction equipment, vehicles, and any other item that is oversized. While container shipping became more popular in the 1960s, break bulk shipping remains and offers several benefits. It tends to be more affordable since bulky items do not need to be disassembled. What’s more, break bulk carriers can call in at more ports than container ships.
Cross-docking is a procedure where goods are transferred from inbound to outbound transport without a company handling or storing those goods. Cross-docking methods include continuous, consolidation, and de-consolidation. There are also two types of cross-docking according to whether the customer is known or unknown before goods are distributed. Cross-docking has obvious benefits for virtually any industry, but it is especially useful in food and beverage, retail and eCommerce, and chemicals.
The Toyota Production System (TPS) is an early form of lean manufacturing created by auto-manufacturer Toyota. Created by the Toyota Motor Corporation in the 1940s and 50s, the Toyota Production System seeks to manufacture vehicles ordered by customers most quickly and efficiently possible.
Six Sigma is a data-driven approach and methodology for eliminating errors or defects in a product, service, or process. Six Sigma was developed by Motorola as a management approach based on quality fundamentals in the early 1980s. A decade later, it was popularized by General Electric who estimated that the methodology saved them $12 billion in the first five years of operation.
Scientific Management Theory was created by Frederick Winslow Taylor in 1911 as a means of encouraging industrial companies to switch to mass production. With a background in mechanical engineering, he applied engineering principles to workplace productivity on the factory floor. Scientific Management Theory seeks to find the most efficient way of performing a job in the workplace.
Poka-yoke is a Japanese quality control technique developed by former Toyota engineer Shigeo Shingo. Translated as “mistake-proofing”, poka-yoke aims to prevent defects in the manufacturing process that are the result of human error. Poka-yoke is a lean manufacturing technique that ensures that the right conditions exist before a step in the process is executed. This makes it a preventative form of quality control since errors are detected and then rectified before they occur.
A Gemba Walk is a fundamental component of lean management. It describes the personal observation of work to learn more about it. Gemba is a Japanese word that loosely translates as “the real place”, or in business, “the place where value is created”. The Gemba Walk as a concept was created by Taiichi Ohno, the father of the Toyota Production System of lean manufacturing. Ohno wanted to encourage management executives to leave their offices and see where the real work happened. This, he hoped, would build relationships between employees with vastly different skillsets and build trust.
Jidoka was first used in 1896 by Sakichi Toyoda, who invented a textile loom that would stop automatically when it encountered a defective thread. Jidoka is a Japanese term used in lean manufacturing. The term describes a scenario where machines cease operating without human intervention when a problem or defect is discovered.
The andon system alerts managerial, maintenance, or other staff of a production process problem. The alert itself can be activated manually with a button or pull cord, but it can also be activated automatically by production equipment. Most Andon boards utilize three colored lights similar to a traffic signal: green (no errors), yellow or amber (problem identified, or quality check needed), and red (production stopped due to unidentified issue).
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
