Vertical Market: What Is A Vertical Market And Why It Matters In Business

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.

Horizontal vs. Vertical Markets

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 vertical market, we can look at the concept of vertical integration and horizontal integration. In a vertically integrated strategy, a company gets closer and closer to the final customer, or perhaps it gets more control over the product manufacturing.

Take the case of Luxottica and how it integrated vertically in the eyewear industry. Luxottica didn’t expand to cover other verticals (for instance, by moving from eyeglasses to footwear) instead it moved vertically by controlling more and more of the manufacturing and distribution process.

On the other hand, think of the case of Alphabet that controls Google. While the company still operates the leading search engine, the search market by definition has grown to cover many verticals (publishing, travel, e-commerce, and many many other small niche markets). This makes Google, in part a horizontal player, therefore, able to cover various niches.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"