A horizontal market supplies many industries, providing advantages such as flexibility and the ability to withstand changes. Examples include computer software and plastic pellets, with more competition and constant demand. Horizontal markets benefit industries by providing access to a variety of vendors and competitive prices.
A horizontal market is a market that supplies many industries, in contrast to a vertical market that supplies only one. There are a number of advantages to developing products and services that can be offered in the horizontal market, and many companies make diversifying their offerings a priority when they are in the research and development stages. Companies that are flexible enough to offer products in a horizontal market are often better able to withstand changes in the economic climate, as well as industry-wide changes that can lead some industries to abandon certain types of products and services.
An example of a horizontal market is the market for computer software. People in a wide range of industries, including individual consumers, education professionals, governments, and businesses, need software. Something like a word processing program can be used by a variety of people and can be sold on the horizontal market. In contrast, a point-of-sale program designed specifically for supermarkets is an example of a vertical market item because it is targeted at a single industry.
Plastic pellets are another example. Numerous industries need raw plastic for manufacturing. They can get pellets in a variety of sizes with different compositions from numerous suppliers. Suppliers, in turn, can market their products to many different potential buyers, ensuring a constant supply of customers and orders. These highly generalized products are useful to people in different industries and positions.
There is usually more competition in a horizontal market because there are more potential buyers. Conversely, vertical markets are more likely to be dominated by a limited number of vendors. These vendors may also fight for market share and may struggle with cash flow. In horizontal markets, the demand is constant and can even increase when new markets are found for the products. This keeps profits consistently high and can allow a company to develop more specialized products to market alongside its general products.
Horizontal markets cross industry boundaries. For industries, they provide access to a number of vendors offering a variety of products at different price points. Companies have more options and can integrate these options into their long-term plans. Prices can also be more competitive, since suppliers are aware that customers can always turn to a low-cost source of goods. This provides an incentive for efficiency and low prices, which benefits the market as a whole.
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