Lateral expansion, in
economics
Economics () is the social science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...
, is the growth of a business enterprise through the acquisition of similar companies, in the hope of achieving
economies of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ...
or
economies of scope
Economies of scope are "efficiencies formed by variety, not volume" (the latter concept is "economies of scale"). In economics, "economies" is synonymous with cost savings and "scope" is synonymous with broadening production/services through div ...
. Unchecked lateral expansion can lead to powerful
conglomerates or
monopolies
A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...
.
Related is
vertical expansion, which is the growth of a business enterprise through the acquisition of companies that produce the
intermediate goods needed by the business or help market and distribute its
final goods
A final good or consumer good is a final product ready for sale that is used by the consumer to satisfy current wants or needs, unlike a intermediate good, which is used to produce other goods. A microwave oven or a bicycle is a final good, but ...
. Any such
value chain
A value chain is a progression of activities that a firm operating in a specific industry performs in order to deliver a valuable product (i.e., good and/or service) to the end customer. The concept comes through business management and was fir ...
activities can be acquired through vertical expansion.
Mergers and acquisitions
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