What Is a Horizontal Market?
Let me explain what a horizontal market is. It's a market that's diversified, meaning the products or services created can meet the needs of more than one industry. In a horizontal market, the output is widely used and in high demand, so producers face little risk in terms of demand for their output. However, you should know that they typically deal with a lot of competition within the industry.
Key Takeaways
Horizontal markets involve broad, diversified production and consumption across multiple sectors. Think of conglomerates—they operate in several market segments and draw in a wide customer base, which is a prime example of working in a horizontal market. This setup contrasts with vertical markets, where the focus is on a specific product or a niche demographic.
Understanding Horizontal Markets
When it comes to profitability for companies in a horizontal market, it's more about internal factors than external ones, since their products are commonly used. Take the demand for pens as an example—pens are needed in basically every industry, so success or failure for pen producers depends on their own decisions and factors, not on big macro events.
If you're running a business in a horizontal market, you're aiming to appeal to a wide demographic that's not really niche. For instance, a reseller of general office furniture isn't going to target other office furniture specialists. Instead, they'll go after all kinds of businesses that need offices, like accounting firms, travel agencies, or insurance companies. Their market is simply anyone who requires office furniture.
You'll see examples of horizontal markets in conglomerates and diversified manufacturing companies.
Horizontal Markets vs. Vertical Markets
Vertical markets are the opposite of horizontal ones—they zero in on a very niche sector or demographic. For example, a manufacturer of solar panel technology that makes nothing else would sell to solar contractors and installers, meaning they're dealing with businesses that compete against each other.
Characteristics of Horizontal Markets
- Defined by a demographic feature that applies to different kinds of businesses
- Broader than vertical markets
- Usually cooperative and seeking joint opportunities
- An opportunity to market to a general audience
Characteristics of Vertical Markets
- A group of businesses that share the same industry
- Always specific and cannot cross industries
- Often competing against each other
- An opportunity to market to a specific audience
Special Considerations
Even though these market types have clear differences, your business's operations might serve both horizontal and vertical markets at the same time. For example, a shoe company could market horizontally to everyone in its local area, while also marketing vertically to anyone in need of new shoes. Similarly, a children’s book publisher could target horizontally to all literate people or vertically to children and parents.
You should know that identifying which horizontal and vertical markets your company wants to serve can boost its marketing success. By defining your markets, you can advertise more effectively and meet the needs of those markets, whether in a general or specific way.
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