Vertical and Horizontal Integration

During the so-called Gilded Age (the period of US history between Reconstruction and the Progressive Era), Americans witnessed the rise of big business. Industrial entrepreneurs, such as Andrew Carnegie and John D. Rockefeller, nearly monopolized the steel and oil industries by growing their businesses to a scale beyond what would have been thought possible just a few decades earlier.

Andrew Carnegie's Vertical Integration

Andrew Carnegie stands outside of one of his steel mills (mage by Grok)

In order to make his steelmaking operation more efficient, Andrew Carnegie grew his business through a process of vertical integration by acquiring as many elements of his supply chain as possible. Since iron is necessary to make steel, Carnegie bought iron mines so that he could control the steelmaking process from the moment the raw iron ore was mined from the earth. This put Carnegie in a position where he didn't have to deal with any middle men who could have controlled and profited from the process at his expense.​

John D. Rockefeller's Horizontal Integration

While Carnegie expanded his business vertically, John D. Rockefeller integrated the Standard Oil Company horizontally by buying out his competitors. When Rockefeller got started, there were around 50 oil refineries in the United States that were independently owned. By buying out his competitors one by one, Rockefeller gained the ability to exercise almost total control of the oil refining process across the United States. He owned over 90 percent of the oil refineries in the United States by 1900.

John D. Rockefeller reluctantly poses for a photo outside of one of his oil refineries (image by Grok)

Comparing Vertical and Horizontal Integration

Vertical and Horizontal Integration Comparison Table

Contemporary Examples of Vertical and Horizontal Integration

Large corporations continue to practice both vertical and horizontal integration today. In the 1980s, PepsiCo bought several fast-food restaurants, including KFC and Taco Bell, in order to have guaranteed outlets for the distribution of their products (PepsiCo has since divested from owning these restaurant chains). In 2012, Facebook acquired Instagram, an up-and-coming competitor in the social media space. By buying out a direct competitor, Facebook instantly made itself more relevant with teens who preferred Instagram's more mobile-friendly format.

This educational content correlates with Topic 6.6 (The Rise of Industrial Capitalism) in the AP® US History Course and Exam Description. AP® is a trademark registered by the College Board, which is not affiliated with, and does not endorse, this website.

Lecture on Vertical and Horizontal Integration

Many years ago, one of my US history students recorded an improvised outdoor mini-lecture, in which I explained the concepts of vertical and horizontal integration using the human body (specifically the children's movement-oriented song, "Head, Shoulders, Knees, and Toes").

Click on the video link to see me explaining this concept to my students.