Vertical and Horizontal Integration in Port Development

In economic theory vertical integration involves an entity, such as a manufacturer, trying to acquire or take control of the activities that are upstream or downstream of the stage it is involved in. So, a manufacturer may attempt to acquire some of its suppliers or the distributors or retailers it is selling to. Horizontal integration involves the acquisition of entities that perform a similar function either as a process of consolidation or for the penetration of new markets. A port authority is a good example of a vertically integrated structure that provides a wide array of services connecting the foreland and the hinterland. Port holdings, such as Hutchison Port Holdings or Dubai Ports World, are attempts at horizontal integration by acquiring stakes at port terminals in a variety of markets. A maritime shipping company that ventures into the management of port terminals performs concomitantly a process of vertical and horizontal integration since it is expanding geographically but also from maritime towards inland services (e.g. Maersk / APM Terminals). In all cases, the outcome is a more integrated and efficient commodity chain as maritime shipping, port terminal operations, inland access and even freight distribution centers.