Vertical and Horizontal Integration in Port Development and Operations
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 try 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. Such a process can also take place in the port sector so that the transport chain becomes better integrated.
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. If inland facilities such as inland (dry) ports and corridors are developed, a form of port regionalization is emerging. 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 transport chain that includes maritime shipping, port terminal operations, inland access and even freight distribution centers (as a service to customers).