Integration in the public sector: HM Revenue and Customs
A HMRC case study

Page 3: Types of integration

The three main types of integration for organisations are described according to the direction of the integration.

Vertical integration

Vertical integration

This occurs when one organisation takes over another at an earlier or later stage of production or work. For example, if HMRC bought up some of the businesses that supply it with paper, this would be described as backward vertical integration. Backward means that integration is at an earlier stage of production. If HMRC was to take over some of the work carried out by accountants in calculating tax payments for taxpayers, this would be called forward vertical integration. Forward means the integration occurs in part of the process that is nearer to the customer (in this case, the tax payer).

The main reasons for forward vertical integration are to make sure that a business:

  • has somewhere to sell its product
  • controls where and how it sells its product.

The main reasons for backward vertical integration are to ensure that a business:

  • can get supplies
  • has control over the quality of supplies.

Horizontal integration

This occurs when one organisation integrates with another business at the same stage of production or work. The creation of HMRC from two tax-collecting bodies is an example of horizontal integration. The main reasons were to:

  • bring together people doing similar jobs
  • give customers a better service
  • achieve lower costs.

Conglomerate integration

This occurs when a business merges with another that produces a completely different product. An example might be HMRC integrating with a cake maker. A major reason for this is to try and spread risks by producing more than one product. For example, many tobacco firms have bought businesses in areas such as hotels and leisure.

HMRC | Integration in the public sector: HM Revenue and Customs

Downloads

You can download resources for this case study below

More from HMRC

Below are external web links provided by HMRC in relation to their business activities.

Newsletter

Subscribe to our newsletter for current business news including lesson plans and activity ideas.

Share this website

This page and contents, ©2014 The Times 100, is intended to be viewed online and may not be printed. Please view this page at http://bizcas.es/UI8rXo.