When one business organization involved with other business which is related with its main function or objective but this task is different than it is called lateral combination, some writers think that lateral and circular combination are same. But there are some functional and other differences. This combination in business refers to the combination of firms engaged in the manufacture of allied products. It is the combination of firms producing products which are connected in some way.
S.S. Sarker and other said that “It is the combination of firms of producing different types of these commodities but being allied in one way or the other.”
Generally, the lateral combination is two types. There are:
Convergent lateral Combination: Wherever one certain product one produced by various types of the element of production then elements and producers may create a combination it is called convergent lateral combination. For example, if the raw materials are used in the printing press like- machine, inks, papers combined into the business combination will be called the Convergent lateral Combination.
Divergent Combination: Wherever combination is made among the organizations there one engaged in producing, different products from same raw-materials it is called divergent combination. For example, the combination of the wheat depending organizations like the Bakery, Restaurants, Hotels, Wheat Mills, Biscuits factory is called the Divergent Combination.