Vertical Integration Strategy

MGMT 510-90

Assignment 6

By Abilash Sagar HUID: 156822

Chapter 9 questions:

1. Upper or higher level management makes the strategies at the corporate level. Capital investments, recruiting and staffing, other business processes and possessions are typically recognized at the corporate level in Multi-business model firms. Decisions to whether or not the firm should participate with other corporations or acquire others companies are part of the corporate level strategy. They conduct advertising strategies that can be repeated across the corporation for different products and services.

2. Companies leverage horizontal integration to combine or obtain other competitive firms that is in the same market. It promotes business in size, upsurge merchandize

c) Economies of scale as size increases and price per unit of production decreases.

Disadvantages: a) High monopoly in the market, can overcharge for the product and customer may lose loyalty. b) Difficult to integrate the work culture throughout the merged firm c) Merged company may fail if synergy is not established and the product becomes outdated.

3. Vertical integration is when company is aiming to control many stages of supply chain. The four different stages of supply chain are Commodities, Manufacturing, Distribution and Retail. A company is said to be forward integration when at the beginning of the supply chain owns a downstream stage. Similarly for backward integration.

Vertical integration takes away the bargaining power of supplier and dealer. It helps in reducing the transportation costs, and improves delivery mechanism.

Advantages:

a. Do not have to rely on suppliers for raw materials.

b. Improves economies of scale.

c. Low prices for customers.

Disadvantages:

a. Unable to adapt to new systems, or methods. Inflexible to new trends.

b. Very expensive. One should do vertical integration when most of the market is addressed by the

A company must estimate its chances of viability on opening up new businesses to maximize its investments. Company must be supportive of change and alterations in its approach with time which guarantees the company will lead the market with competitive advantage. If company overestimates a new spearhead or alterations of the work carried out, it can lead to diversification failure. Sometimes this diversification can lead to conflicting counter progression within industry which leads to failure. Other times diversification can become costly, for an investor if he invests in multiple dissimilar businesses. Diversification can bring down the progression made by the existing firm if synergy is not attained.

4. Acquisition is the most preferred method used nowadays by a company to enter a new industry especially if the new industry has high barriers for new entry. Buying in shares of a new company or acquiring the company by financial means enables a firm that all the abilities which otherwise would be difficult to obtain.

Advantages:

a. Increased revenue and economy of scale by increasing value to the combined