In this discussion we are looking at vertical and horizontal integration the first thing is they different yet have the same agenda. They are trying to move the company towards a competitive advantage in the market. The vertical integration the company takes on several roles. Commodities, manufacturing, distribution, and retail. They assume the role of at least two of the four roles of these four areas of the supply chain. They have their own label, and this is the way they retail their products. Netflix is a good example: with the fact they produce content to be aired by their own company. There are five advantages and four disadvantages:
It does not have to rely on suppliers. Their beginning capital is high.
They take advantage of the supplier market power. They have less flexibility.
They can give economies to scale. Problems with focus.
Knows what is selling well. The clash of cultures can lead to
The lower prices. Misunderstanding, conflict, and
Lost of productivity.
(Five reasons Companies Go Vertical) by Kimberly Amadeo http://www.thebalance.com/what-is-vertical-integration-3305807
Horizontal Integration is different because it stays within the confounds of the same industry to get more strength within. The goal for this company is for growth, to increase its differentiation achieve economies to scale, reduce competition or access new markets. This is achieved through mergers or acquisitions. The knowledge of merger is two companies becoming one, acquisitions is the purchase of another company. Then there is the hostile takeover is taking over a company against it desires. The best example: Is amazon.com taking over Whole Foods.
Lower Costs Destroyed Value
Increase Differentiation Legal repercussions
Increased market power Reduced flexibility
Access to new markets
(Horizontal Integration? Strategic Management Insight
As this shows they are for the company to gain in the markets, to obtain competitive advantage in the market of a parent company. The measure of which becomes a value to company depends on the cost and the needs of the company.
The diversification of a company is used to reduce the volatility to offset loses that may have been acquired at some level. This puts investment into several areas instead of one hoping for the gains to supersede the loses. This is used basically for unsystematic risks that affect one or a small group of companies. This is not a risk that is within the market of the company in question.
Diversification Definition-Overview Definition, and Strategy http://www.corporatefinanceinstitute.com/…/diverification
If the target that the company is utilized properly, and the company is doing well in the country it is in it may not be the way to go. The clientele you have won’t change as far as target consumers. Yet, with technology it is easier than ever before. This can give new branding opportunities it can help find customer and new prospects. The digest fall back is it going to be something other cultures will use. The marketing will have to go in a different direction because of the different cultures.
Advantages & Disadvantages of a Global Strategy By Sampson Quain http://www.smallbusiness.chron.com/advantages-disadvantages …
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