Alternative Strategies Essays
1.0 Integration Strategies.
Forward integrations, backward integrations, and horizontal integrations are sometimes collectively referred to as vertical integrations strategies. Vertical integrations strategies allow a firm to gain control over distributors, supplier and competitors. The degree to which a firm owns its upstream suppliers and its downstream buyers is referred to as vertical integration. Because it can have a significant impact on a business unit's position in its industry with respect to cost, differentiation, and other strategic issues, the vertical scope of the firm is an important consideration in corporate strategy. Expansion of activities downstream is referred to as forward integration, and …show more content…
Example if Intel acquires Dell, it is a forward integration because it is an acquisition of manufacturer by a supplier. If Dell acquires a distributor of computers such as BestBuy it will be a forward integration too since it is an acquisition of a distributor by a manufacturer.
Six guidelines when forward integration may be an especially effective strategy: * When an organization’s present distributors are especially expensive or unreliable, or incapable of meeting firm’s distribution needs. * When the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward. * When an organization competes in an industry that is growing and expected to continue to grow markedly. * When an organization has both the capital and human resources needed to manage the new business. * When the advantages of stable production are particularly high. * When present distributors have high profit margins.
1.2 Backward Integration
Both manufacturers and retailers purchase needed materials from suppliers. Backward integration is a strategy of seeking ownership or increased control of a firm’s suppliers. This strategy can be especially appropriate when a firm’s current suppliers are unreliable, too costly, or cannot meet the firm’s needs. Backward