Forward Integration Essay

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FORWARD INTEGRATION
It is very common for corporations to acquire their supply chains vendors or create facilities for the distribution of their products. This process of acquiring existing supplier or creating own distribution chain is referred to as forward integration. The process of forward integration involves integrating the supply chain within the corporate family.
Forward Integration is a part of the vertical integration which is best understood by applying Michael Porters Value Chain Model. Vertical integration refers to the degree of integration between a firm’s value chain and the value chain of its suppliers and distributors. Full Backward Integration happens when a company incorporates the value chain of a supplier into its …show more content…

While excuse may be granted for shortcomings unsuccessful efforts made in reducing cost of raw materials storage, that of the finished goods should not be forgiven, rather, attributed to inefficiency on the part of management. One of the major strategies used by manufacturing companies is to aggressively push their product to the final consumer. With this, the quantity of finished goods to be held will greatly reduce and so also their storage cost. To facilitate the timely distribution of their finished goods to consumer, companies permanently engaged some major distributors as mini-depot for further distribution to other smaller distributors within their localities. While major distributors also sells in bulk to other distributors within their locality and also engaged salesmen, these other distributor too sells in smaller quantities to retailers and some also engaged bicycle boys to sell directly to the final consumers. All the suppliers and actors on the chain of distribution are rewarded with commission on sales (distributors) or salaries plus commissions for salesmen and …show more content…

However, whether planned or spontaneous, temporary forward integration is usually embarked upon as an addition and not a replacement for non-existence of forward integration.
Planned temporary forward integration mostly occurred during sales promotions and trade fairs or trade exhibitions. These are planned for as part of the company’s programme for the year. Also planned temporary forward integration programmes are engaged in to introduce (penetrate) product to some major cities where their presence is not known or much felt. Companies sometimes retained their presence in these areas for some period till they are able to secure distributors.
However spontaneous temporary forward integration occurred sometime as reaction to government order like that given to some major manufacturing companies (PZ, Unilever etc) during Buhari/Idiagbo regime to orgarnise direct sales of essential goods to final consumers to beat hoarding created by some of their major distributors. Also companies engaged in spontaneous temporary forward integration to fight competitors’ expansion programmes or increasing area

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