1. What are the differences between horizontal and vertical boundaries of the firm? Integration determines the ownership and control of assets, and it is through ownership and control that firms are able to exploit contractual incompleteness. It determines who gets control resources, make decisions, and allocate profits when contracts are incomplete and trading partners disagree. Horizontal integration is the process of acquiring or merging with industry competitors (ex. acquisitions and mergers) to increase market share. Profits and profitability increase when horizontal integration: • Lowers the cost structure and creates increasing economies of scale • Increases product differentiation: product bundling/total solution/cross selling • Replicates the business model in new market segments within the same industry • Reduces industry rivalry by eliminating excess capacity in the industry • Increases bargaining power and gaining greater control Vertical integration is the process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company’s or entity’s power in the marketplace. Vertical integration differs across industries, firms within the same industry, and transactions within the firm. A company may expands its operations backward into industries that produces inputs to its products or forward into industries that utilize, distribute or sell it products. Types of Vertical Integrations: • Backward Integration Company expands its operations into an industry that produces inputs to the company’s products. • Forward Integration Company expands into an industry that uses, distributes, or sells the company’s products. • Full Int... ... middle of paper ... ... and incentives to implement strategy. The importance of structure persists even in the face of the growth of the internet, globalization, and changing demographics of the workforce. Types of Organizational Structures: • The unitary functional structure (U-form) • The multidivisional structure (M-form) • The matrix structure • The network structure The U-form structure used to allow firms to exploit the economies of scale in production marketing and distribution. When firms began to diversify in the 20th century the U-form became cumbersome and M-form emerged as a better alternative. The M-form lead to the duplication of activities, when firms expanded globally, incorporating international divisions into their structure. As firms attempt to balance local responsiveness with global economies, a mix of matrix form and network form help create flexible organizations.
This essay examines the vertical chain of the recent strategic alliance of BlackBerry and Foxconn. The examination utilizes the make-or-buy issue tree to uncover the strategic and economic rationale for the vertical chain. The essay then goes on to evaluate the vertical chain using the concepts of Transaction Cost Economics, revealing any potential economic hazards that could have a negative impact on the efficiency and effectiveness of the vertical chain.
Horizontal integration brings organizations under one organization, and system. Vertical integration brings together all or part of a production procedure under one management, the fundamental principle of vertical integration is supplying a set of health care services to satisfy the needs of individuals in a specific group.
The Meaning of Vertical and Horizontal Integration Horizontal integration is where an organisation owns two or more companies, on the same level of the buying chain. An example of this is the First Choice Group; they own First Choice Travel Agency and First Choice Hypermarket, both of which are on the same level of the buying chain. The advantage of horizontal integration is that it can increase the company’s market share. Another good example of this type of integration is when EasyJet purchased the airline Go from British Airways. Now EasyJet and Go both operate under the company name of EasyJet.
Delta’s purchase of the Trainer Refinery and the merger with Virgin Airlines are clear examples of grand strategies. Delta sought these strategies to achieve long-term business objectives. Delta recognized hurdles in achieving profit posed by increased costs associated with jet fuel (and their incredible dependence on fuel as an operating cost) and a lack of access to the international market for trans-Atlantic flights. In order to achieve these objectives Delta employed two different strategies. The first was vertical acquisition. By purchasing a refinery, Delta was acquiring a supplier and the inputs that it needed for operations. More specifically, this is an example of backward vertical integration because Trainer “operates at an
In the horizontal integration, the company product range is from a wide clientele. That is they sell product either clothing or luxurious foods from different manufacturers. These give them the edge since the products they offer a variety for the customers to choose from, and hence they can shop less than one roof (Cole, 1997). In the vertical integration strategy, the firm will deal substantial with products from a single supplier and M&S gets the exclusive rights to deal with the product and its supply to the market. This is necessary when the company aim is to serve an identified target market which is exclusive and has the potential to sustain and grow the company substantively. These employ a tar...
In order for one to evaluate and identify with the diverse business structures, he/she must be aware of the meaning and standards that makes that structure. Various businesses functions in different ways as the world is full of technology and new structures, company cultures and new ways in which companies are run. In order to fully grasp the concepts of Organizational structure and culture in the movies, I will use the Movie Up in the Air and The Devil Wear Prada movies to analyze a business scenario from them.
Organizational structure can be defined as the “formal arrangement of jobs within an organization” (Robbins & Coulter, 2009, p. 185). Having a defined and unified structure helps employees work more efficiently. Jacques Kemp, former CEO of ING Insurance Asia/Pacific, realized this need early on in his role. The company had been performing well and recently acquired another insurance company to become “one of the largest life insurance companies in Asia-Pacific” (Schotter, 2006, p. 4). However, Kemp’s proactive personality led him to seek out ways to achieve more efficient coordination between the regional office and business units (Robbins & Coulter, 2009). Kemp noticed that “most business unit managers did not even know the current corporate standards” and he began searching for a way to manage the managers (Schotter, 2006, p. 5). ING Insurance Asia/Pacific’s organizational structure was mechanistic and fairly well structured, but for a company that had recently been involved in a major acquisition and was divided across 12 geographically dispersed markets there was a great need to tweak this structure to unify the company (Schotter, 2006). If I had been in Kemp’s position as CEO, I would have made modifications to the organizational chain of command, formalized business processes, and used technology to stimulate collaboration amongst the region to help this company overcome organizational design challenges.
Companies merge and acquire other companies for a lot of strategic reasons with different degree of success. The success of a merger is measured by whether the value of the acquiring firm is enhanced by it. The impact of mergers and acquisitions on organization can be small and big in other cases.
Business structure is a critical factor to determine a company 's success or failure. Generally, larger organization has a more complex organizational structure. In the case of H&M, they had adopted matrix structure, one of the traditional organizational structure, into their business. As shown in figure 1, range of functional groups is listed horizontally across the table and on the other is product/task with a manager taking control of each. The functional structure is divided
Organizations must operate within structures that allow them to perform at their best within their given environments. According to theorists T. Burns and G.M Stalker (1961), organizations require structures that will allow them to adapt and react to changes in the environment (Mechanistic vs Organic Structures, 2009). Toyota Company’s corporate structure is spelt out as one where the management team and employees conduct operations and make decisions through a system of checks and balances.
‘Horizontal Merger’ is when two companies with similar products join together. ‘Vertical Merger’ is two companies at different stages in the production process. ‘Conglomerate Merger’ is when two different types of companies join together. ‘Market extension merger’ is between two companies who produce the same product but sell in different markets. ‘Product Extension merger’ is between companies with related production but they do not compe...
Vertical integration is where a company becomes their own supplier or distributor through acquisition. Seprod uses the strategy by their acquisition of Belvedere Estate in 2006 so as to expand its dairy farm pastures to increase their supply of milk output from the dairy farming. They also use vertical integration in their subsidiary Industrial Sales Limited. This is done by making them the main distributer and marketer of their
...tion of virtual integration initiatives allows supplier companies, which are performing only certain processes, to work together as one entity. Therefore operations become more efficient by reducing inventory delivery time. More importantly, the organization maintains the ability to thrive in a competitive marketplace by achieving increased customer satisfaction through unique and strategic core competencies.
Matrix structure is first introduced in the aerospace industry in the 1960s and become one of the popular organizational design options in today’s business and industry (Derven & Alexandria, 2010). Burns and Wholey (1993) poinited out that matrix structure were used in advertising agencies, aerospace firms, research and development laboratories, hospitals, government agencies, and universities. Matrix structure is the combination of two or more different structures and take the advantages of the pure functional structure and the product organizational structure (Robbins & Judge, 2011, p. 497). The employees in the matrix may have two bosses: their functional department managers and their product managers. For example, all engineers may be in one engineering department and report to an engineering manager, but these same engineers may be assigned to different projects and report to a project manager while working on that project. In many organizations, a matrix structure is implemented to address the requirement to do more with less and become more agile. The matrix structure, which focuses on horizontal as well as vertical management, has become more widespread as a result of globalization and the...
Bussler, C. (2003). B2B integration: Concepts and architecture : with 4 tables. Berlin [u.a.: Springer.