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Impact of Intergration

March 21, 2016 | Author: | Posted in mathematics, mathematics and economics

Impact of Integration


One of the companies ‘ techniques in staying competitive and improving their business is to perform integration . There are two kinds of integration : vertical and horizontal integration . The two kinds differ in their approach to integration and have their own strengths and limitations . Integration , however , does not only refer to the built of the company . It can only be applied to the roles and ranks of the employees in the company

This discusses what vertical and horizontal integrations are . An analysis will also be done as to [banner_entry_middle]

the impact of these kinds of integration in a company ‘s role and functions as well as its built to remain competitive

Vertical Integration

Companies , especially manufacturers , who want to maximize their profits and gain more control in their products and their distribution often resort to vertical integration . Vertical integration is a business strategy wherein a company either acquires or builds another company that will work with the main company to supply the inputs or produce the outputs of the company

An example of a company applying vertical integration is the Carnegie Steel company . The company controlled not only the mills where the steel was manufactured , but also the mines where the iron ore was extracted , the coal mines that supplied the coal , the ships that transported the iron ore and the railroads that transported the coal to the factory ( Vertical Integration ‘ 2006 . With this example vertical integration can somehow be thought of some form of cartel

Vertical integration has three types as described in an article in Wikipedia entitled Vertical Integration (2006

In backward vertical integration , the company sets up subsidiaries that produce some of the inputs used in the production of its products . For example , an automobile company may own a tire company , a glass company and a metal company . Control of these three subsidiaries is intended to create a stable supply of inputs and ensure a consistent quality in their final product . [ .]

In forward vertical integration , the company sets up subsidiaries that distribute or market products to consumers or use the products themselves

In balanced vertical integration , the company sets up subsidiaries that both supply them with inputs and distribute their outputs

Vertical integration in terms of employee hierarchy is described by Dorf (1999 ) as ‘flattening out ‘ the hierarchy ‘ This integration minimizes the huge gap among different ranks in the company . Galbraith (1994 , as cited in Dorf , 1999 ) described vertical integration as not really eliminating hierarchy but focusing on eliminating the dysfunctional effects ‘ of hierarchy , which is the gap in communication between employees due to the differences in ranks

Horizontal Integration

Horizontal integration in supply chain is somehow similar to vertical integration in terms of gaining control . It is a business strategy of manufacturing companies to try to expand their target market . A company who used to sell only to middle social class would do horizontal integration if they want to reach the lower end or the high-end market This is done by… [banner_entry_footer]

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