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    MGT600 Unit 4 Discussion Board Ps

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    Donna De Jesus
    Vertical integration involves merging firms that operate at different stages of the same product's supply chain, such as a company owning suppliers or distributors. It reduces costs and increases control and profits. A notable example is Apple owning manufacturers and distributors. Horizontal integration merges same-stage firms in an industry to eliminate competition and gain market share, such as Disney acquiring Pixar. Diversification grows a company's markets and products to increase shareholder-expected growth. A global strategy saves on costs but additional costs and loss of reputation can occur in unfamiliar environments, making it not viable sometimes.

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    MGT600 Unit 4 Discussion Board Ps

    Uploaded by

    Donna De Jesus
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    Vertical integration involves merging firms that operate at different stages of the same product's supply chain, such as a company owning suppliers or distributors. It reduces costs and increases control and profits. A notable example is Apple owning manufacturers and distributors. Horizontal integration merges same-stage firms in an industry to eliminate competition and gain market share, such as Disney acquiring Pixar. Diversification grows a company's markets and products to increase shareholder-expected growth. A global strategy saves on costs but additional costs and loss of reputation can occur in unfamiliar environments, making it not viable sometimes.

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    Vertical integration involves merging firms that operate at different stages of the same product's supply chain, such as a company owning suppliers or distributors. It reduces costs and increases control and profits. A notable example is Apple owning manufacturers and distributors. Horizontal integration merges same-stage firms in an industry to eliminate competition and gain market share, such as Disney acquiring Pixar. Diversification grows a company's markets and products to increase shareholder-expected growth. A global strategy saves on costs but additional costs and loss of reputation can occur in unfamiliar environments, making it not viable sometimes.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    20 views2 pages

    MGT600 Unit 4 Discussion Board Ps

    Uploaded by

    Donna De Jesus
    Vertical integration involves merging firms that operate at different stages of the same product's supply chain, such as a company owning suppliers or distributors. It reduces costs and increases control and profits. A notable example is Apple owning manufacturers and distributors. Horizontal integration merges same-stage firms in an industry to eliminate competition and gain market share, such as Disney acquiring Pixar. Diversification grows a company's markets and products to increase shareholder-expected growth. A global strategy saves on costs but additional costs and loss of reputation can occur in unfamiliar environments, making it not viable sometimes.

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    © All Rights Reserved
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    MGT600 Unit 4 Discussion Board

    1.  Compare and contrast vertical and horizontal integration.  What are some of the
    variables make each of these integrations valuable? Provide an example of a
    vertical and a horizontal integration that has happened recently.

    Vertical integration is the merging of firms that do business for the same product but operate
    at different levels of the supply chain, like when a company owns or controls its suppliers,
    distributors, or retail locations with the aim to strengthen the supply chain and gain control
    over the industry (Sewak & Vaidya, 2021). There are two types of vertical integration: forward
    (when a company controls distribution or product supply) and backward (when a company
    expands into product manufacturing). Vertical integration reduces waste, costs of
    transportation, and per-unit costs, and increases competitiveness and profitability (Hayes,
    2021). The most notable example of forward vertical integration is Apple. It owns and controls
    the manufacturing and distribution of its products. Netflix is one of the most notable examples
    of backward vertical integration when it went backward from being at the end of the supply
    chain to being a creator of original content (Quain, 2018).

    Horizontal integration is the merging of firms (in the same or different industries) that have the
    same or similar levels in the production supply chain with the aim to eliminate competition,
    expand the market share, and gain control over the market (Sewak & Vaidya, 2021). A notable
    example of horizontal integration is when Disney acquired Pixar in 2006, combining traditional
    ink-and-paint animation and innovative digitally-animated movies. A more recent example is
    Facebook’s acquisition of Instagram – both are in the same social media industry with similar
    photo-sharing production stages. The integration grew the market share, reduced competition,
    gained new audiences, and saw a 100% return in six years (Tarver, 2020).

    References

    Hayes, A. (2021, May 19). Vertical Integration. Investopedia.


    https://www.investopedia.com/terms/v/verticalintegration.asp.

    Quain, S. (2018, November 26). Examples of Vertically Integrated Companies. Small Business -
    Chron.com. https://smallbusiness.chron.com/examples-vertically-integrated-companies-
    12868.html.

    Sewak, M., & Vaidya, D. (2021, May 19). Horizontal vs Vertical Integration: Top 5 Differences.
    WallStreetMojo. https://www.wallstreetmojo.com/horizontal-vs-vertical-integration/.

    Tarver, E. (2020, August 28). Horizontal Integration Definition and Examples. Investopedia.
    https://www.investopedia.com/ask/answers/051315/what-are-some-examples-horizontal-
    integration.asp.
    2.  In what circumstances should an organization consider diversification as a viable
    strategy?

    Diversification is a growth strategy a company uses in order to increase its variety of products,
    services, markets, and/or geographic regions in which it competes. Managers of a majority of
    the Fortune 500 companies engage in product and geographic diversification to some degree in
    order to achieve continuous growth shareholders expect (Rothaermel, 2017a). Since
    diversification is used to grow profit, an organization should consider this a viable strategy to
    help expand into previously unexplored markets.

    3.  What benefit does a global strategy provide an organization? Describe a situation when
    a global strategy would not be a viable solution for an organization.  

    Globalization is closer integration and exchange worldwide which reduces transportation costs
    and opens doors to larger markets. A global strategy saves an organization money by lower
    costs of raw materials, labor, packaging, and marketing.

    Disadvantages of using a global strategy include:


    - additional costs of doing business in an unfamiliar cultural and economic environment,
    - loss of reputation due to poor working conditions in other countries, and
    - reverse-engineering or loss of intellectual property (Rothaermel, 2017b).

    References

    Rothaermel, F. (2017a). Corporate Strategy: Vertical Integration and Diversification. In Strategic


    Management (3rd ed., pp. 271-281). McGraw-Hill Education. Retrieved from
    https://www.academia.edu/41073703/_Frank_Rothaermel_Strategic_Management_Con
    cepts_z_lib_org_

    Rothaermel, F. (2017b). Global Strategy: Competing Around the World. In Strategic


    Management (3rd ed., pp. 326-339). McGraw-Hill Education. Retrieved from
    https://www.academia.edu/41073703/_Frank_Rothaermel_Strategic_Management_Con
    cepts_z_lib_org_

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