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Jason Heyland
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UNIT 4 - DISCUSSION BOARD - PART 1
Thu 6/15/2023 9:14 PM
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Jason Heyland
Business Research for Decision Making: MGT600
Unit 4 Discussion Board – Part 1
For this week’s discussion board, we’re going to discuss horizontal and vertical integration from a business perspective. Both of these integrations have to do with and revolve around strategies to expand a business. However, what are they and are there any differences?
When a business expands by acquiring another company in the same line of business and products it’s called horizontal integration (Surbhi, S. 2021). An example could be a franchise owner of a McDonald’s deciding to purchase a second McDonald’s franchise to have two stores. Another example could be two like companies deciding to merge to create an even bigger company. The point of horizontal integration is an attempt to lessen or eliminate the competition by the expansion of the business.
Let’s move onto vertical integration. This type of integration is similar to horizontal integration because the goal of this type of integration is also to expand the business. However, there also some important differences. The biggest difference is that with a vertical integration one company is trying to attempt to gain control over the entire industry in which it serves with mergers and acquisitions and deals more with supply chain (Surbhi, S. 2021).
When thinking of examples of vertical integration try to think of companies that manufacture and distribute their own products. Think of it like cutting out as many “middle men” as possible. There is a movie called American Gangster with Denzel Washington as the lead character that comes to mind when thinking of vertical integration. That was an illegal business, but the same ideas apply. When you have control over the supply and distribution of the best products in the world you are certainly going to have the advantage. The movie is based on a true story and is a pretty good watch. It’s also a great example of diversification within a business to create more market share.
Now that I’ve mentioned diversification, at what time should a company decide to diversify? There could be a number of reasons for this. One reason might be that revenue of the business has plateaued so to speak so it may be time to think of new ways to create more revenue. Diversification is a way to make that happen. Another reason could be that there is just too much competition in the current lines of business to remain competitive. It could even be that the owners are very aggressive and want to try and take over their whole industry.
*I will cover question three in week two of Unit 4.
References
Surbhi, S. (2021, July 27). Difference Between Horizontal and Vertical Integration. Key
Differences.