When profitability comes up in the line of business, a company faces a question whether they should opt for horizontal or vertical integration for further stability, profits, and growth. Horizontal integration entails companies that obtain products or services which are in the same line of business or which compete with the present market which allows the expansion of the company (Treasure, 2009). Vertical integration constitutes of companies that take control of either the supply or distribution side of the business.
Vertical integration is highly valuable to any company because it gives room for an improved supply chain of the product or service at hand. It also provides a chance for increased control over outputs. Horizontal integration also has its importance within the business world in that; there are competitiveness and an increased market share within the business world.
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Some companies have been involved in vertical integration recently, and one of them is Dell which made the biggest acquisition in technology history after agreeing to buy a data storage company EMC. A recent example of horizontal integration is the way Facebook acquired Instagram. The two companies were in the same business field, and Instagram got an opportunity to increase its market share, reduce competition as well as gain access to new markets.
According to Kim, Hoskison, & Wan (2004), a company should apply diversification in an instance where the business is not making profits, and this can be done by adding services, products, markets or the stages of production. If a company wants to expand the business, they can also apply diversification strategy since it helps in increase of sales and expansion of the company.
Global strategy has many benefits within an organization the main one is that it gives a company the ability to leverage great ideas effectively and quickly (Yip, 2001). It also enables a business to come up with increased industrial scales, and this allows the company to save in labor, packaging and marketing costs.
The global strategy is not always effective in all organizations for instance if a company has financial instability; a comprehensive approach is not viable because a comprehensive plan needs a significant economic boost to allow the company to tap beyond the domestic market. If the organization expanded to the global heights, then it would cause financial constraints in the existing business.
References
Kim, H., Hoskisson, R. E., & Wan, W. P. (2004). Power dependence, diversification strategy, and performance in keiretsu member firms. Strategic Management Journal , 25 (7), 613- 636.
Treasure, W. (2009). Vertical versus horizontal integration. Br J Gen Pract , 59 (566), 694-694.
Yip, G. S. (2001). Total global strategy . Prentice Hall PTR.
