...Give recent examples of forward integration, backward integration, and horizontal integration. A business strategy that involves a form of vertical integration (upstream supplier and downstream buyers) whereby activities are expanded to contain control of the direct distribution of its products. The advantages of forward integration consist of excluding competing suppliers, greater capacity to reach end customers and better admittance to information about end customers. (Example) Forward integration is when a farmer offers his crops at the local market rather than to a distribution center. (Example 2) Dell reaches its customer directly through the internet this cuts out traditional computer stores. Backward integration is vertical integration that combines a core business with its suppliers. The advantages of backward integration may include assurance of the pricing, quality and availability of supplies, and efficiencies gained from coordinating production of supplies with their consumption. A form of vertical integration that involves the purchase of suppliers in order to reduce dependency. (Example) A bakery business bought a wheat farm in order to reduce the risk associated with the dependency on flour. (Example 2) Many grocery stores now have their own brand products to compete the name brand products (less expensive). When a company expands its business into different products that are similar to current lines. Horizontal integration is the widening of a business at...
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...Less time consuming Information and reviews Price and selection Disadvantages Fraud and security concerns Lack of full cost disclosure Privacy Lack of hands-on inspection What advantages does Dell derive from virtual integration? How important are these advantages in the auto business? Virtual integration and its benefits A way of capturing the advantage of vertical integration without actually vertically integrating Vertical integration solves production problems related to communications, coordination, and control but at a cost of the increased overhead needed to arrange production organization Virtual integration therefore is the ability to achieve the advantage of vertical integration without incurring the overhead. Communication and coordination Vertical integration leads to efficient and effective coordination, through a number of mechanisms that include likelihood of physical proximity, established patterns of communications, and greater willingness to cooperate with other members of the same group. “Stitching together a business with partners that are treated as if they’re inside the company” Michael Dell Control The prospect of improved control over the actions of suppliers is another important rationale for virtual integration. Un-integrated partners can exert power over each other as transactions unfold over time Though Dell enjoy information sharing for now but inventory are not completely aligned Inventory not held by Dell may need to be held...
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...DISNEY BUY PIXAR | Pros | Cons | Disney have the brand and distribution | External factors, such as increasing competition or a declining industry, can affect future growth | Pixar have the technology and creative part | The seller’s personality and their established relationships may be a major factor for the success of the business | Buying an established business means immediate cash flow | Influenced by Apple | The business will have a financial history, which gives you an idea of what to expect and can make it easier to secure loans and attract investors | Culture between Disney & Pixar | Acquisition of existing customer, contacts, goodwill, suppliers, staff, plant, equipment and stock | Financial stock Dilution | The market for the product (animated movies) is already established | | Existing employees and managers will have experience they can share | | Skipping the start-up stage | | Inheriting systems, customers and image | | Disney consolidate its dominant position in the market | | Pixar improve the capacity of profitability and then create more value | | Revitalize Disney’s animation department, eliminate competition, access to technology & human capital | | | | 1. Buy When assessing if Disney should buy Pixar is necessary to evaluate the pros and cons of the action. Considering the cons, firstly is necessary to understand that there are some external factors such as, increasing competition or the decline of the...
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...ECCO Case Study - Question 1 ECCO has a fully integrated vertical value chain. What are the pros and cons of that strategy? What economic and strategic factors should be analyzed to answer this question? The pros of a having a fully integrated vertical supply chain for Ecco include the following: * Improved supply chain coordination between tanning, manufacturing and distribution. This would ultimately help maintain quality and improve operational efficiencies such as logistics. * There is also an increase in the areas possible for differentiation, as Ecco can control more inputs. An example might be in the tanning process, in which their competitors may have less control over. * Ecco can also create greater barriers of entry for competitors. By differentiating competition out of the market such as marketing their strict in house controls of the tanning process. * Ecco can also access downstream distribution channels that may otherwise have been inaccessible if they were to just sub out distribution and be at mercy to what the market can provide. * Opportunities for control over investment or innovation both upstream or downstream which may otherwise not be possible will be advantageous for Ecco. * Facilities in different countries can take advantage of local resources and expertise in different areas like the leather research center in Denmark. * Overseeing operations throughout the whole value chain. * Better control and...
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...which leads to reduced “bureaucratic costs” B. Costs (Disadvantages): 1) There is a total dependency on the industry (the firm has all its eggs in one basket) 2) Firms tend to develop a “myopic” view and management doesn’t see change coming and therefore is unable to change when times get tough 3) Top managers are not challenged and may become bored and stagnant 4) The firm misses opportunities to leverage resources and capabilities in an area outside of the industry that may be more profitable 2. Vertical Integration A. What is vertical integration? Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers. Typically a firm does not vertically integrate unless by doing so it can either cut costs or create a differentiation advantage. B. What are the pros (benefits) and cons (drawbacks) of vertical integration? Benefits of Vertical Integration: 1) Reduce transportation costs if common ownership results in closer geographic proximity. 2) Improve supply chain coordination. 3) Provide more opportunities to differentiate by means of increased control over inputs. 4) Capture upstream or downstream profit margins. 5) Increase entry barriers to potential competitors, for example, if the firm can gain sole access to a...
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...2.2. Pros of vertical integration of Value chain according to ECCO. One of ECCOs biggest advantages by having a vertical integration is they create economies of scale and lowers production costs because it eliminates many of the price markups in each production step. Ecco have control of each process in the making of their shoes. This gives them a huge advantage in ensuring that there will be fewer costs and no losses of communication in the process. (page 554, Mam book) We must assume that when Ecco owns several tanneries in three different countries(Page 4, Ecco Case) the leather, which Ecco uses as main material to their upper shoe, is a process where Ecco is able to hold cost down. Making leather takes several steps (page 14 Ecco Case) and as owners of their value chain, Ecco is in a position where they are able to optimize and reduce waste easier. Others than that, by making the leather themselves Ecco is able to ensure that the quality is at highest standard. Besides that Ecco was one of the five largest producers of leather worldwide while they also sell their leather to the auto and furniture industries. Another advantage of being in control of your entire value chain is that you avoids time-consuming tasks, such as price shopping, communicating design details and negotiating contracts. Aswell does control of their inventory, investments and all innovation, gives them a way to respond quickly to the market “Being in control of the entire value chain allowed...
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...different levels of the organization and how exactly to integrate the emerging technologies into its supply chain. If we were the presenting team we would have approached this case in a very different way. An important part of analyzing any case is to elaborate on the alternatives the company has, delving the implications of each and exploring ways how best it can be implemented. Therefore we have enlisted the alternatives with a brief description of the pros and cons. Then we also go ahead and recommend the best alternative according to us and discuss the reasons behind it. Alternatives with their pros and cons: - 1) Keep its existing supply chain a) Advantages: No major changes and additional costs involved. b) Disadvantages: Ford’s IT will eventually become obsolete. 2) Form a mix of online and offline operations and lay procedures to enable customization and ordering by customers over the internet but maintain physical dealerships as well. a) Advantages: Customization to clients, start of vertical integration, b) Disadvantages: Costly, time consuming, requires internal and external changes which are not easy to handle and integrate with other operations. Team 4 Critique 4 3) Create a virtually integrated supply chain based on Dell's model. Ford and all its suppliers would share information...
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...a wholesale business selling undecorated t-shirts, and after its successful, its expand to retailing business, open its first store in L.A in 2003, and expand more to Canada, Europe and Asia. And also h ave its own online retail store. It currently has more than 270 retailer stores in 20 countries. Its retail business offer products for men, women, children, babies and even household pet, targeting at all age. Its wholesale business consists of producing from undecorated apparel to military uniform. And company oftenly promote itself as “Made in the USA" and “Sweatshop Free” product. Company Strategy Vertical integration: In the past decades, it has become the norm amongst the majority of US apparel co mpanies to outsource their manufacturing operations abroad to third vendors. But American apparel ha s kept it local. it had made both backward and forward vertical integration as a central part of its strateg y. It bases its operation and manufacturing in this building 800,000 sq. ft. factory in downtown L.A. In t his building it does fabric cutting, sewing, knitting, dyeing , as well as distribution and wholesale operat ion. And it also does its own clothing design, marketing, and advertising, which often using its employee s as photographers and clothing models. As the company believe that having manufacturing under the same roof as design, marketing, retail, and distribution gives them the ability to quickly mobilize all departments, to respond directly to changes in the...
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...A merger occurs when two companies pull their resources together and join as one. With any new acquisition changes will have to be made and they can either be beneficial to a respective industry or have adverse consequences. Kudler Foods is currently in the position to acquire a company which can have both positive and negative effects. In pursuing a vertical merger Kudler Foods will be in position where they will have an increased market share that places them in a position of reduced competition. Current consumers may not necessarily be attracted to this format, however, through new marketing tactics they can attract new consumers and target a broad demographic and also drive in more profits. If Kudler Foods proceeds with this merger it will allow this establishment to put in to play a new strategic direction. One of the benefits of using this strategic business method according to "More-For-Small Business.com" (2002), “it provides you with efficiencies related to economies of scale (from production, inventory, purchasing, sales and marketing, administration perspectives and more)” (vertical merger). Kudler Foods can benefit and exceed in this merger and in this industry by promoting competitive prices, they will be able to add a new dynamic to their stores by having trained personnel in new products and merchandise, and offer equipment to their employees that will allow them to conduct their work in an expedient manner therefore allowing savings and synergies. If Kudler...
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...has, delving the implications of each and exploring ways how best it can be implemented. Therefore we have enlisted the alternatives with a brief description of the pros and cons. Then we also go ahead and recommend the best alternative according to us and discuss the reasons behind it. Alternatives with their pros and cons: - 1) Keep its existing supply chain a) Advantages: No major changes and additional costs involved. b) Disadvantages: Ford’s IT will eventually become obsolete. 2) Form a mix of online and offline operations and lay procedures to enable customization and ordering by customers over the internet but maintain physical dealerships as well. a) Advantages: Customization to clients, start of vertical integration, b) Disadvantages: Costly, time consuming, requires internal and external changes which are not easy to handle and integrate with other operations. Team 4 Critique 4 3) Create a virtually integrated supply chain based on Dell's model. Ford and all its suppliers would share information between their systems and the Internet to coordinate the flow of materials and production. All customer orders would be taken either via Ford's web site or by phone and then built. A pull system would be implemented completely. a) Advantages: Customization to clients, start of vertical integration in the supply chain. b) Disadvantages: Ford's traditional processes and production methods would have to be changed to take advantage of this new form of supply-chain...
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... |This course is an interdisciplinary and systematic introduction to international business with an emphasis on the:| |Objective |drivers, patterns and trends of globalization | | |national differences in political economy | | |international trade theories and patterns of international trade | | |political economy of international trade and investment | | |implications of regional economic integration | | |global monetary system | | |strategies and structures of international business | | |foreign market entry strategies and international strategic alliances | |Instructor |Muhammad Nauman Habib, | | |Ph.D. Scholar, Institute of Management Sciences, ...
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...and/or corporate level) 6. Discuss the performance of the firm and any other outcomes (use multiple measures, if applicable) 7. What are the main alternatives and what are the pros and cons of each? 8. What is your recommendation? Problem Recognition: -Symptoms: * Weak fundamentals in a Highly Competitive industry * External Environment: Political/legal -Future development of global PV market largely hinged on government initiatives and renewable support schemes - EEG (Erneuerbare-Energien-Gesetz) – Germany’s Renewable Energy Law - FIT (Feed-in Tariff) – standard offer contract advanced renewable tariff or renewable energy payments in Spain, Japan, Canada, & China - United States programs for enacting incentives and stimulus programs for renewable energy Economic segment Technological Product Innovation Global segment Porters 5 Forces Model of Competition: -Bargaining Power of Suppliers HIGH - Suppliers’ product are differentiated (Specialized equipment manfact. to make solar components. ex. Furnaces, Sawing machines, printing and laminators. - Supplier’s product are important to buyers’ product -Supplier’ Product have few substitute (Silicon, glass, substrates, metels, and cabels) -Threat of Vertical integration from silicon producers/ specialized suppliers of PV cells -Supplier industry is dominated by the top 10 producers. 55.3% as of 2008 -Bargaining Power of Buyers -- Hundreds...
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...For construction projects, quality control means making sure things are done according to the plans, specifications, and permit requirements. Quality is defined as 'fitness to purpose', in regards to how quality is significant for Bull’s Construction. It means providing a building that has an appropriate quality for the purpose for which it is intended. Moreover, a different way of looking at this concept is that the price of the building could potentially reflect the expectations of quality. A cheaper building probably uses inferior materials and is likely to be less attractive and less durable. Quality control in construction typically involves insuring compliance with minimum standards of material and workmanship in order to insure the performance of the facility according to the design. These minimum standards are contained in the specifications described in the previous section. For the purpose of insuring compliance, random samples and statistical methods are commonly used as the basis for accepting or rejecting work completed and batches of materials. Rejection of a batch is based on non-conformance or violation of the relevant design specifications. Procedures for this quality control practice are described in the following sections. One of the elements that our company will be utilizing to assure a quality measurement process for our projects is an inspector. An inspector tries to ensure that the job is done right the first time and that no major accidents occur...
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... * An organization may go for backward, forward or vertical integration in value chain * An organization may decide to go from one value chain to other value chain * From economists’ point of view in a competitive market, there will be atleast 3-4 competitors of equal caliber and market share would not be more than 35% for a given company. In theory there has to be numerous competitors for a perfectly competitive market. Case: ONGC India – In search of new growth strategy ONGC has gone for vertical integration during Mr. Raha’s tenure. Mr. Sharma has to decide whether to continue with the same or differ. Pros: 1. The bullish market earned lot of fortune. The earned money can be easily invested into diversification and hence multiplicate from this investment in future. 2. If they see investments in renewable sources of energy, ONGC can also start to be looked upon as green company. 3. When Mr. Subir Raha took over the workforce was highly de-motivated, and all the cash that had been earned would be given back to government in form of dividends. Mckinskey had projected that ONGC would go sick if it continues to operate the way it operates now. Mr. Raha saw an opportunity in the additional cash of Rs. 18,400 was seen as opportunity to create new business & new challenges for the organization, motivating the staff by giving them new challenging positions and hence re-invent the organization. Cons: 1. The growth in Raha regime looks phenomenal. Sales...
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...Chapter 4 of the text detailed the planning process for organizational structures. Step one involves situational analysis of reviewing all resources available and needed for the planning of the goals for the company. This analysis looks at past and projected circumstances from internal and external influences. The second step concerns alternate plans and goals. This means that optional methods and goals are explored for future endeavors. Goals fall into categories known as SMART, which stands for specific, measurable, and time-bound. Plans are the methods used to achieve the goals set. Step three of the planning process entails managers reviewing the pros and cons of the plans and goals set. This is the point when managers establish priorities and eliminate potential risks. The fourth step is called the goals and plans selection, which means the best course of action is determined for reasonableness and feasibility. Implementing the plan is the fifth step, and this involves putting the plan into action. The action over a reasonable tome period will reveal if the plan needs changes, and specifically where. The last planning step is to monitor and control the process implemented to see if the action for the plan work s well enough to sustain the goal for the desired term. Planning also has different types as well as steps. Strategic planning is used for long-term planning. This allows a company to plan strategies for long-tern economic survival through...
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