...average profitability. Corporate management must create strategies and capitalize on evolving competitive markets (Lindgrin, 2012). Both the companies Yahoo and Amazon are constantly implementing such strategies to maintain a reputation that stays ahead of the market trends, information system and globalization. This study will evaluate the success of both companies’ corporate-level strategies in terms of horizontal integration, vertical integration, strategic outsourcing and diversification, and will determine the type of strategy that contributed most effectively to the creation of a successful and profitable multibusiness model. Additionally, this paper will recommend an appropriate new strategy for each company that may maximize profitability and improved competitiveness in the industry. Yahoo!, Inc. Competitive analysis To better understand Yahoo’s internal and external opportunities and threats, in order to better estimate Yahoo’s ability to capture value, our starting point would be a quick analysis of operating and financial performance of Yahoo comparing to its peers in the industry during the last four years. We already studied around 10 on-line based service providers with AOL having the closest business model, size and shared markets. One of the most important industry features observed was the ability of taking the advantage of economies of scale, the larger the revenues a company can generate, larger...
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...STUDIES The Effects of Vertical Integration on Oil Company Performance Fernando Barrera-Rey Oxford Institute for Energy Studies WPM 21 October 1995 The contents of this paper are the author's sole responsibility. They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members. Copyright 0 1995 Oxford Institute for Energy Studies All rights reserved. No palt of this publication may be reproduced, stored in a retrieval system, or transmitted in any fomi or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior pemiission of the Oxford Institute for Energy Studies. This publication is sold subject to the condition that it shall not, by way of trade or otherwise. be lent, resold, hired out, or otherwise circulated without the publisher's prior consent in any fonii of binding or cover other than that in which it is published and without D similar condition including this condition being imposed on the subsequent purchaser. ISBN 0 948061 90 1 ABSTRACT When asked to rank industries by their degree of vertical integration, most people would agree that the oil industry should come top of the list. Underlying this belief is the fact that integration and size tend to be closely associated. As the oil industry is so large and oil companies so visible and perceived as so profitable, the common belief is a correlation between vertical integration, size and performance. If...
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...From: Management To: Mr. Ron Assaf Re: Backwards Vertical Integration of Sensormatic Sensormatic Electronics Corporation should utilize the backwards vertical integration strategy. If Sensormatic vertically integrates backwards, they will have a competitive advantage over its competitors, such as Knogo, Checkpoint Systems, and 3M, which is a fit that is difficult to emulate. Backwards vertical integration is when a firm has a large amount of control over its supply systems, which leads to an elimination of the “middleman.” Due to the efficiency of backwards vertical integration and lower costs of production, a firm is able to be more competitive in the marketplace. By bringing both sides of the transaction into a single administrative structure with vertical integration, transaction costs can be avoided. Therefore, Sensormatic Electronics Corp. can benefit greatly from the positive outcomes that backwards vertical integration will bring in the future. Best Regards, Management After analyzing all three options (in-house production, Canon acquisition, and outsourcing), it becomes apparent that backward integration results in lower costs in the long term. The acquisition of Canon allows even more cost savings than in-house production. Backward integration will give Sensormatic more control over quality and quantity of its raw materials. By integrating backwards, Sensormatic will be able to avoid the inconsistencies it experienced previously with...
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...FROM WHOLESALE TO RETAIL: IMPROVING THE FORWARD VERTICAL INTEGRATION STRATEGY AT FRESHMARK (PTY.) LTD. A dissertation by BARTHOLOMEW CHARLES BENECKE Submitted in partial fulfillment of the requirements for the degree MASTER’S DEGREE IN BUSINESS ADMINISTRATION (MBA) in the BUSINESS SCHOOL FACULTY OF MANAGEMENT SCIENCES TSHWANE UNIVERSITY OF TECHNOLOGY Supervisor: Prof. JA Watkins Co- Supervisor: V Naidoo May 2007 DECLARATION OF COPYRIGHT “I hereby declare that this dissertation submitted for the degree Master’s in Business Administration (MBA) at the Tshwane University of Technology, is my own original unaided work and has not previously been submitted to any other institution or higher education. I further declare that all sources cited are cited or quoted are indicated or acknowledged by means of a comprehensive list of references” BARTHOLOMEW CHARLES BENECKE Copyright© Tshwane University of Technology 2006 ii DEDICATION “This study is dedicated to my God, and King, to whom I give praise for all the gifts and strength He has granted me, and to my love Jasmyn, for her steadfast support through this time. I will love you both forever.” iii ACKNOWLEDGEMENTS I hereby wish to acknowledge the contribution of the following persons to the completion of this dissertation: ► To my parents for their love and support through all my years of study. Thank you for believing in me, even when I did not believe in myself. ► To Professor Watkins, for all his...
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...Professor Tino Business Comparison Paper A vertical market relationship is connections between the firm, customers, and supplier. In which companies within any given vertical market are mostly the same in solving similar issues. Most of these markets are very competitive because of overlapping focal points of the manufactured goods being provided to the customer. Examples of vertical markets are: insurance, real estate, banking, heavy manufacturing, retail, transportation, hospitals, and government. Vertical market relation is the process in which several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that company’s or entity’s power in the marketplace (Dharma, 2009). There are basically 3 classifications of Vertical Integration namely: Backward integration where in the company tries to own an input product company. Forward integration the business tries to control the post production areas, namely the distribution network. Like a mobile company opening its own Mobile retail chain. Balanced integration a mix of the above two balanced strategy to take advantages of both the worlds. In the external analysis customers play a key role because of their characteristics determine the firm’s market opportunities (Dharma, 2009). It is the glory of God to conceal things, but the glory of kings is to search things out (Proverbs 25:2 AMP). External analysis point out possible customers for the firm and...
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... Horizontal integration b. Vertical integration c. Conglomerate integration d. None of the above 2. The source (home) location of most of the world's leading multinational enterprises is: a. North America and Europe b. North America and Asia c. Europe and South America d. Europe and Asia 3. Which type of multinational diversification occurs when the parent firm establishes foreign subsidiaries to produce intermediate goods going into the production of finished goods? a. Forward vertical integration b. Backward vertical integration c. Forward horizontal integration d. Backward horizontal integration 4. Suppose that an American automobile manufacturer establishes foreign subsidiaries to market the automobiles. This practice is referred to as: a. Forward vertical integration b. Forward conglomerate integration c. Backward vertical integration d. Backward conglomerate integration 5. Suppose that a steel manufacturer headquartered in Japan sets up a subsidiary in Canada to produce steel. This practice is referred to as: a. Conglomerate integration b. Forward vertical integration c. Backward vertical integration d. Horizontal integration 6. During the 1970s, American oil companies acquired nonenergy companies (e.g., copper, auto components) in response to anticipated decreases in investment opportunities in oil. This type of diversification is referred to as: a. Horizontal integration b. Conglomerate integration c. Forward vertical integration d. Backward...
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...Strategic Analysis for Crocs, Inc. To Increase Competitiveness in Shoe Industry Unit Code and Name: MGW1010 Introduction to Management Lecturer: Dr Esther Chong Tutor: Ms Aziana Word Count: 3300 word, excluding header and reference Contents Executive Summary i 1.0 Introduction 1 1.1 Purpose 1 1.2 Company Information 1 1.3 Assumption 1 1.4 Methodology 1 1.5 Plan of Report 1 2.0 SWOT Analysis 3 2.1 Identification of Strengths 3 2.1.1 Well recognized and financially sound 3 2.1.2 Have propriety rights over CrosliteTM material 3 2.2 Identification of Weaknesses 3 2.2.1 Expansion is a dilemma 3 2.2.2 Seasonal usage 3 2.3 Identification of Opportunities 4 2.3.1 Further exploration of the Asian market 4 2.3.2 Online sales 4 2.4 Identification of Threats 4 2.4.1 Replicas and imitation 4 2.4.2 Anti- Crocs Sentiment 5 3.0 Evaluation of Alternative Strategies 6 3.1 Proposed Alternative Strategies 6 3.1.1 Pursue diversification 6 3.1.2 Pursue vertical integration 7 3.2 Selection of Best Strategy 9 4.0 Implementation of Selected Strategy 10 4.1 Controlling Function 10 4.1.1 To implement feedforward control 10 4.1.2 To implement concurrent control 10 4.1.2 To implement feedback control 10 4.2 Organising Function 11 4.2.1 To introduce departmentalization 11 4.2.2 To execute formalisation 12 4.2.3 To implement decentralization 12 5.0 Conclusion 13 6.0 Reference List ii Executive Summary The purpose...
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...retail outlets and among other outlets served; they accounted for over 75% of their frozen food sales. Problem Summary Birds Eye was losing its market share and profitability during the 1970's and 1980's due to increased competition in the frozen foods market. In 1978 their market share of 60% declined to 29%. Private label competitors had gained over 21% of the frozen food market. The increase of stiff competition drove prices down and lowered profitability for Birds Eye. A huge factor in loss of profitability and market stronghold was their internal strategy. The company’s vertical integration strategy worked for in the beginning to initially strengthen their brand, but lost its performance during the 1970's and 1980's. Due to the rising costs of producing frozen foods in the 1970's, and increasing market competition, the company needed to shift to a more horizontal strategic approach. Analysis Value Chain Birds Eye value chain was the chain of activates that it was operated on. The chain of activities gave them more value to its service and its products until early late 1960’s. The primary activities for Birds Eye were inbound logistics, operations, outbound logistics, marketing...
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...otherwise, be lent, resold, hired out, or otherwise circulated without the publisher’s consent in any form of binding or cover other than that in which it is published and without similar conditions including this condition being imposed on the subsequent purchaser. ISBN 1-901795-27-6 Cover designed by Clare Hofmann Typeset by Philip Armstrong, Sheffield Printed by Biddles, Guildford CONTENTS List of Figures Acknowledgements 1 2 INTRODUCTION INDUSTRY STRUCTURE 2.1 An Examination of Corporate Structure 2.2 The Urge to Integrate 2.3 A Question of Balance 2.4 Just how Operationally Integrated? 2.5 Are there Tangible Benefits to Operational Integration? 2.6 Important Transition to Financial Vertical Integration 2.7 Integration or Atomisation? 2.8 Market Inefficiencies that Favour Integration 2.9 Firm Specific Arguments in Favour of Integration 2.10 Should Companies or Equity Markets Diversify? 2.11 Business Segment Response to Market and Firm Specific Risks and Challenges 2.12 Core capabilities A...
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... but from which only one corporation survives. Answer: T (p.166) 5. A strategic alliance is a partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial. Answer: T (p.166) 6. The two basic growth strategies are concentration and strategic alliances. Answer: F (p.166) 7. Vertical integration is going backward on an industry’s value chain. Answer: F (p.167) 8. Vertical integration is the degree to which a firm operates vertically in multiple locations on an industry’s value chain from extracting raw materials to manufacturing to retailing. Answer: T (p.167) 9. Forward integration is often more profitable than backward integration. Answer: F (p.167) 10. BP Amoco and Royal Dutch Shell are examples of fully integrated firms because they internally make 100% of their key supplies and completely control their distributors. Answer: T (p.168) 11. With taper integration, a firm internally makes 100% of its key supplies and completely control its distributors. Answer: F (p.168-169) 12. An example of forward quasi-integration would be a large pharmaceutical firm that acquires part interest in a drugstore chain in order to guarantee that its drugs have access to the distribution channel. Answer: T...
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...actions that will lead to the anticipated results. Strategy formation is the process by which an organization develops and implements a strategy. All steps of the process should be followed in order because they build upon each other. The other steps of the process include value assessment, vision and mission formulation, strategy design, performance audit analysis, action plan development, contingency planning and implementation. 5.1 Integration Strategies In the competitive world of business, companies generally do whatever it takes to secure their stature in the marketplace. One of the most effective means to this end involves what is referred to as vertical integration, which takes on two forms: forward and backward integration. Forward integration focuses on the manner in which a company oversees its product distribution. On the other hand, the backward form concentrates on how a company regulates its goods or supplies. 5.1.1 Forward integration Forward integration is a type of vertical integration which a supplier acquires a manufacturer or a manufacturer acquires a distributor. Businesses engage in forward integration either to generate a higher margin from a key input which it owns or produces or to better market its products and increase its profitability. Dr. Gerhard Bester, an Agricultural Research and Development Director, our aim is to ensure PepsiCo has continued access to the key agricultural raw materials necessary to supply growing consumer needs, while respecting...
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...Vertical Integration vs Outsourcing of Zara Written by Mohd Rahman October 04, 2014 “The original business idea was very simple. Link customer demand to manufacturing, and link manufacturing to distribution. That is the idea we still live by” -- Jose Maria Castellano Rios, Inditex CEO. 1 Introduction to Zara Zara is an icon in the fashion world and largest international fashion designing and manufacturing company. Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega, Inditex is one of the world's largest fashion retailers with eight brands and over 6,460 stores throughout the world (Ref-1). Headquarter of the group is in Coruña, Spain where the first store of Zara was launched in 1975. This paper will analyse the company and try to link its activities with supply chain strategy of vertical integration and outsourcing. Later will come to a conclusion that Zara is vertically integrated with justification and made recommendation for further improvement. Definition of Vertical Integration In strategic management, the term vertical integration describes a style of management control, when a company expands its business into areas at different points of the same production path. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or services, and the production combine to satisfy common need. In the following paragraph I will try to...
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...understand whether it is more advantageous to buy a particular part or product from an outside vendor or to produce the part themselves. Keiretsu is a type of supply-chain strategy that focuses on integrating the two strategies of building relationships with a few suppliers and vertical integration. As with traditional make-or-buy decisions, Keiretsu does include purchasing goods from suppliers. However, make-or-buy decisions and Keiretsu would not typically be considered a type of outsourcing. 2. Keeping a product generic as long as possible before customizing is known as __________. postponement Keeping a product generic as long as possible before customizing is known as postponement. This process is very useful when making somewhat generic products (like computers, printers, televisions, etc.). While the external features of these devices will be different, the primary mechanisms that make each device function are similar. Thus, it makes sense for a company to postpone putting the external elements on a computer or television until farther along in the production cycle so that a business can more easily meet customer expectations. Forward and Backward integration are two types of vertical integration. Forward...
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...the tricky issues in vertical integration is striking a balance between the need to have control over crucial elements of the value addition process and the need to encourage technology development among suppliers Firms often vertically integrate to reduce uncertainties in sourcing and marketing. They may also feel that control over a larger portion of the value chain, may facilitate differentiation. What is often forgotten is that different activities along the value chain may need different managerial styles. Vertical integration: Doing a Cost-Benefit Analysis Benefits • Bringing different elements of the value chain together can generate efficiencies. • Integration lowers the cost of scheduling, coordinating and responding to emergencies. • Integration reduces the need for collecting various types of information from the external environment and cuts transaction costs. • Upstream and downstream stages can develop more efficient and specialized procedures for dealing with each other than would be possible with independent suppliers/ customers. • The firm can gain more expertise in the technology associated with upstream and downstream businesses. • Integration reduces uncertainty about supply of parts/raw materials and demand for finished goods. • The bargaining power of suppliers and customers can be reduced. • By controlling a larger segment of the value chain, a firm has greater scope for differentiation. • In some cases, vertical integration can raise entry barriers...
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...ECONOMICS OF INDUSTRY Companies of firms in the same industry are bound to fall along the same vertical chain, this is the chain wherein some bit of value is being added to the product at each step. Vertical integration means the firm has complete control over its inputs, production and outputs along the value chain. The different firms only differ in terms as in how many links are present in their vertical chain. Adopting vertical integration for a firms means reduction of transportation costs as common ownership means closer geographical areas, the supply chain is more coordinated, barriers to entry are there making it hard for new firms to enter the market, core competency is expanded and access to uneasy distribution channels is gained. I think it can be in a firms interest to outsource its components from competitors rather than producing in-house because (Make Vs Buy Decision) this way the firms can gain economies of scale which is a good amount of saving in costs gained by the increased level of production (the firm being a supplier) whereas in-house production doesn’t gain much economies of scale as the demand would be little. The firm becomes obedient and efficient as they must follow the rules and efficiency as is in the entire market. Buying from the market improves flexibility but some disadvantages of the buy decision are the search costs, incomplete contracting which is transaction costs- under the contracts between parties only certain remedies are covered...
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