Premium Essay

Vertical Integration Essay

In: Business and Management

Submitted By samfsr
Words 376
Pages 2
Carnegie not only controlled the mills where he manufactured the steel, but he also owned the iron mines where they extracted iron ore, coal mines that supplied the factories coal, the trains and boats that transported the coal and iron ore, and the ovens that coal was coked in (Online Highways). The company also tried to focus on using internal talent from the floor up, rather than buying it from other companies. Because he did not have to pay any middle men, Carnegie could aggressively cost his steel and still make a profit (Online Highways). With his lower prices, Carnegie began to slowly become a monopoly due to being the cheapest option in steel.

American Apparel is an example of a modern day company that uses vertical integration. They start by knitting and dying fabrics, and continue all the way to public stores. Due to the lack of middlemen, they are able to cut production costs, and because they are entirely in the United States, they are able to cut shipping costs by not using foreign vendors (American Apparel. This supplies American’s with jobs rather than outsourcing to another country (American Apparel). People like the idea of supporting their country rather than a foreign one, so people tend to buy American-products (Economist), giving American Apparel an advantage over other companies.

Vertical integration gives society more competitive prices, meaning the consumer saves money as well as the companies. Vertical integration creates more jobs, leading to more people being paid so more money is spent, helping everyone. The only disadvantage of vertical integration is how competitive the pricing is. If a local business has to compete with a big one that is vertically integrated, the small business will have to charge more due to more expenses in the middlemen (Economist). However, some people would rather buy things from a small merchant than a...

Similar Documents

Free Essay

Zara Success

...Arab Open University Faculty of Business Studies Business Functions in Context I B203A -- Second Semester 2015-2016 Tutor Marked Assessment Managing Marketing Channels: Zara | One global retailer is expanding at a dizzying pace. It's on track for what appears to be world domination of its industry. Having built its own state-of-the art distribution network, the company is leaving the competition in the dust in terms of sales and profits, not to mention speed of inventory management and turnover. Wal-Mart you might think? Dell possibly? Although these two retail giants definitely fit the description, we're talking here about Zara, the flagship specialty chain of Spain-based clothing conglomerate, Inditex. This dynamic retailer is known for selling stylish designs that ' resemble those of big-name fashion houses, but at moderate prices. "We sell the latest trends at low prices, but our clients value our design, quality, and constant innovation," a company spokesman said. "That gives us the advantage even in highly competitive, developed markets, including Britain." More interesting is the way that Zara achieves its mission. FAST-FASHION—THE NEWEST WAVE A handful of European specialty clothing retailers are taking the fashion world by storm with a business model that has come to be known as "fast-fashion." In short, these companies can recognize and respond to fashion trends very quickly, create products that mirror the trends, and get those products onto shelves...

Words: 2033 - Pages: 9

Premium Essay

Crocs Managemetn

...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 of his report is to conduct a SWOT analysis about Crocs Inc. and to propose two strategic analyses. Then we had to choose the best strategy and find solutions to implement the strategy. Crocs, Inc. is a footwear manufacturing company......

Words: 4855 - Pages: 20

Premium Essay

Tce and Make or Buy Decision in Major Pharmaceutical Company

...Introduction: In this essay, the discussion will focus on the vertical chain of a major pharmaceutical company as well as TCE and its effect on make or buy decision. The vertical chain is ‘’ the process that begins with the acquisition of raw materials and ends with the distribution and sale of finished goods and service.’’ (Besanko et al, 2010, p119) The term vertical integration is used to describe firms that produce and sell their goods without relying on external co-ordination. Firm’s vertical boundaries can identify what to make (internally inside the organization) and what to buy (externally by using the market). Some of the pharmaceutical companies like Pfizer have strong vertical chains. So as to market its drugs in 150 countries, it gives high importance for production that starts by acquiring active pharmaceutical ingredients (API) and shifting them to manufacturing sites all across the globe. These manufacturing sites are either approved under the stringent laws of FDA or EMEA (2 important bodies responsible in monitoring the quality of registered products across the globe). Sometimes Pfizer also uses loan-licensing companies as external manufacturers when in-house facilities are not available or feasible. Once the product is manufactured, it is sent for quality control release and then packed and shipped to the first point of distribution (global hubs). From these locations; depending on the demand from each region; packed products (formulated products)......

Words: 1815 - Pages: 8

Premium Essay

Business

...http://www.papercamp.com/essay/39587/Zara-Recommendations http://jacennedyconsulting.wordpress.com/2012/03/04/social-media-integration-risks-and-challenges-zara/ http://europe.chinadaily.com.cn/business/2011-04/20/content_12360712.htm Some of its risks and challenges lies in its strategy, principles and company structure. Zara is a vertically integrated retailer. Unlike similar apparel retailers, Zara controls most of the steps on the supply chain, designing, manufacturing, and distributing its products. Regarding the design strategy, an article inBusinessworld magazine describes it as follows: “Zara was a fashion imitator. It focused its attention on understanding the fashion items that its customers wanted and then delivering them, rather than on promoting predicted season’s trends via fashion shows and similar channels of influence, which the fashion industry traditionally used. 1.Diseconomic of scale – in long term, the costs is getting higher. Zara is a vertical Integration that work differently from traditional retailers Because of managing distributions on their own, designing and production process. 2.Centalized distribution system Recommendation Design: cooperate with vary range of designers in order to maintain its competitive advantage to be “the fast fashion” ,remain a distinctive design. Production: cooperate with any channel of production all over the world new improvement in operation technology can be applied into Zara instead of......

Words: 302 - Pages: 2

Premium Essay

Business

... 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...

Words: 6682 - Pages: 27

Premium Essay

Cemex Case Study

...CASE STUDY 1 http://www.scribd.com/full/38399959?access_key=key-222j5zlz3s8dd9x2b6pu CASE STUDY 2 http://www.antiessays.com/free-essays/99985.html CASE STUDY 3 1) DESCRIBE THE MAIN DIFFERENCES BETWEEN THE PRIMARY SECONDARY AND TERTIARY SECTORS. GIVE EXAMPLES OF HOW CEMEX CARRIES OUT WORK INVOLVING EACH OF THESE THREE SECTORS  There are three main sectors of industry.  CEMEX’s business covers all three sectors of industry: * Primary – involves extraction, processing and use of raw materials from the earth * Secondary - manufacturing finished goods and construction activity * Tertiary – providing services to business and consumers, e.g. retail, finance and transport.       Primary activities In its primary activities, CEMEX extracts raw materials from the land or at sea. The process of extracting mineral deposits has to fit in with the government’s Regional Minerals Plan. This specifies how much material needs to be extracted to ensure a fair balance across the country. Before extraction can begin, CEMEX must obtain permission from local authorities. Its plans must include sensitive ways of working, restoration and after-care of sites. This ensures the quality of the environment is maintained and improved once extraction is complete. CEMEX’s marine aggregates business involves extracting sand and gravel from the sea bed by dredging. Dredged aggregates are vital for the future development and maintenance of our hospitals, schools, housing and......

Words: 2285 - Pages: 10

Premium Essay

Importance of Trust in States and Firms

...firms Name: Han Xu CPR no.: 231092-3616 Date of submission: 11 January 2014 Study programme: BSc. Business Administration and Sociology Integrated assignment Supervisors: Jacob Lyngsie, Benedikte Brincker STU Count: 8102 This essay will focus determining if trust is indeed fundamental, or necessary to every organisation. Since trust usually suggests a relationship between 2 or more parties, the essay will look into how trust is established between organisation and define trust. Later on, the economic benefits of trust will be explained and lastly, the importance of trust will be evaluated. Trust and the state The Corruption Perception Index (CPI) is an The CPI is an example of measuring a state’s economic legitimacy based on an empirical understanding, seeking to shed light on the economic and political legitimacy of a regime by reviewing international institutions’ perception on the transparency and corruption of the state. Every year, Transparency International releases a CPI report on countries around the globe. The annual report (Transparency International 2013) measures countries according to the perceived level of corruption, reflecting the level of trust in the accountability of each state. In this section of the essay, we point our attention to the state and trust is defined as the ‘belief in legitimacy’ (Rostboll 2013). Such formalised documentation of trust between neutral international institutions and the state is particularly important......

Words: 1141 - Pages: 5

Premium Essay

Competitive Tactics

...By Mashell Chapeyama Competitive tactics There are a number of competitive tactics that a company may choose from. For example, there are timing tactics, market locations tactics and cooperative tactics. This essay shall discuss the cooperative tactic that is used in business. A tactic is basically similar to a strategy, but it has a shorter time frame. An example of Zimpost private limited shall be discussed in this essay. Zimpost private limited is a company that is mainly owned by the government. Yes, there are some partners in this company. Zimpost owns all the post offices in Zimbabwe. That is where postage stamps are sold. Parcels are sent and delivered by Zimpost. It delivers mail and parcels in the country and globally. Various types of parcels and mail are sent. Zimpost has entered into a partnership with DHL. DHL is an international company that delivers mail and parcel across the entire globe. In Zimbabwe, DHL has very limited facilities. It does not have huge offices and other premises. It does not have many delivering vehicles in the country. As a result, DHL entered in cooperation with Zimpost, which has a lot of facilities in the country. On the contrary, DHL has got cargoes to deliver parcels across the globe. On the other hand Zimpost does not have cargo flights to carry mail around the globe. In their partnership these two companies are using cooperative strategy. This is a form of strategic alliance between these two countries. The main......

Words: 2537 - Pages: 11

Premium Essay

Supply Chain

...Writing a Strategic Management Report This document summarises what I have learnt about report writing in my own career in industry, consultancy and academia. I believe that it constitutes a reasonable guide to good practice. But this is an area in which opinions and practices differ - for example, some people DO like to see the different theoretical models laid out in detail, something that I regard as unnecessary. You are advised to check with your tutor to make sure that what is written here accords with their own requirements and preferences. ©Adrian Haberberg 2001 Please remember that you are writing a business report and not an academic essay, and that you are writing it for a busy and intelligent manager. More specifically: • Do not waste time and paper reproducing information from the case study. In particular, do not bore your "client" with a long history of the organisation you are studying. You should assume that they have read and understood everything in the case study. Your job is to add value to that information. • Remember that a report, like any other good piece of writing, tells a story in an interesting and coherent way. There should be a clear flow from one section of your writing to another, and each part of the report should draw upon what has gone before, and feed analysis forward to what follows. • Do not assume that, if you write down all the theoretical models one after the other, you have done your job. If all you write is a PEST, followed......

Words: 1563 - Pages: 7

Premium Essay

How to Write a Business Strategic Report

...Writing a Strategic Management Report This document summarises what I have learnt about report writing in my own career in industry, consultancy and academia. I believe that it constitutes a reasonable guide to good practice. But this is an area in which opinions and practices differ - for example, some people DO like to see the different theoretical models laid out in detail, something that I regard as unnecessary. You are advised to check with your tutor to make sure that what is written here accords with their own requirements and preferences. ©Adrian Haberberg 2001 Please remember that you are writing a business report and not an academic essay, and that you are writing it for a busy and intelligent manager. More specifically: 0 Do not waste time and paper reproducing information from the case study. In particular, do not bore your "client" with a long history of the organisation you are studying. You should assume that they have read and understood everything in the case study. Your job is to add value to that information. * Remember that a report, like any other good piece of writing, tells a story in an interesting and coherent way. There should be a clear flow from one section of your writing to another, and each part of the report should draw upon what has gone before, and feed analysis forward to what follows. * Do not assume that, if you write down all the theoretical models one after the other, you have done your job. If all you write is a PEST...

Words: 1570 - Pages: 7

Premium Essay

International Trade and Foreign Direct Investment

...Alimatou TRAORE Concept Application essay #1 International Trade- IBS390 Summer 2015 International Trade and Foreign Direct Investment Introduction 1. International Trade, what is it? 2. FDI : Definition and different types 3. Impacts of FDI( Foreign Direct Investment) on International Trade 4. Costs and Benefits of FDI( Foreign Direct Investment) Conclusion Introduction The world economy has developed over the past few decades in a great manner, regarding investment in particular and the way multinationals enterprises are now investing in the developing world to increase their production, assets, and interconnected market networks. Individuals everywhere in the world turn out to be closer than ever before. Goods and services available in one nation A will be instantly promoted in another country B or C. Universal exchange and communication became more basic. This current situation is called Globalization. Globalization is at the same time the primary cause and effect of the incredible growth of International Trade over the past decades. Thanks to International Trade, consumers around the world enjoy a wider range of products than they would if they only had access to domestically made products. 1. International Trade, what is it? International trade simply refers to the movement of goods and services across borders. This activity gives rise to a greater competition and more competitive pricing in the market. However let’s......

Words: 736 - Pages: 3

Premium Essay

Strategic Management

...Chapter 8 Strategic Management True/False Questions THE IMPORTANCE OF STRATEGIC MANAGEMENT 1. Strategic management is the set of managerial decisions and actions that determines the short-term performance of an organization. (False; moderate; p. 208) 2. “Strategic model” is a term that is often used in conjunction with strategic management and strategies. (False; easy; p. 209) 3. The most fundamental questions about strategy address why firms, facing the same environmental conditions, have varying levels of performance. (True; easy; p. 209) THE STRATEGIC MANAGEMENT PROCESS 4. The first step in the strategic management process is analyzing the external environment. (False; difficult; p. 210) 5. Within an industry, an environment can present opportunities to one organization and pose threats to another. (True; moderate; p. 212) 6. Evaluating an organization’s intangible assets is part of doing an internal analysis in the strategic management process. (True; easy; p. 212) 7. Activities that an organization does well or resources that it has available are called capabilities. (False; easy; p. 212) 8. Exceptional or unique organizational resources are known as core capabilities. (False; moderate; p. 212) 9. A strong organizational culture may act as a significant barrier to accepting any changes in organizational strategies. (False; easy; p. 213) 10. SWOT analysis includes an analysis of an organization’s......

Words: 7708 - Pages: 31

Premium Essay

Busn 412

...Strategic Management True/False Questions THE IMPORTANCE OF STRATEGIC MANAGEMENT 1. Strategic management is the set of managerial decisions and actions that determines the short-term performance of an organization. (False; moderate; p. 208) 2. “Strategic model” is a term that is often used in conjunction with strategic management and strategies. (False; easy; p. 209) 3. The most fundamental questions about strategy address why firms, facing the same environmental conditions, have varying levels of performance. (True; easy; p. 209) THE STRATEGIC MANAGEMENT PROCESS 4. The first step in the strategic management process is analyzing the external environment. (False; difficult; p. 210) 5. Within an industry, an environment can present opportunities to one organization and pose threats to another. (True; moderate; p. 212) 6. Evaluating an organization’s intangible assets is part of doing an internal analysis in the strategic management process. (True; easy; p. 212) 7. Activities that an organization does well or resources that it has available are called capabilities. (False; easy; p. 212) 8. Exceptional or unique organizational resources are known as core capabilities. (False; moderate; p. 212) 9. A strong organizational culture may act as a significant barrier to accepting any changes in organizational strategies. (False; easy; p. 213) 10. SWOT analysis includes an analysis of an organization’s environmental......

Words: 7706 - Pages: 31

Premium Essay

Tactics Which Can Support a Strategy of Growth

...This essay/coursework/dissertation was stolen from UK Essays, call 0115 966 7955 to speak to a Fraud Officer now for more details. We have made it available for use as a study resource. Tactics which can support a strategy of growth There are three tactics which can support a strategy of growth. First a firm can adopt internal or organic development. For example Glaxo Smith Klein (GSK) a large UK drugs business reorganised its research and development (R&D) operations to improve expansion. Second, another UK pharmaceutical company AstraZeneca carried out takeovers of bio-science firms (mergers and acquisitions M&A). Compare and contrast these two approaches to growth by discussing their relative advantages and disadvantages. Use examples from any relevant sector, not just "Big Pharma". Summary The paper presents a contrast between conservative and aggressive growth options. It discusses mergers and acquisitions, organic growth and alliances using examples from a range of industries which include online businesses, brewery firms, soft drink giants and also a major pharmaceutical industry merger. In examining the interface between the different growth options the paper posits that they are not mutually exclusive and one may lead to the other, whereas a portfolio of growth options is strategically astute to have. The advantages, disadvantages and issues surrounding the growth options suggest that it is a risk-benefit premise that underpins the value perceptions from......

Words: 928 - Pages: 4

Premium Essay

Paper

...(1968-1985), HCA acquired many small rural hospitals; many of which were struggling to fund new technologies necessary to provide care to the citizens of their communities, and responding to new Federal Government regulations related to Medicare and Medicaid (1965). In the late 70's and early 80's HCA began to acquire competing investor-owned health care companies . Compare and contrast these strategies to the text reference relative to Restructuring of Assets outlined in Chapter 6. What role, if any, did the General and Competitive environment play in these strategies? 3. Consider the comments of the author of the text; "page 195, The Popularity of Mergers and Acquisition Strategy". How did HCA utilize strategies of Horizontal and Vertical Integration to exploit these concepts during the 1980s and 1990s. Reference the files and links provided in your response. 4. On page 203 chapter 7, the author describes...

Words: 636 - Pages: 3