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1) The document discusses vertical and horizontal growth strategies for businesses. Vertical growth focuses on selling additional products and services to existing customers, while horizontal growth focuses on finding new customers.
2) It also covers vertical and horizontal integration. Vertical integration involves different stages of production under common ownership, while horizontal integration involves firms in the same industry and stage of production merging.
3) Horizontal integration can provide economies of scale through bulk purchasing, specialization, and spreading advertising costs over more output. Related diversification involves expanding into businesses that leverage existing resources and capabilities.
1) The document discusses vertical and horizontal growth strategies for businesses. Vertical growth focuses on selling additional products and services to existing customers, while horizontal growth focuses on finding new customers.
2) It also covers vertical and horizontal integration. Vertical integration involves different stages of production under common ownership, while horizontal integration involves firms in the same industry and stage of production merging.
3) Horizontal integration can provide economies of scale through bulk purchasing, specialization, and spreading advertising costs over more output. Related diversification involves expanding into businesses that leverage existing resources and capabilities.
Droits d'auteur :
Attribution Non-Commercial (BY-NC)
Formats disponibles
Téléchargez comme DOCX, PDF, TXT ou lisez en ligne sur Scribd
1) The document discusses vertical and horizontal growth strategies for businesses. Vertical growth focuses on selling additional products and services to existing customers, while horizontal growth focuses on finding new customers.
2) It also covers vertical and horizontal integration. Vertical integration involves different stages of production under common ownership, while horizontal integration involves firms in the same industry and stage of production merging.
3) Horizontal integration can provide economies of scale through bulk purchasing, specialization, and spreading advertising costs over more output. Related diversification involves expanding into businesses that leverage existing resources and capabilities.
Droits d'auteur :
Attribution Non-Commercial (BY-NC)
Formats disponibles
Téléchargez comme DOCX, PDF, TXT ou lisez en ligne sur Scribd
When growing your business you need to decide on a growth strategy
Here are two examples: 1) Vertical growth - focusing on current customers to make additional purchases of your product or services. Develop new products or services to appeal to existing customer base. 2) Horizontal growth - finding new customers to buy existing products or services. Expand the geographic reach of your business as well as sell to different customers in same area.Don't limit yourself. You can combine both strategies. If you are a smaller firm, concentrate on one at a time. Communication Tip - when communicating to your target market - U.S. Mail postage, envelope, paper and labor on average will cost you $1 per person, an email about 3 cents per person. In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies are united through a hierarchy with a common owner. Usually each member of the hierarchy produces a different product or (market- specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. Vertical integration is one method of avoiding the hold-up problem. A monopoly produced through vertical integration is called a vertical monopoly, although it might be more appropriate to speak of this as some form of cartel. Nineteenth century steel tycoon Andrew Carnegie introduced the idea of vertical integration. This led other businesspeople to use the system to promote better financial growth and efficiency in their companies and businesses. In microeconomics and strategic management, the term horizontal integration describes a type of ownership and control. It is a strategy used by a business or corporation that seeks to sell a type of product in numerous markets. Horizontal integration in marketing is much more common than vertical integration is in production. Horizontal integration occurs when a firm is being taken over by, or merged with, another firm which is in the same industry and in the same stage of production as the merged firm, e.g. a car manufacturer merging with another car manufacturer. In this case both the companies are in the same stage of production and also in the same industry. A monopoly created through horizontal integration is called a horizontal monopoly. A term that is closely related with horizontal integration is horizontal expansion. This is the expansion of a firm within an industry in which it is already active for the purpose of increasing its share of the market for a particular product or service.
Advantages of Horizontal integration
Economies of scale, in microeconomics, are the cost advantages that a business obtains due to expansion. They are factors that cause a producer’s average cost per unit to fall as scale is increased. Economies of scale is a long run concept and refers to reductions in unit cost as the size of a facility, or scale, increases.[1] Diseconomies of scale are the opposite. Economies of scale may be utilized by any size firm expanding its scale of operation. The common ones are purchasing (bulk buying of materials through long-term contracts), managerial (increasing the specialization of managers), financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments), and marketing (spreading the cost of advertising over a greater range of output in media markets). Each of these factors reduces the long run average costs (LRAC) of production by shifting the short-run average total cost (SRATC) curve down and to the right. Related Corporate Diversification When multiple lines of business are linked in a firm, the firm is pursuing a strategy of related diversification. Such a firm is conscious of leveraging its resources and capabilities beyond a single product or market into those businesses that are related to their current activities. Related diversification can happen in two ways: �Related-constrained – when all the businesses in which a firm operates share a significant number of inputs, production technologies, distribution channels, similar customers, etc. � Related-linked – when the different businesses that a single firm pursues are linked on only a couple of dimensions, or if different sets of businesses are linked along very different dimensions. Examples help in understanding the critical difference between related- constrained and related-linked types of diversification. Bic, the French Company, produces products such as disposable razors, cigarette lighters, and pens. The company pursues a related-constrained diversification strategy because all their products share significant commonalities in the areas of plastic injection molding, retail distribution, and brand name. Newell Rubbermaid is a good example of a related-linked firm. After Newell Company acquired Rubbermaid, the company is organized into five segments: cleaning and organization; home and family; home fashions; office products; and, tools and hardware. All five segments share common distribution channels – supermarkets (such as Wal-Mart) and office supply stores (Staples, Office Depot, etc.). The products are sold under various brand names (Sharpie, Levolor) and do not typically share common technology or inputs across segments. Related Diversification and Competitive Advantage Competitive advantage can result from related diversification when a company captures cross- business opportunities to Transfer expertise/capabilities/technology from one business to another Reduce costs by combining related activities of different businesses into a single operation Transfer use of firm’s brand name reputation from one business to another Create valuable competitive capabilities via cross-business collaboration in performing related value chain activities What Is Unrelated Diversification? Involves diversifying into businesses with No cross-business strategic fits No meaningful cross-business value chain relationships No unifying strategic theme Basic approach – Diversify into any industry where potential exists to realize good financial results While industry attractiveness and cost-of-entry tests are important, better-off test is secondary