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I.

Organizational architecture
1. Definition

Organizational architecture is a business term referring to a set of plans defining a

business. It describes the internal structure through which an enterprise assembles staff
and procedures into a means of productive commerce. Also referred to as enterprise
modeling, this defines the means the company uses to express itself as an organized
system.
It means that is the totality of a firms organization including:
-

Organizational structure
Control systems and incentives
Processes, organizational culture, and people

To maximize profitability a firm must achieve consistency between the various

components of its architecture:
-

The elements of the organizational architecture must be internally consistent

The organizational architecture must fit the strategy
The strategy and architecture must be consistent with each other, and consistent
with competitive conditions

II.

Vertical Integration & Horizontal Integration

Vertical Integration

Vertical integration is a strategy used by a company to gain control over its suppliers or
distributors in order to increase the firms power in the marketplace, reduce transaction
costs and secure supplies or distribution channels. There are 2 sorts of vertical
integration: Backward integration and Forward integration
Forward integration is a strategy where a
firm gains ownership or increased control
over its previous customers (distributors or
retailers).
Backward integration is a strategy where a
firm gains ownership or increased control
over its previous suppliers.
For example: The company has to decide if
it only manufactures its products or would
engage in retailing and after-sales services
as well. Two issues have to be considered
before integration: Cost and scope of the
firm.

Horizontal Integration
It is a type of integration strategies pursued by
a company in order to strengthen its position in
the industry.
A corporate that implements this type of
strategy usually mergers or acquires another
company that is in the same production stage.
For example, Disney merging with Pixar
(movie production)