Backward Vertical Integration - Integration strategies

Corporate Level Strategies

Prepared By

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Manu Melwin JoyAssistant Professor

Ilahia School of Management Studies

Kerala, India.Phone – 9744551114

Mail – manu_melwinjoy@yahoo.com

Integration strategies

Integration strategies

• It is done where the company attempts to widen the scope of its business definition in such a manner that it results in serving the same set of customers. The alternative technology of the business undergoes a change.

Integration strategies

• It is combing activities related to the present activity of a firm. Such a combination may be done through value chain. A value chain is a set of interrelated activity performed by an organization right from the procurement of basic raw materials down to the marketing of finished products to the ultimate customers.

Vertical Integration

• When pursuing a vertical integration strategy, a firm gets involved in new portions of the value chain. This approach can be very attractive when a firm’s suppliers or buyers have too much power over the firm and are becoming increasingly profitable at the firm’s expense.

Examples of Vertical Integration

• Oil companies like ConocoPhillips can be involved in all stages of the value chain, including crude oil exploration, drilling for oil, shipping oil to refineries, refining crude oil into products such as gasoline, distributing fuel to gas stations, and operating gas stations.

Backward Vertical Integration

• When pursuing a vertical integration strategy, a firm gets involved in new portions of the value chain. This approach can be very attractive when a firm’s suppliers or buyers have too much power over the firm and are becoming increasingly profitable at the firm’s expense.

Examples of Backward Integration

• Ford Motor Company created subsidiaries that provided key inputs to vehicles such as rubber, glass, and metal. This approach ensured that Ford would not be hurt by suppliers holding out for higher prices or providing materials of inferior quality.