This week let’s discuss integration. First, name a company the practices horizon
ID: 449520 • Letter: T
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This week let’s discuss integration. First, name a company the practices horizontal integration. Describe the structure. Now do the same for a company vertically integrated. In your opinion, which is better to work for? Which offers workers the better opportunity to better yourself? Now, if you owned the business, which would you implement? Think again about the workers opportunities. Does their betterment also mean what’s best for your business? This week let’s discuss integration. First, name a company the practices horizontal integration. Describe the structure. Now do the same for a company vertically integrated. In your opinion, which is better to work for? Which offers workers the better opportunity to better yourself? Now, if you owned the business, which would you implement? Think again about the workers opportunities. Does their betterment also mean what’s best for your business?Explanation / Answer
In the structure, vertical integration allows a company to take hold from start till the end of the process. Usually, the vertical integration is seen in manufacturing process. Thus, in manufacturing, vertical integration allows to control backward as well as forward process, right from controlling raw material to the final step of controlling the consumers.
The vertical integration is used to expand the new operations in the firm. EX: a departmental store previously used to hire trucks and tempos from outside for the transportation of the goods. Now, the store has expanded into new operation, it has purchased its own trucks and tempos which as a result decrements the transportation cost since it does need to pay outsiders for transportation.
Whereas, horizontal integration allows a company to merge with other companies to grow in the economy, it allows to enter into new industry by merging with another company doing the same function. For example: Two firms doing the bakery business merged and expanded their business in bakery.
Horizontal integration is better for larger companies rather than small firms, as the companies goodwill is at stake when getting into acquisition & merger. It sounds beneficial for economies of scale. It increases its power and business in market sector. It is used in business which are trying to invest in foreign markets.
Seeing all the negative and positive aspects, vertical integration is much better and useful than horizontal integration. Vertical integration is more controllable as the expansion is within the firm only. Thus it is less rigorous. The collaboration or merging act can be less controllable as the previous firm is now dependent upon the new merged firm. Trust is the main key in horizontal integration as it can be a loss in case the other merged firm can be fraudulent.
In my opinion, vertical integration is best for the workers as it enhances their skills and capabilities by expanding the operations and introducing new operations within the firm. This implies that workers will be able to discover their core capabilities and competencies within the organization, introducing them to new processes may realize their areas of specialization which results in job satisfaction and they will be motivated towards their work, which is better for them as well as the growth of the company.
If I would have owned a business, I would go for vertical integration as it allows me to grow on my own increasing my potential as well as the potential of employees and workers working in my firm.
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