What Vertically Integrate Assignment Help Tells You Significance of This Strategy
Writing answers on vertically integration firms is very simple if the concept is clear to you. One of the most frequently asked question on this strategy is related to its significance. At myhomeworkhelp.com we have few members who can provide expertise why vertically integrate?homework help to explain your answers in a comprehensive way.
What is vertical integration and why it is important?
It is a management strategy in which a parent company collects its production inputs from its own subsidiaries, instead of buying them from external suppliers. You can say that a company controls its own supply chain.
This strategy enables a company to cut costs in different segments of production. Vertical integration also ensures stringent quality control, a better flow, and control of information across the supply chain. The strategy aims to create value and greater profit potential by putting tighter control over its operations. Why vertically integrate?assignment help can explain you with examples how this strategy can eliminate transportation costs, business-to-business marketing costs, and transaction costs.
Several advantages vertically integrated firms enjoy:
Vertical integration gives the parent company more control over the value chain. When a retailer acquires a manufacturing unit, it gets more control on the production segment of the distribution process. Likewise, when a manufacturer takes the responsibility of distribution or retailing, it has more hold on the way of presenting products and deciding the selling price.
This strategy is significant for cost control in the entire distribution process. In a traditional distribution system, each stage in product flow includes markups, enabling re-seller to earn a profit. But by selling directly to the end-user, a manufacturer can keep away a middle man and remove one or more stages of markups along the way. If a single entity manages the distribution process, then it is possible optimizing resource utilization and avoiding wasted costs. Similarly, lower transportation costs can also be avoided.
Some vertically integrated firms increase advantages over competition and to prevent competitors from accessing scarce resources or important markets. Why vertically integrate? homework help explains all the advantages more clearly citing the examples of major companies.
Vertically integrated companies can easily distinguish themselves from its peers through effective marketing. Such companies can easily adapt to changing requirements of customers if it has its own manufacturing and production unit for making products.
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