Types of Integration Flashcards
Horizontal Integration
when a business takes over a firm in the same industry
Benefits of Horizontal Integration
This will allow the business to achieve cost synergies this is the business is reducing its overall costs as it changing the business overall organisation structure
There is an increased in the level of innovation in the business
allow the business to achieve economies of scale
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Increased capital this has allowed the business
Synergies( Revenue, Cost
Drawbacks of Horizontal integration
there is an increased risk this is because the market is competitiveness
This can have an impact on the motivation this is because there is an risk of job and as Maslow ‘s hierarchy needs means that the employees need their psychological needs meant in order to be productivity in the business
there may be different cultures between firms and trade union this may prevent intergration
Forward Vertical Intergration
Forward vertical integration is when a business takes over another business further up to the chain of production
benefits of forward vertical intergration
this allow the business to have control of the
reduce the overall power of competition
increase their overall profit margins
Easier to conduct market research this is because the business is closer to the consumer as a result this allow the business to understand the needs of the consume
Drawback of Forward Vertical Integration
Diseconomies of scale between different parts of the supply chain this can lead to a reduction in overall quality of the business
lack of focus due to mutiple sectors
Backward Vertical Intergration
When a business takes over another business backdown the chain of production
Benefits of Backward Vertical Intergration
This can allow the business to achieve technical economies this is because this business is improving the efficiency of production in the chain of production
This is reducing the overall cost this is because the business is able to achieve a low average unit costs
It can ensure the quality within the production -allow the busines to create a good that is price inelastic thus have a unique selling
Drawbacks Of Backward Vertical Intergation
There is an increased risk
AS the business may have a lack of expertise
this could potentially impact the quality
Conglomerate integration
When a business takes over another totally unrealted business
Benefits of Conglomerate intergration
this allows the business to expand its product profolio this allows the business to spread its risk through these products
This allows the penetrate the market with a compqany that is well known in that market
Drawbacks Of conglomerate Intergration
Potential failure to understand the target company as it will be in an unfamiliar market.
* May distract management from original business due to unfamiliarity and slowness to integrate.
there is an increased risk
