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    Business 82 PDF

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    Lissa Montiel
    This document discusses different types of business integration including horizontal, forward vertical, backward vertical, and conglomerate integration. Horizontal integration involves merging with another firm in the same industry. Forward vertical integration is merging with a customer, while backward vertical integration is merging with a supplier. Conglomerate integration merges firms across different industries. Each type of integration has advantages and disadvantages for businesses, workers, and consumers.

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    Business 82 PDF

    Uploaded by

    Lissa Montiel
    39 views1 page
    This document discusses different types of business integration including horizontal, forward vertical, backward vertical, and conglomerate integration. Horizontal integration involves merging with another firm in the same industry. Forward vertical integration is merging with a customer, while backward vertical integration is merging with a supplier. Conglomerate integration merges firms across different industries. Each type of integration has advantages and disadvantages for businesses, workers, and consumers.

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    This document discusses different types of business integration including horizontal, forward vertical, backward vertical, and conglomerate integration. Horizontal integration involves merging with another firm in the same industry. Forward vertical integration is merging with a customer, while backward vertical integration is merging with a supplier. Conglomerate integration merges firms across different industries. Each type of integration has advantages and disadvantages for businesses, workers, and consumers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    39 views1 page

    Business 82 PDF

    Uploaded by

    Lissa Montiel
    This document discusses different types of business integration including horizontal, forward vertical, backward vertical, and conglomerate integration. Horizontal integration involves merging with another firm in the same industry. Forward vertical integration is merging with a customer, while backward vertical integration is merging with a supplier. Conglomerate integration merges firms across different industries. Each type of integration has advantages and disadvantages for businesses, workers, and consumers.

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    07 Growth and evolution

    KEY TERMS KEY TERMS


    horizontal integration integration with firm in the same merger an agreement by shareholders and managers of two
    industry and at same stage of production businesses to bring both firms together under a common
    forward vertical integration integration with a business in the board of directors with shareholders in both businesses
    same industry but a customer of the existing business owning shares in the newly merged business
    backward vertical integration integration with a business in takeover when a company buys over 50% of the shares of
    the same industry but a supplier of the existing business another company and becomes the controlling owner – often
    conglomerate integration merger with or takeover of a referred to as ‘acquisition’
    business in a different industry
    EXAM TIP
    External growth is often referred to as integration as it If an examination question refers to a merger or takeover, you
    involves bringing together two or more fi rms. Table 7.4 should start by identifying what type it is. Do not forget that
    provides a guide to the different types of integration, mergers and takeovers often cause businesses as many prob-
    their common advantages and disadvantages and the lems as they solve.
    impact they often have on stakeholder groups.

    Type of integration Advantages Disadvantages Impact on stakeholders


    Horizontal integration ● Eliminates one competitor. ● Rationalisation may bring bad ● Consumers have less choice.
    ● Possible economies of scale. publicity. ● Workers may lose job security
    ● Scope for rationalising ● May lead to monopoly as a result of rationalisation.
    production, e.g. concentrating investigation if the combined
    output on one site instead business exceeds certain size
    of two. limits.
    ● Increased power over
    suppliers.
    Forward vertical integration ● Business is able to control the ● Consumers may suspect ● Workers may have greater job
    promotion and pricing of its uncompetitive activity and security because the business
    own products. react negatively. has secure outlets.
    ● Secures an outlet for the firm’s ● Lack of experience in this ● There may be more varied
    products – may now exclude sector of the industry – a career opportunities.
    competitors’ products. successful manufacturer does ● Consumers may resent lack of
    not necessarily make a good competition in the retail outlet
    retailer. because of the withdrawal of
    competitor products.
    Backward vertical integration ● Gives control over quality, ● May lack experience of ● Possibility of greater career
    price and delivery times of managing a supplying opportunities for workers.
    supplies. company – a successful steel ● Consumers may obtain
    ● Encourages joint research and producer will not necessarily improved quality and more
    development into improved make a good manager of a innovative products.
    quality of supplies of coal mine. ● Control over supplies to
    components. ● Supplying business may competitors may limit
    ● Business may control supplies become complacent having a competition and choice for
    of materials to competitors. guaranteed customer. consumers.
    Conglomerate integration ● Diversifies the business away ● Lack of management ● Greater career opportunities
    from its original industry and experience in the acquired for workers.
    markets. business sector. ● More job security because
    ● This should spread risk and ● There could be a lack of clear risks are spread across more
    may take the business into a focus and direction now that than one industry.
    faster-growing market. the business is spread across
    more than one industry.

    Table 7.4 Types of business integration

    74

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