Pros And Cons Of Vertical Integration - 809 Words

5. Vertical integration is when two businesses or organizations at different levels of production merge. The principal goal is to increase the overall efficiency and to cut down costs throughout the supply chain. In return, it will improve profitability and competitiveness. It allows companies to obtain matchless amount of influence over them, and if you have a company and are thinking about using it in your organization as a business strategy, it is important to know its Pros and Cons beforehand. The Pros of vertical integration is (1) it gives you more control over your business, (2) It allows for positive differentiation and (3) offers more cost of control. Gives you more control over your business, for example whenever†¦show more content†¦Makes things more difficult, you must learn to run a segment in the corporate world. When jumping into things without a full understanding on how it works can be a lot to handle for the company. It can decrease flexibility because of t he upstream and downstream investments the business is making. Last but not least, it can cause confusion within the business because retail and product development are distinct businesses, and doing both could require more work to be done. Also, some entrepreneurs are often trying to think of too many things at once which would confuse, distract and/or harm their bottom line. Pros of business portfolio diversification, it reduces an investors overall level of instability and potential risk. For example, an investor who chooses to diversify their portfolio with investments in foreign stocks may find they have invested in stocks of countries experiencing economic booms and those stocks produce large gains at a time when the performance of domestic stocks is mediocre to poor. Cons of business portfolio diversification, it is less publicized, and less well known but the fact is diversification can also have adverse effects on an investment portfolio. Too much diversifying can reduce potential gains and produce only mediocre results. Too much diversifying can saturate the gains because there are more underperforming stocks wheneverShow MoreRelatedThe Pros and Cons of Vertical Integration Essay1127 Words   |  5 Pages It leads to reduction of transportation costs as the common ownership results in closer geographic proximity. The transaction costs can be controlled if a firm acquires the other firms in the vertical chain, then one division of the same company will transfer goods to other divisions. So, transaction costs in form of transport, cost of negotiation, cost of control etc. will be eliminated. The overall average cost of the firm will decrease because if the divisions are under same management controlRead MoreEssay Ecco Case Anwers1256 Words   |  6 PagesECCO Case Study - Question 1 ECCO has a fully integrated vertical value chain. What are the pros and cons of that strategy? What economic and strategic factors should be analyzed to answer this question? The pros of a having a fully integrated vertical supply chain for Ecco include the following: * Improved supply chain coordination between tanning, manufacturing and distribution. This would ultimately help maintain quality and improve operational efficiencies such as logistics. Read MoreThompson and Strickland Essay Questions1432 Words   |  6 Pages 54. Why is competitive advantage an important strategy-making consideration? 55. Describe the strategy of striving to be the low-cost producer. What are its pros and cons. 56. What are the pros and cons of a differentiation strategy? 57. 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One of the big dangers in crafting a competitive strategy is that managers, torn between the pros and cons of the various generic strategies, will opt for â€Å"stuck in the middle† strategies that represent compromises between lower costs and greater differentiation and between broad and narrow market appeal. True or false? Chapter 6 20. What are theRead MoreA Great One! 979 Words   |  4 Pagesstrengths and minimize the weaknesses of both the functional and divisional structures (Gibson, Ivancevich, Donnelly Konopaske, 2009). The matrix organization superimposes a lateral structure that concentrates on product or project coordination on a vertical functional structure (Cummings, 2009). In practical terms, the matrix design combines functional and product department bases (Gibson, et al., 2009). 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