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Vertical Integration (PPT)

The document discusses vertical integration as a strategy where companies control multiple stages of production or distribution. It outlines the advantages, such as cost management and market control, as well as disadvantages like mismanagement and high capital requirements. Additionally, it describes types of vertical integration (backward, forward, balanced) and the four degrees of integration, emphasizing its impacts on organizational efficiency and market influence.

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Julie Ann Rala
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5 views

Vertical Integration (PPT)

The document discusses vertical integration as a strategy where companies control multiple stages of production or distribution. It outlines the advantages, such as cost management and market control, as well as disadvantages like mismanagement and high capital requirements. Additionally, it describes types of vertical integration (backward, forward, balanced) and the four degrees of integration, emphasizing its impacts on organizational efficiency and market influence.

Uploaded by

Julie Ann Rala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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VERTICAL

INTEGRATION
PRESENTORS:

AGUILAR, TRICIA MANALO, GERLYN E. RAYOS, CRISTHEL


REMOQUIN , KRISTINE JOY VILLENA, KAYE M.
LEARNING OBJECTIVES
Define vertical integration
Explain the advantages and disadvantages of
vertical integration
Identify and describe three types of vertical
integration (backward, forward, balanced)
Explain the four degrees of vertical integration
Discuss the impacts of vertical integration in
the organization
VERTICAL
INTEGRATION
Vertical integration is an expansion strategy
where a company takes control over one or more
stages in the production or distribution of its
products.
HOW DOES VERTICAL
INTEGRATION WORK?
SAMSUNG

Samsung® is one example of a global brand which


employs vertical integration strategy. Samsung is
actively involved in the production of various
components, such as LCD and AMOLED displays,
antennas, Li-ion batteries, camera modules, and
semiconductors.

JOLLIBEE FOOD CORPORATION

Jollibee, is the epitome of efficient vertical


integration as the brand controls the
manufacture of its primary products, logistics
and sale of the products through retail outlets.
advantages
ADVANTAGES
1 ESTABLISHING INDEPENDENCE

2 MANAGING COSTS

3 CREATING ECONOMIES OF SCALE


ADVANTAGES

4 INCREASING KNOWLEDGE

5 IMPROVING MARKETABILITY
ADVANTAGES
6 MAXIMIZING MARKET CONTROL

7 LOWERING PRICES
DISadvantages
DISADVANTAGES
1 MISMANAGEMENT

2 OUTSOURCING

3 A LARGE AMOUNT OF CAPITAL

4 LOSS OF FOCUS
F

BALANCED
INTEGRATION
BALANCED
INTEGRATION
a company seeks to control both
upstream (backward integration) and
downstream (forward integration)
activities in its supply chain.
FOUR DEGREES OF
VERTICAL INTEGRATION
1 Full vertical integration

2 Quasi vertical integration

3 Long-Term Contracts

4 Spot Contracts
FULL VERTICAL
INTEGRATION
when a company controls all aspects of its
production process, from sourcing raw materials
to the final sale of its products.
QUASI VERTICAL
INTEGRATION
where a company does not fully own its
suppliers or distributors but maintains
significant control over them through partial
ownership, strategic investments, or exclusive
agreements
LONG-TERM CONTRACTS
agreements between companies and their
suppliers or distributors that establish terms for
the delivery of goods or services over an
extended period.
SPOT CONTRACTS
allow firms to respond quickly to market
changes without being tied to long-term
agreements
FORWARD AND F

BACKWARD
VERTICAL
INTEGRATION
FORWARD
INTEGRATION
This involves a company
expanding by taking control
of later stages in its supply
chain, like distribution, retail,
or direct sales to consumers.

https://dealroom.net/blog/forward-integration
BENEFITS
1 Increase the company’s market share

2 Gain control over distribution channels

3 Competitive advantage

4 Create barriers to potential competitors


RISKS
1 Bureaucratic inefficiencies

2 Failure to realize synergies between the companies

3 High costs
BACKWARD
INTEGRATION
This occurs when a company
expands its operations to take
control of earlier stages in its
supply chain, such as acquiring
or setting up production for raw
materials.

https://dealroom.net/blog/backward-integration
ADVANTAGES
1 Better control

2 Cost control

3 Competitive advantage
DISADVANTAGES
1 Inefficiencies

2 Substantial investment
IMPACTS OF
VERTICAL
INTEGRATION IN
THE ORGANIZATION
IMPACTS OF VERTICAL INTEGRATION
IN THE ORGANIZATION

enables companies to reduce costs, increase


quality control, and gain greater market
influence by managing more stages of the
supply chain independently.
THANK YOU!

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