Vertical and Horizontal Integration Essay Example | Topics and Well Written Essays - 2500 words

Vertical and Horizontal Integration - Essay ExampleCompanies, especially in the technology industry, are continuously reorganizing and restructuring. This is in order to keep their relevance in a celestial sphere that HPs CEO cites as ruthless.The technology industry has continuous consumer shifts, new inventions, and these present risks for redundancy. Companies that require hardware in previous years are now acquiring the proceeds of parcel. Companies that only dealt with software are acquiring hardware production facilities in a bid to stay afloat this occurred in the cocktail dress of HP and Google. HP has been, since its inception, manufacturing hardware, but in 2011, it acquired Autonomy, a software maker (Idea 2011). In the case of Google, in has since acquired Motorola, which deals with handset manufacturing (Blodget 2011). Other industries seem to be inclined to this restructuring. For example in the hammer industry, repayable to strict employment law and labor intens ive nature of the equip industry, companies had shifted to offshore production in a bid to diminish costs and elevate returns margins. Nevertheless, an internalized company, Zara, bypassed the companies that operated using this model, in size and profitability. Zara is the current loss leader in apparel sell, overtaking GAP and H&M. Inditex, which owns Zara, oversees the production of cotton, its processing and final conversion to fashion goods. This happens in its more than 100 companies dealing with diametrical levels of production. Oversea production compromised lead-time (time taken for goods to reach consumers and responsiveness to customer needs. This led to higher levels of inventory cost this was absent in Zaras model, which controlled its production, designing, making and retail of its products. This allows for lower inventory costs, increased lead-time, and efficiency (Grant 2005, p. 398-399). Numerous apparel companies, for example, GAP, are returning to local product ion to balance their market competitiveness in an industry, which moves, terribly fast. An early(a) industry with a similar path is the oil and gas industry. In this segment, companies with gross market shares, for example, BP and ExxonMobil control and invest in petroleum exploration, mining, transportation, processing, supply, and retailing of petroleum goods. These structural adjustments are not without controversies and questions. Regulating body determine whether, apart from the companies increased revenues, at that place are benefits to consumers. For example, authorities and litigators have extensively questioned and subjected to investigations, the move by Google. This write up will mensurate the definition and implications of the two distinct structural models, their advantages and limitations. Defining the concepts Vertical integration Vertical integration refers to a form of management control. Companies using this model, have other affiliated companies, either in upst ream or downstream, which a common owner as their basis of unity. This is achieved through mergers or acquisition of companies at different levels of production. Vertical integration refers to a companys ownership of vertically related activities. The greater the potents tenure over successive stages of the value chain for its creations, the greater the extent of vertical integration. This great power depends on the ratio of the companys value added to its sales revenue. In the technology industry, specifically PC industry, these levels of production may be categorized as follows raw materials, which mainly include plastic, silicon and other metals. Components parts manufacturing follow, examples in this category include Intel and micron technology. The next level is the final assembly through by corporations including HP and Dell. The last stage involves delivery to customers through retailers such as OfficeMax and CompUSA. In the apparel industry, the above stages would be divis ible into cotton growing or petroleum