Vertical Diversification (Integration) Assignment Help Homework Help Online Tutoring Help (2024)

FAQs

What is an example of vertical diversification? ›

Vertical diversification is when you move up or down the supply chain of your industry, and take control of more stages of production or distribution. For example, a clothing retailer might start manufacturing its own fabrics, or a car maker might acquire a dealership network.

If a company is hoping for the most increase in profit, it may consider using conglomerate or vertical diversification methods. Each of these strategies allows the potential to expand into new industries and appeal to a new target audience.

While vertical integration involves a firm moving into a new part of a value chain that it is already within, diversification requires moving into an entirely new value chain. Many firms accomplish this through a merger or an acquisition, while others expand into new industries without the involvement of another firm.

Strategies for Diversification

A company may decide to diversify its activities by expanding into markets or products that are related to its current business. For example, an auto company may diversify by adding a new car model or by expanding into a related market like trucks.

In economics, vertical integration is the term used to describe a business strategy in which a company takes ownership of two or more key stages of its supply chain. A vertically integrated automaker, for example, might produce automobile components and vehicles and also sell directly to customers.

The most famous vertical integration examples are Apple, Mcdonald's and Amazon. A good example of vertical integration is Apple, which keeps controlling the whole manufacturing process. Having used to outsource producing some parts before, the company now manufactures basically everything: from chipsets to cases.

Vertical diversification, also known as vertical integration, is when you expand forward or backwards in your supply chain or production process. During vertical integration, the business combines two or more stages of production that are usually operated by other companies.

Vertical integration is a strategy that allows a company to streamline its operations by taking direct ownership of various stages of its production process rather than relying on external contractors or suppliers.

Vertical integration helps a company to manage and control various aspects of the production, distribution, and sales processes. The goal of vertical integration is typically to increase sales, eliminate costs, and improve profits by improving business operations.

Definition. Vertical integration is a business strategy in which a company controls multiple stages of its production process and supply chain, minimizing or eliminating the need for outside entities.

How does vertical integration affect society? ›

How does vertical-integration affect society? Vertical-integration makes the market efficient. Previously smaller, less competent firms come together to form a large corporation—more productive. But, on the other hand, it can be a threat to society since it may wipe out multiple competitors.

Benefits of diversification

Reduces risk due to your investments being spread across multiple areas; if one market fails, success in others will reduce the impact of failure. Helps you gain access to larger market potential, due to lower competition in foreign markets. Increases your business's overall market share.

Diversification is important because it helps a business spread its risk across different areas, reducing dependency on a single market or product. It can also lead to increased revenue streams and improved long-term sustainability.

Diversifying your business can also bring about some challenges, such as higher costs for research and development, marketing, production, distribution, and management. Additionally, you may lose focus on your core business and customers, or face conflicts between different businesses or segments.

Vertical diversification, also known as vertical integration, is when you expand forward or backwards in your supply chain or production process. During vertical integration, the business combines two or more stages of production that are usually operated by other companies.

The word vertical can also be used to describe the motion of objects. Since we know, vertical stands for top to bottom, the motion of an apple falling from a tree, would be vertical motion. Or the motion of a rocket or a balloon going from bottom to top is also classified as vertical.

An example of vertical growth can be seen with clothing retailer Zara. The Spanish company produces many of their clothes themselves rather than outsourcing to suppliers. This gives Zara greater control over the quality of their products and allows them to quickly turn around supply.