Integration Strategy

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Integration Strategy
azeem, Student (MBA), Pakistan, Member
Here's my summary of integration strategies:
1A. Forward (Vertical) integration:
= Seeking ownership or increased control over distributors or retailers.
Forward integration involves gaining ownership or increased control over distributors or retailers.
You can gain ownership or control over the distributors or retailers using forward integration.
1B. Backward (Vertical) Integration:
= Seeking ownership or increased control over a firmís suppliers.
Both manufacturers and retailers purchase needed materials from suppliers. Backward integration is a strategy of seeking ownership or increased control of a firm's suppliers. This strategy can be especially appropriate when a firm's current suppliers are unreliable, too costly, or cannot meet the firm's needs.
= Seeking ownership or increased control over a firm's competitors.
Horizontal integration refers to a strategy of seeking ownership of or increased control over a firm's competitors. One of the most significant trends in strategic management today is the increased use of horizontal integration as a growth strategy. Mergers, acquisitions, and takeovers among competitors.
Allows for increased economies of scale and enhanced transfer of resources and competencies.

Is There a Third Dimension?
David Wilson, Manager, Canada, Premium Member
Hi Azeem. Have you ever consider a diagonal integration, where you may gain ownership in a market that can be used to support other products or markets? Regards, David.

3. Orthogonal Integration
Leonard Caillouet
To the strategic integration models suggested by azeem, I would suggest a third dimension would be partnerships orthogonal (Editor: ~independent, non-overlapping) to both ones competitors and one's primary business.
The ideal partners are those who provide a complementary service or product that does not compete with your own and also does not align with your competitors.

Strategies beyond Competition
srinivas, Lecturer, India, Member
The integration strategies discussed above are based on control and taking ownership of other firms (assumptions).
If the focus and objective is on the value generation capability, then I think the integration based on management based on consciousness will be of help, where there will be co-creation in the value generation capabilities even among the competitors.
Competition is not negative where competitors are at war, but co-creators have value generating capabilities in their own way. I think there is enough space available for some competitors to co-create.

Vertical and Horizontal Integration are the Main 2
Ajaya Shankar Gupta Ainapur, Management Consultant, India, Member
The main classification of Integration Strategies is Vertical and Horizontal.
All other strategies can be based on these two dimensions with different ratios, permutations and combinations.

FMCG Multinationals are Practicing Horizontal Integration
Murtaza Syed, Consultant, Pakistan, Member
I appreciate azeem has shared the summaries of these strategies, it seems vertical integration is a more traditional, conventional practice and horizontal is more current in the present era.
To be competitive, large FMCG multinationals seem to be more inclined towards horizontal integration, that's my opinion.

Only 2 Dimensions in Strategic Integration
Onyango Lucius, Events Marketer, Uganda, Member
I think there really are only two dimensions in strategic integration, but other options can be based on these two (vertical and horizontal).

Focus Strategy on Own Firm's Strategy or Think Beyond that?
Adonis, Business Consultant, France, Member
@srinivas proposes a good view. We don't need geometric figures for something related more to flows than to static properties. V or H integration are concepts for internal economies and proper strategies based on internal economic control and manageability.
Today companies are unavoidably much more open due to the presence of stronger external processes. Proactive strategies have to include more and more external strategies and ways to deploy business and activities.
So thinking beyond these traditional corporate strategy concepts is necessary.
When there is fusion or acquisition in a supply chain, or in the same market, it becomes unavoidable and it may show that before this event a certain level of integration preexisted. Any integration internal or external has an impact to the competition environment.

Horizontal Integration Tends to Monopolizing
Walter Berns, Strategy Consultant, United States, Member
The unfortunate thing about mergers and takeovers is the overall niche of the business would tend to become monopolized in a fashion and thus fall to regulation. This of course is dependent on the laws of the country in which the business resides. In business there is such a thing as healthy competition.

Integration Strategies Reaction to External Enviroment
James Mudzikitiri, Business Consultant, Zimbabwe, Member
Integration strategies can also be embarked on as a platform for strategic change to counter changes in macro economic factors as well as other external factors particularly in highly volatile economies.

The Third Dimension
Jay Lo, Partner, Taiwan, Member
To me the third dimension would be people. Integration is not just about merging two businesses to achieve a better set of formality. Depending on the acquisition integration approach, one should also avoid taking on a set of people that will not mix well. On the other hand, taking on great people can even be more valuable than the numbers presented on financial statements.

Limited Dimensions of Integration Strategy Models
Leonard Caillouet
To those who point out that there are primarily these two dimensions for strategic integration, I understand that.
But no model can completely capture the reality of a complex situation in actual business practice. Models are only useful to the extent that they give us a starting point for discussion and analysis, but one must always be looking for the points at which they fail to allow innovative thinking.
Strategy has to be creative, not just tied to a particular set of agreed upon concepts.

Example of Diagonal Integration
faisal, Manager, Pakistan, Member
@David Wilson: Can you give any example of such 'diagonal integration'? I would really appreciate that...

Integrating All Activities in the Strategy
Sandhya.R, Professor, India, Member
Integration strategy is not only a concept applicable to mergers and acquisitions but in the broader sense it could also mean how an individual firm is able to integrate all its activities namely marketing, human resource, production or finance to the overall objective of the organisation or its corporate strategy.

Horizontal and Vertical Integration
Tom Wilson, HR Consultant, United States, Premium Member
The military depends upon the chain of command for vertical integration and staff officers, the Military Entrepreneurs in the French sense of the word, for horizontal integration to ensure organic performance of its operational mission. These structures are an element of the instrumental strategy and are not sustained relative to competitive forces, per se.

Flexible Integration Strategies
eduardo oliva, Professor, Mexico, Member
May I suggest that we could approach this integration subject in a flexible manner?
Consider that our business climate and our negotiating capabilities keep changing all the time. Consequently, we have to keep changing our managerial strategies, tools and actions. Think about it...

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