Types of Integration Strategies Explained
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ScribdTranslationsTypes of Integration Strategies Explained
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ScribdTranslationsIntegration strategy
This integration is used to reduce the threats present in the environment and also as
means for companies to gain control and reduce bargaining power over
distributors, suppliers, and competitors. There are three types of Integration Strategy:
Forward Integration, Backward Integration and Horizontal Integration
One of the main attractions of this strategy is linked to opportunities and with the firm
conviction that it is a very good method to gain competitive advantages for the
companies.
Integration strategy
Integration Strategies seek to control or acquire the negotiating power of the
distributors, from the suppliers or from the competition. This way they can reduce the threats that
there is in the environment.
Also to gain ownership or greater power over them, for which there are three types of
Integration Strategy: Forward Integration, Backward Integration, and Integration
Horizontal.
a) Forward integration.
Forward integration involves acquiring or gaining ownership of distributors.
to associate with my clients). The aim of this type of integration is to achieve a higher degree
of efficiency and greater control.
This forward integration strategy also causes a company to acquire more channels.
of distribution, that is, its own distribution centers (warehouses) and retail stores.
It can also mean that the company will go even further, as it acquires its own customers.
This type of strategy is advisable to apply when:
The current distributors of an organization are especially costly, unreliable or
unable to meet the distribution needs of the company.
When current distributors have high profitability, as this
The company could profitably distribute its own products and set prices in a more
competitive and thus obtain more profits.
Conclusions
Companies can use forward integration in order to differentiate themselves from their competitors.
rivals.
or a greater understanding of consumer behavior is acquired. Due to this
new closeness with the client.
By using this strategy, companies can avoid price controls, taxes, and regulation.
on the part of the Government.
Entering the market can be costly for the company, especially if there are barriers.
very high entrance.
b) Backward integration
The idea of this strategy is to acquire or incorporate the company of my suppliers, that is,
It consists of being the company that integrates manufacturing activities into its organization. This type
integration can be proposed to ensure the continuity of supply and the quality of the
purchased products, to coordinate the distribution functions more effectively and efficiently.
Through this strategy, we aim to become our own suppliers, not depend on them, and reduce their influence.
negotiating power.
This type of strategy is advisable to apply when:
The current suppliers of an organization are especially costly, scarce, and unreliable.
or unable to meet the needs of the company (raw materials).
If all or the great majority of its competitors depend on suppliers, it can with this.
strategy to take competitive advantages by reducing costs and also because our
competidores necesitan recursos de terceros que nuestra organización sí tendría
Conclusions
This strategy can generate significant cost advantages when suppliers present
an important profit margin.
If the company has the necessary technology, it can carry out a more efficient production.
than that carried out by the suppliers
strengthen the company by reducing costs or differentiating products.
3.-Avoid or reduce the bargaining power of suppliers when they are the only ones producing.
this good or this is scarce.
c) horizontal integration
This strategy is to control or acquire a company by another from the same market.
with the aim of improving efficiency or to increase market power.
This type of strategy is advisable to apply when:
When an organization competes in a growing industry.
When the company has the capital and human talent it needs to manage the company.
that is acquiring.
Conclusions
o Reduce a la competencia
It increases the company's negotiating power
It strengthens entry barriers and the emergence of substitute products.
One can obtain more distribution channels.
General Conclusion
With this report we were able to conclude that the strategy of vertical integration can be both towards
forward as backward since it refers to the expansion of the company's activities towards its
supply sources or towards the end users for integration towards
upfront may increase control over distributors, while backward integration
allows for increased control over suppliers unlike the horizontal which tries to
acquire the domain or greater control over competitors