Assignment 6
#3. Give recent examples of forward integration, backward integration, and horizontal integration.
A business strategy that involves a form of vertical integration (upstream supplier and downstream buyers) whereby activities are expanded to contain control of the direct distribution of its products. The advantages of forward integration consist of excluding competing suppliers, greater capacity to reach end customers and better admittance to information about end customers. (Example) Forward integration is when a farmer offers his crops at the local market rather than to a distribution center. (Example 2) Dell reaches its customer directly through the internet this cuts out traditional computer stores.
Backward integration is vertical integration that combines a core business with its suppliers. The advantages of backward integration may include assurance of the pricing, quality and availability of supplies, and efficiencies gained from coordinating production of supplies with their consumption. A form of vertical integration that involves the purchase of suppliers in order to reduce dependency. (Example) A bakery business bought a wheat farm in order to reduce the risk associated with the dependency on flour. (Example 2) Many grocery stores now have their own brand products to compete the name brand products (less expensive).
When a company expands its business into different products that are similar to current lines. Horizontal integration is the widening of a business at the same point in the supply chain. (Example) Supermarkets that are moving towards selling a larger variety of non-food items are increasing their level of horizontal integration. The advantages of horizontal integration can lie in reaching the customers (if you are already selling them one thing, use the opportunity to sell more) but can include economies of scales in