...In this essay, we are going to identify the meaning of vertical integration and its two types then apply it on an organization. When a company enlarge its business into parts that are at different positions on similar production path, for example when a manufacturer possess its seller and distributor. Vertical integration can assist companies reduce costs and advance effectiveness by reducing transportation operating cost and reducing turnaround time, within other benefits. Yet, occasionally it is more practical for a company to depend on information and economies of scale of other supplier rather than be vertically integrated. Vertical integration has two types which are backward vertical integration and forward vertical integration. A company...
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...Arab Open University Faculty of Business Studies Business Functions in Context I B203A -- Second Semester 2015-2016 Tutor Marked Assessment Managing Marketing Channels: Zara | One global retailer is expanding at a dizzying pace. It's on track for what appears to be world domination of its industry. Having built its own state-of-the art distribution network, the company is leaving the competition in the dust in terms of sales and profits, not to mention speed of inventory management and turnover. Wal-Mart you might think? Dell possibly? Although these two retail giants definitely fit the description, we're talking here about Zara, the flagship specialty chain of Spain-based clothing conglomerate, Inditex. This dynamic retailer is known for selling stylish designs that ' resemble those of big-name fashion houses, but at moderate prices. "We sell the latest trends at low prices, but our clients value our design, quality, and constant innovation," a company spokesman said. "That gives us the advantage even in highly competitive, developed markets, including Britain." More interesting is the way that Zara achieves its mission. FAST-FASHION—THE NEWEST WAVE A handful of European specialty clothing retailers are taking the fashion world by storm with a business model that has come to be known as "fast-fashion." In short, these companies can recognize and respond to fashion trends very quickly, create products that mirror the trends, and get those products onto shelves...
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...Summary i 1.0 Introduction 1 1.1 Purpose 1 1.2 Company Information 1 1.3 Assumption 1 1.4 Methodology 1 1.5 Plan of Report 1 2.0 SWOT Analysis 3 2.1 Identification of Strengths 3 2.1.1 Well recognized and financially sound 3 2.1.2 Have propriety rights over CrosliteTM material 3 2.2 Identification of Weaknesses 3 2.2.1 Expansion is a dilemma 3 2.2.2 Seasonal usage 3 2.3 Identification of Opportunities 4 2.3.1 Further exploration of the Asian market 4 2.3.2 Online sales 4 2.4 Identification of Threats 4 2.4.1 Replicas and imitation 4 2.4.2 Anti- Crocs Sentiment 5 3.0 Evaluation of Alternative Strategies 6 3.1 Proposed Alternative Strategies 6 3.1.1 Pursue diversification 6 3.1.2 Pursue vertical integration 7 3.2 Selection of Best Strategy 9 4.0 Implementation of Selected Strategy 10 4.1 Controlling Function 10 4.1.1 To implement feedforward control 10 4.1.2 To implement concurrent control 10 4.1.2 To implement feedback control 10 4.2 Organising Function 11 4.2.1 To introduce departmentalization 11 4.2.2 To execute formalisation 12 4.2.3 To implement decentralization 12 5.0 Conclusion 13 6.0 Reference List ii Executive Summary The purpose of his report is to conduct a SWOT analysis about Crocs Inc. and to propose two strategic analyses. Then we had to choose the best strategy and find solutions to implement the strategy. Crocs, Inc. is a footwear manufacturing company developing...
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...Introduction: In this essay, the discussion will focus on the vertical chain of a major pharmaceutical company as well as TCE and its effect on make or buy decision. The vertical chain is ‘’ the process that begins with the acquisition of raw materials and ends with the distribution and sale of finished goods and service.’’ (Besanko et al, 2010, p119) The term vertical integration is used to describe firms that produce and sell their goods without relying on external co-ordination. Firm’s vertical boundaries can identify what to make (internally inside the organization) and what to buy (externally by using the market). Some of the pharmaceutical companies like Pfizer have strong vertical chains. So as to market its drugs in 150 countries, it gives high importance for production that starts by acquiring active pharmaceutical ingredients (API) and shifting them to manufacturing sites all across the globe. These manufacturing sites are either approved under the stringent laws of FDA or EMEA (2 important bodies responsible in monitoring the quality of registered products across the globe). Sometimes Pfizer also uses loan-licensing companies as external manufacturers when in-house facilities are not available or feasible. Once the product is manufactured, it is sent for quality control release and then packed and shipped to the first point of distribution (global hubs). From these locations; depending on the demand from each region; packed products (formulated products) move...
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...http://www.papercamp.com/essay/39587/Zara-Recommendations http://jacennedyconsulting.wordpress.com/2012/03/04/social-media-integration-risks-and-challenges-zara/ http://europe.chinadaily.com.cn/business/2011-04/20/content_12360712.htm Some of its risks and challenges lies in its strategy, principles and company structure. Zara is a vertically integrated retailer. Unlike similar apparel retailers, Zara controls most of the steps on the supply chain, designing, manufacturing, and distributing its products. Regarding the design strategy, an article inBusinessworld magazine describes it as follows: “Zara was a fashion imitator. It focused its attention on understanding the fashion items that its customers wanted and then delivering them, rather than on promoting predicted season’s trends via fashion shows and similar channels of influence, which the fashion industry traditionally used. 1.Diseconomic of scale – in long term, the costs is getting higher. Zara is a vertical Integration that work differently from traditional retailers Because of managing distributions on their own, designing and production process. 2.Centalized distribution system Recommendation Design: cooperate with vary range of designers in order to maintain its competitive advantage to be “the fast fashion” ,remain a distinctive design. Production: cooperate with any channel of production all over the world new improvement in operation technology can be applied into Zara instead of …old Distribution:...
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... but from which only one corporation survives. Answer: T (p.166) 5. A strategic alliance is a partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial. Answer: T (p.166) 6. The two basic growth strategies are concentration and strategic alliances. Answer: F (p.166) 7. Vertical integration is going backward on an industry’s value chain. Answer: F (p.167) 8. Vertical integration is the degree to which a firm operates vertically in multiple locations on an industry’s value chain from extracting raw materials to manufacturing to retailing. Answer: T (p.167) 9. Forward integration is often more profitable than backward integration. Answer: F (p.167) 10. BP Amoco and Royal Dutch Shell are examples of fully integrated firms because they internally make 100% of their key supplies and completely control their distributors. Answer: T (p.168) 11. With taper integration, a firm internally makes 100% of its key supplies and completely control its distributors. Answer: F (p.168-169) 12. An example of forward quasi-integration would be a large pharmaceutical firm that acquires part interest in a drugstore chain in order to guarantee that its drugs have access to the distribution channel. Answer: T...
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...CASE STUDY 1 http://www.scribd.com/full/38399959?access_key=key-222j5zlz3s8dd9x2b6pu CASE STUDY 2 http://www.antiessays.com/free-essays/99985.html CASE STUDY 3 1) DESCRIBE THE MAIN DIFFERENCES BETWEEN THE PRIMARY SECONDARY AND TERTIARY SECTORS. GIVE EXAMPLES OF HOW CEMEX CARRIES OUT WORK INVOLVING EACH OF THESE THREE SECTORS There are three main sectors of industry. CEMEX’s business covers all three sectors of industry: * Primary – involves extraction, processing and use of raw materials from the earth * Secondary - manufacturing finished goods and construction activity * Tertiary – providing services to business and consumers, e.g. retail, finance and transport. Primary activities In its primary activities, CEMEX extracts raw materials from the land or at sea. The process of extracting mineral deposits has to fit in with the government’s Regional Minerals Plan. This specifies how much material needs to be extracted to ensure a fair balance across the country. Before extraction can begin, CEMEX must obtain permission from local authorities. Its plans must include sensitive ways of working, restoration and after-care of sites. This ensures the quality of the environment is maintained and improved once extraction is complete. CEMEX’s marine aggregates business involves extracting sand and gravel from the sea bed by dredging. Dredged aggregates are vital for the future development and maintenance of our hospitals, schools, housing and transport...
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...results. Strategy formation is the process by which an organization develops and implements a strategy. All steps of the process should be followed in order because they build upon each other. The other steps of the process include value assessment, vision and mission formulation, strategy design, performance audit analysis, action plan development, contingency planning and implementation. 5.1 Integration Strategies In the competitive world of business, companies generally do whatever it takes to secure their stature in the marketplace. One of the most effective means to this end involves what is referred to as vertical integration, which takes on two forms: forward and backward integration. Forward integration focuses on the manner in which a company oversees its product distribution. On the other hand, the backward form concentrates on how a company regulates its goods or supplies. 5.1.1 Forward integration Forward integration is a type of vertical integration which a supplier acquires a manufacturer or a manufacturer acquires a distributor. Businesses engage in forward integration either to generate a higher margin from a key input which it owns or produces or to better market its products and increase its profitability. Dr. Gerhard Bester, an Agricultural Research and Development Director, our aim is to ensure PepsiCo has continued access to the key agricultural raw materials necessary to supply growing consumer needs, while respecting the environment and communities...
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...prepared for the unexpected. As the old saying goes, “It’s better to be safe than sorry.” Another thing to consider is ordering in bulk. Ordering in bulk is great for items that doesn’t spoil quickly or doesn’t change very often. Also the unit price for the item decreases due to the high quantity of items ordered. Without having a good knowledge of the operations, a business would be hard to function or possibly inoperable. Special decisions are something to be considered from the start of opening to 5 years into the business. Whether you decide to purchase insurance allows to company to be ready for crisis. If an accident happens, insurance will help you pay for most of the damages instead you paying directly out the business account. Vertical integration and diversification is another decision to contemplate on. It may be cheaper to make complimentary items at your own workplace rather than outsourcing to another vendor. Also keeping up with the latest trends of the consumer world. If a business doesn’t offer what is popular with the market, a business may not last to long. Giving a survey to customers allows the business to understand what the customer wants. Many customers can give their opinion on how they would liked to be served, then a business can decide on how they can complete their request. If your business becomes a huge success, a decision on expanding the business may be considered to meet the demand. Special decisions always come up in the business world, whether they...
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...ECCO Case Study - Question 1 ECCO has a fully integrated vertical value chain. What are the pros and cons of that strategy? What economic and strategic factors should be analyzed to answer this question? The pros of a having a fully integrated vertical supply chain for Ecco include the following: * Improved supply chain coordination between tanning, manufacturing and distribution. This would ultimately help maintain quality and improve operational efficiencies such as logistics. * There is also an increase in the areas possible for differentiation, as Ecco can control more inputs. An example might be in the tanning process, in which their competitors may have less control over. * Ecco can also create greater barriers of entry for competitors. By differentiating competition out of the market such as marketing their strict in house controls of the tanning process. * Ecco can also access downstream distribution channels that may otherwise have been inaccessible if they were to just sub out distribution and be at mercy to what the market can provide. * Opportunities for control over investment or innovation both upstream or downstream which may otherwise not be possible will be advantageous for Ecco. * Facilities in different countries can take advantage of local resources and expertise in different areas like the leather research center in Denmark. * Overseeing operations throughout the whole value chain. * Better control and...
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...treated with strict confidence. 1. The government of Kenya introduced the e-government program in June 2004, what would you describe as some of the key achievements over this past 10 years? 2. Based on your experience, would you say the government has done enough to leverage on ICT to improve service delivery? Explain 3. Implementation of e-government is thought to go through the following 4 stages: I) Catalogue stage (Online presence with a website, basic information and downloadable forms) II) Transaction stage (the public can make requests, process applications, make returns etc and get feedback from the government online) III) Vertical integration stage (services provision at different functional levels are linked through a shared database) IV) Horizontal integration (One –Stop –Shop, service delivery arms of government are connected to a shared database through computer interphases). From these four stages, where will you place our current e-government platform? Explain why 4. a) What would you say have been the main challenges in implementing the e-government program over the past 10 years? b) Any proposals on how these challenges could be overcome as we move forward? 5. In your opinion, do we have enough technical skills among the public servants to drive the next phase of the e-government? If not, what measures can the government take to build this right capacity? 6. The e-government is meant...
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...In reviewing the facts presented to me it is my opinion, along with those of my colleagues at WIF Consulting, that your recommendation to horizontally expand the production of market pulp is the better decision when weighing it against the prospect of forward integrating into paper production. After doing an initial calculation, the net present value of the Valdivia project is roughly $3.7 billion (see Exhibit A), which yields a gain of almost $2.6 billion. Below are the key points we’ve identified to support this figure. Existing Competencies Within Arauco’s Contracted Workforce Because Arauco already has over 10,000 employees aiding in forestry and transportation operations under roughly 300 subcontracts, along with a workforce of independent workers operating all of Arauco’s sawmills, it becomes clear that several relationships are already being managed in order to ensure efficiency and effectiveness. By adding another workforce entirely dedicated to the production of paper, Arauco is taking on even more workers that are performing a series of operations that Arauco is not familiar with. Because of this, enforcement costs will be incurred to simply oversee the workforce’s numbers. Additionally, upper management will either need to be trained in a whole new set of competencies, or new employees must be taken on to optimize production performance. Additionally, to take full advantage of the potential sharing activities, will require an unknown amount of resources to...
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...Global and Domestic Issues in the Food Supply Chain (Source: Roger W. Hutt, Arizona State University) High-value and processed foods, accounting for three-fourths of total world food sales have increased in response to consumers diversifying their diets or demanding higher-quality and labor-saving food products (Regmi and Gehlhar, 2005). More and more, consumers are asking for convenience, and the food system is responding. The relatively higher cost of a ready-to-serve bag of salad is preferable to a head of lettuce that must be trimmed and prepared. Demand for foreign brands and consumer-ready products, in particular, are expanding as well. Food producers and marketers are responding to the demands of the marketplace. Producers are investing in processing facilities in many host companies. Adjusting to meet the needs of consumers, retailers are importing high-value foods from around the world and selling it from a variety of retail store formats, with supermarkets and hypermarkets accounting for more than fifty-percent of global packaged food sales in 2003 (U. S. Department of Agriculture, Global Food Industry Structure, 2007). Globalization and safety and defense of the nation’s food system are themes very much intertwined in the literature. As Cheek (2006) pointed out, “Today, global consumers are demanding a source-verified and disease-free food supply. . . Changing consumer attitudes have resulted in demands for greater food safety on the retail market.”...
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...otherwise, be lent, resold, hired out, or otherwise circulated without the publisher’s consent in any form of binding or cover other than that in which it is published and without similar conditions including this condition being imposed on the subsequent purchaser. ISBN 1-901795-27-6 Cover designed by Clare Hofmann Typeset by Philip Armstrong, Sheffield Printed by Biddles, Guildford CONTENTS List of Figures Acknowledgements 1 2 INTRODUCTION INDUSTRY STRUCTURE 2.1 An Examination of Corporate Structure 2.2 The Urge to Integrate 2.3 A Question of Balance 2.4 Just how Operationally Integrated? 2.5 Are there Tangible Benefits to Operational Integration? 2.6 Important Transition to Financial Vertical Integration 2.7 Integration or Atomisation? 2.8 Market Inefficiencies that Favour Integration 2.9 Firm Specific Arguments in Favour of Integration 2.10 Should Companies or Equity Markets Diversify? 2.11 Business Segment Response to Market and Firm Specific Risks and Challenges 2.12 Core capabilities A...
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...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...
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