Question

You are a private tution teacher who conducts one-on-one home tuition in economics for senior college students. You are considering growing your business. In particular you are considering vertical and horizontal integration. Using the theory of the optimal boundary of the firm, discuss the make-or buy decision as well as the scope for horizontal integration and diversification of your business. What stages of the vertical chain should you consider conducting in house? What other horizontal markets may you integrate into?

Answer 1

Horizontal integration is the mechanism by which a business increases the output of products or services within the same portion of the supply chain. An enterprise may do this through internal expansion, acquisition or merger.

Vertical integration is a scheme in which that company owns the supply chain. Each supply chain member usually produces a different good or service, and it incorporate to meet a familiar need.

As a private teacher who teaches 1:1, he must take particular measures in terms of horizontal integration or vertical integration in his business. The teacher can add other subjects such as mathematics and statistics to horizontal integration so that the number of students can rise. In the case of vertical integration, the higher or lower classes can be added for more revenue.

There are therefore two opportunities for the teacher to apply. Now if we use the firm's optimal theory of territories that describes scale and scope of economies. Here, a teacher who has already in this field can take the advantage from economic of scale. So the teacher can take advantage of it by efficiently processing and distributing it.

When an educator is actually working on horizontal integration, by including other subjects specifically, he need to improve his limits. He can choose personal teaching, which he can learn, or he may employ an external expert under his brand to improve its efficiency.

The introduction of high-school economics and PG economics i.e economics subject from different classes be used as In-House-Vertical-Integration to enhance students. So the economies of scale here is that a teacher is already famous and no additional advertising has to be made.

Afterwards, if he want to extend his territory, he can go for online lessons or hire an expert panel and add new sections under the same banner. He can also launch location-based teachings and open a number of branches at some other places in town.

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