Question

What are the differences between horizontal and vertical acquisition? Between a joint venture and a strategic alliance? Between product development and innovation?

Answer 1

The first difference which distinguishes these two types of business acquisitions is objective. A horizontal merger is made with the goal of combining two companies selling the same goods and services and at the same production cost.

Under this case acquired companies are typically the purchasing firm's primary competitors. Therefore, we might assume that the key justification for a horizontal takeover is to reduce competition. It, in effect, provides other benefits. You would see an improvement in market share, cost savings, and greater sales and benefit by removing direct rivals. The purpose of a vertical acquisition is, however, very different from a horizontal acquisition. Like a horizontal acquisition, which seeks to minimize costs and maximize income, a vertical acquisition's main goal is to protect the supply of critical products, prevent supply interruption and limit supply to competitors.

A horizontal acquisition relates to the latter while vertical acquisitions are concerned with the former. You will get more leverage over the entire manufacturing and distribution cycle with a vertical acquisition. By removing intermediaries it will allow you to increase income.

One type of strategic alliance is the joint venture. This can be understood as a joint arrangement in which two or more parties agree to pursue a specific venture. The fundamental difference between the Joint Venture vs Strategic Partnership lies in the relationship they share and the character of the two organizations. The joint venture is a two- or more-part deal. This occurs when two or more parties agree to enter into a binding agreement for the implementation of a specific business undertaking.

The strategic partnership is an arrangement that brings together two or more separate parties with an goal and does not sacrifice their independence. Generally two or more parties form a strategic partnership when each has some experience or business tools that help to accomplish the objective or improve their businesses.The companies that form a joint partnership no longer act as separate organizations unlike the strategic alliance where the companies that form an alliance still tend to work independently.
In the case of a joint venture, the existence of the contractual agreement which specifies all the terms and conditions of the arrangement between the two parties is important, but in the case of a strategic alliance, there is no such requirement. It can be announced explicitly or implied too.

The creation of new technologies is a branch of innovation. Innovation involves literally developing new things, principles, methods, ideas, labels, products and so on. New product development is a subset of product development (you can build on older products) that is usually a sub-set of innovation. You could invent a whole new idea of the supply chain that is not actually a commodity but it could still be of great benefit to the client. Established product development (sometimes called EPD) is not innovation-an example of this form of product creation may be new variations in the flavor of an established range of products. This method involves minimal creative thinking, as no new ingredients or processes are needed – the blueprint for the product already exists and the marketing of such goods should be fairly straightforward.