Question

Question #3 – How does vertical integration and diversification impact a company’s organizational structure and activity?

Meaning of the Question – This is a strategic management question that deals with a broad-based and long-term view on the use of vertical integration and diversification that would determine how the organization is structured to achieve its goals and objectives. The reader must see that an understanding of vertical integration, diversification, and the impacted organizational structure options are presented. Again, there are many concepts and terms to support your response.

Answer 1

Answer. MEANING OF VERTICAL INTEGRATION: It is a technique which looks for the methods which reduce costs and control quality of the products and services they provide. The stages relative to vertical integration are materials, suppliers, manufacturing and distribution.

IMPACT OF VERTICAL INTEGRATION ON ORGANIZATION: Many clothes and apparel companies have a flagship store that sells a huge range of their products than are available from outside retail shops. Many of these retail shops also sell last season's products at a discount.

ADVANTAGES OF VERTICAL INTEGRATION

1. A vertical integrated company can avoid supplyers and deal with supply itself

2.A company get benefit by avoiding suppliers.

DISADVANTAGES OF VERTICAL INTEGRATION

1. It is expensive in nature as everything is done by company itself

2.It reduces a company's flexibility

VERTICAL DIVERSIFICATION : It is a process in which organisations main strategy is to acquire firms that supply it inputs such as raw material or customers for its output, such as godowns for keeping finished products.

IMPACT OF VERTICAL DIVERSIFICATION : Like a cloth manufacturing company is buying the industry which is providing cloth material to company . They basically do this for the growth in business operations