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In: Economics

QUESTION 4 You are the owner-manager of a chain of coffee shops in Singapore, brewing and...

QUESTION 4 You are the owner-manager of a chain of coffee shops in Singapore, brewing and selling the latest types of expresso drink inhouse but buying all necessary factors from the market. Your 50 or so shops located around the city can seat around 20 patrons each and currently only sell caffeinated drinks. At this stage of growing your business 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 inhouse? What other horizontal markets may you integrate into?

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Expert Solution

To expand the business, One need to understand the various aspects how to grow the Business to various branches, and how properly the development plans will properly create a positive impact on the business.
There are some aspect which can be used to accompany to expand the business operations and develop the existing company to higher stages. A horizontal integration is a method used by companies by acquiring similar companies in their industry to expand their supply chain and business activities. We can also implement horizontal integration method in the coffe shop business by acquiring similar chain of shops of top branded shops and carry out our business with our brand name and products. Through this integration method the company can Increase their presence in various cities outside their current limits.
Vertical integration is the business in which the company acquires the supporting businesses and taking control over them and reduce cost. Through this methodthe business can improve work efficiency. Vertical integration can be used in the expansion of coffe shops by acquiring the ( coffee supply) business, or aquire a coffee estate,will help to company to create their own trademarks. Franchising is a good method for horizontal integration. By franchising, a business can expand and create its presence in various areas.

Rahul Sunny answered 1 year ago
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