Horizontal Integration and competitor acquisition

For this final SLP, imagine that your business has become successful and you are now
considering expanding the scope of your company. Carefully review all of the required
background materials, and then write a three-page paper answering the following
questions. Make sure to cite at least one of the required readings for each of your answers:

  1. If you were to engage in horizontal integration, which of your direct competitors would
    you decide to acquire? Overall, do you think horizontal integration is the best long-run

plan for your business if it is successful?

  1. Do you think your business should vertically integrate over time? Should you engage in
    backwards vertical integration, forward vertical integration, both, neither? Explain your

reasoning.

  1. How about diversification/conglomerate strategy? Any advantage to diversifying your
    business? Discuss unrelated diversification and related diversification and whether or not
    these strategies might be good for your business. Explain your reasoning.

SLP Assignment Expectations
� Answer the assignment questions directly.

� Stay focused on the precise assignment questions. Do not go off on tangents or devote a

lot of space to summarizing general background materials.

� Make sure to use reliable and credible sources as your references. Articles published in
established newspapers or business journals/magazines are preferred. If you find articles
on the Internet, make sure they are from a credible source.

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530 SLP 4

This paper looks into the possible strategies for expansion of the business. In this case,
the example firm is doing well and, therefore, considered a successful business. In the search for
increased profits and growth, I put various expansion tactics into consideration and compare
them to assess which of them is the most suitable. The strategies considered for implementation
are horizontal integration, vertical integration, and diversification (conglomerate) strategy.

Horizontal Integration and competitor acquisition

With this option, the business would undertake horizontal integration by taking over other
similar businesses with operations in other areas. By looking into the competitors with outlets in
areas where my business is not well known due to not venturing, it would enable easier spread
into such markets. An acquisition of such a business would ensure a wider distribution network
without much compromise on existing markets.
Horizontal integration and the long run business plan
In acquiring a business with a developed distribution network and a good customer base,
the firm would be set to take over these assets. As such, this type of acquisition would be
beneficial to the firm in the short term, as well as the long term. However, as to the question of
the best, horizontal integration alone would not be the best plan. The business will need to
combine horizontal integration and vertical integration to create the best long-run plan.

Vertical integration of the business over time

As stated earlier, it is my view that the best plan for the long-term concern of the business
would involve a combination of horizontal and vertical integration strategies. As such, my
opinion is that the business should strive to integrate vertically over time. However, such a move
needs to be calculated to avoid wastage of resources.

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Backwards vertical integration
The business will need to engage in backward vertical integration as a growth strategy.
This process will involve the identification of a suitable supplier that is struggling with an aspect
of its business model. This weakness should be the point of entry for the firm, where it should
also optimize. For optimality, the firm should seek some suppliers in various specializations to
enable wider control of the market and increase profits.
Forward vertical integration
Once the company has a firm grasp on the suppliers of its raw materials, it may shift
focus to problematic retailers. Once a few struggling retailers are identified, a pitch is made for a
merger, takeover, or acquisition – where both firms would benefit. Such integration would allow
the firm to have guaranteed outlets for its products, get closer to their customers, and increase the
level of profits for the firm (Holden, 2011) .
The business, in a bid to stay relevant and spur growth, will have to find a suitable mix of
strategies. The proposed strategy is one that involves both forward vertical integration and
backward vertical integration. The reasoning behind this is that there are numerous advantages to
being in control of the three stages of production. The reasoning behind this is that it creates
operational efficiency, increases profits, and provides control over competitors (Ketchon &
Short, 2012) .

Diversification / Conglomerate strategy

Advantages to diversifying the business
The diversification strategy is quite essential for a business that is looking to grow. It
involves the expansion of the firm by investing in very different business or industry. Among the
main advantages of this strategy is the spreading of risk into many industries. The method also

530 SLP 44
helps the management of the business spread ideas, and get ideas from different industries.
Another advantage is cross stabilization of the different parts of the firm, where a failing section
gets boosted by the success in another, or proceeds from one section are used to improve another
segment (Holden, 2011) .
Related diversification
Related diversification may be good for the business as a starting strategy. This is due to
the availability of information about the industry and experience in running a similar business.
The entry into similar business may be used as a learning tool or as a preparation for diversifying
into industries where the management may not have sufficient experience. As the managers are
learning, the business benefits from the extra income as long as the said venture is profitable and
a going concern.
Unrelated diversification
The firm may decide to invest in a field that is not related in any way to the current
industry where it operates. Such a decision may be driven by higher demand for goods from that
sector by its customers. The target industry may have better profit margins, and the increased
earnings may be used to supplement the dwindling, seasonal, or unstable income in the current
operations. As such, the business may be good for the business owing to seasonal income.

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Reference List

Holden, P. (2011). Business integration – vertical, horizontal and conglomerate. St. Lawrence
College.
Ketchon, D., & Short, J. (2012). Chapter 8: Selecting Corporate-Level Strategies. In D. Ketchon,
& J. Short, Strategic Management: Evaluation and Execution. New York: Flat World
Education.

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