2. Integration strategies
• Combining activities related to present
business process of the firm
• Refers to the Value Chain
• Expansion through integration -- in adjacent
business and results in serving the same set of
customers.
3. Why Integrate ??
• Make of Buy analysis..
• Types of Integration
• Horizontal Integration
• Vertical Integration
5. Benefits of H I
• Reduce costs
• Increased Value through a wide range of
bundled products
• Reducing industry rivalry
• Increased Bargaining power
6. Limitation of HI
• No evidence of value creation
• Attracts attention of regulation
7. Vertical Integration
• When a firm deals in business to serve its own
needs
• A firm expands either to supply inputs or to
distribute its products.
• So it resorts to ..
• Forward I and
• Backward I
• Besides this, there are two types..
• Full Integration and Taper Integration
8. Advantage of V I
• Builds barrier to entry
• Protects product quality
• Improves scheduling
9. Disadvantage of V I
• Cost Disadvantages
• Technological change
• Demand unpredictability
10. Diversification
• Dependence on a single industry makes a firm
vulnerable, hence firms diversify
• Process of adding new business that are
distinct from established operations
• Involves two or more distinct businesses
• It means new products for new markets
11. Diversification takes place when…
• Firms want to invest in distinct business
• When a company wants to leverage on
competencies
• Sharing resources
• Managing rivalry – multipoint competition
12. Types of diversification
1) Related Diversification
two types…
a) Market Related D
b) Technology related D
2) Unrelated Diversification
13. Reasons for related Diversification
• Financial synergies in terms of cost reductions
• Marketing synergies
• Operational synergies
• HR synergies
Reasons for related Diversification
• Maximising returns by investing in profit sector
• Leveraging opportunities especially emerging
• Stability in earnings
• HR synergies
14. Risks of Diversification
• Unrelated diversification may lead to
unsuccessful ventures
• Dissimilar skill sets a risk
• High costs of diversification
15. Expansion through Cooperation
• Coexist with cooperation
• Rival firms get together for mutual benefit
• Through……..
• Mergers and Acquisitions
• Joint Ventures
• Strategic Alliances
17. Types of Mergers
• Horizontal M
• Vertical M
• Concentric
• Conglomerate(collection)
18. Reasons for Mergers
• To reduce competition
• Take advantage of synergies
• To increase growth rate
• To diversify
• To improve stability and earnings
• To avail tax concessions