Vertical Integration Program
Posted: Sun Dec 22, 2024 5:41 am
This strategy is based on the expansion of the company through the accession of new structures. Within its framework, two methods are used:
Acquisition of companies from related market niches (manufacturers, suppliers or retailers).
Formation of own structures in adjacent industries. For example, a company that buys yoghurts from a third-party manufacturer sells them under its own brand. Thus, through the strategy of vertical integration, the organization opens its own production.
Vertical integration can be carried out “backward” (to the initial stages of the business process) or “forward” (closer to the end consumer).
Vertical Integration Program
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In the first case, control over suppliers and kuwait whatsapp numbers manufacturers is strengthened, which allows for the following benefits:
reducing the company's dependence on sellers and their pricing policies;
The addition of new divisions may help increase revenue in the future.
For example, a yoghurt manufacturer, having opened its own production, not only produces products under its own brand. It can also accept orders from other companies, which opens up additional sources of income.
Forward vertical integration provides for the stages of distribution between the enterprise and the end customer. For example, a yoghurt manufacturer can create its own sales network, eliminating intermediaries.
This will reduce the costs of their services and take control of the entire sales process. In branded stores, the company will be able to train personnel in accordance with corporate policy, place only its own advertising, eliminate competition on the shelves, etc.
Diversification program
This strategy is suitable for companies that have reached the highest level in their business area. It can develop in several directions.
Diversification program
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Centered diversification involves developing a new product using internal resources, without adjusting business processes or attracting outside investment. For example:
creation of a new product based on previously implemented technologies;
development of another service based on existing ones;
offering consumers alternative ways to use their product.
Horizontal diversification is aimed at introducing a new product, the consumer of which will be the existing buyer. For example:
expanding the range of products by adding new items (for example, a yogurt brand starts producing other dairy products);
introduction of another service that will be of interest to the current target audience (a marketing agency, in addition to providing advertising services, is included in the SMM niche).
Conglomerate diversification is aimed at introducing a completely new product to the market that is unrelated to the current range. This strategy is similar to starting a business and is suitable for companies that are ready to significantly change their activities and explore other niches.
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Choosing a Business Development Strategy
This long-term policy is aimed at developing an action plan that will help achieve a specific goal. To choose the method of its development, it is necessary:
conduct an analysis of competitors, target audience and product potential (will it be in demand, what value does it provide to consumers, does it solve their problems);
formulate tasks;
assess available resources.
It is necessary to perform an analysis of the company's capabilities in order to determine a realistic goal. For example, differentiation is a subtype of competitive strategy aimed at creating a unique product.
At the initial stage, it is necessary to develop a new offer for consumers and find out whether the company can continue to operate on the existing production base or whether it will need to be modernized. It is also important to assess whether there are enough labor resources for the tasks set. If you do not create a specific development plan with a detailed description of each step, it will be difficult to achieve the set goal.
The choice of a business development strategy should be a holistic and coherent answer to three key questions:
Where are the world and society heading?
What internal advantages (values, competencies, resources) does the company have on this path?
What do you see your business as in decades?
When answering the third question, it is important to consider the age of the enterprise. The strategy should be developed for a period equal to or exceeding the duration of the company's existence by 2-3 times. Thus, for a company that has been operating on the market for 5 years, the strategic plan should cover no more than 10-15 years.
Acquisition of companies from related market niches (manufacturers, suppliers or retailers).
Formation of own structures in adjacent industries. For example, a company that buys yoghurts from a third-party manufacturer sells them under its own brand. Thus, through the strategy of vertical integration, the organization opens its own production.
Vertical integration can be carried out “backward” (to the initial stages of the business process) or “forward” (closer to the end consumer).
Vertical Integration Program
Source: shutterstock.com
In the first case, control over suppliers and kuwait whatsapp numbers manufacturers is strengthened, which allows for the following benefits:
reducing the company's dependence on sellers and their pricing policies;
The addition of new divisions may help increase revenue in the future.
For example, a yoghurt manufacturer, having opened its own production, not only produces products under its own brand. It can also accept orders from other companies, which opens up additional sources of income.
Forward vertical integration provides for the stages of distribution between the enterprise and the end customer. For example, a yoghurt manufacturer can create its own sales network, eliminating intermediaries.
This will reduce the costs of their services and take control of the entire sales process. In branded stores, the company will be able to train personnel in accordance with corporate policy, place only its own advertising, eliminate competition on the shelves, etc.
Diversification program
This strategy is suitable for companies that have reached the highest level in their business area. It can develop in several directions.
Diversification program
Source: shutterstock.com
Centered diversification involves developing a new product using internal resources, without adjusting business processes or attracting outside investment. For example:
creation of a new product based on previously implemented technologies;
development of another service based on existing ones;
offering consumers alternative ways to use their product.
Horizontal diversification is aimed at introducing a new product, the consumer of which will be the existing buyer. For example:
expanding the range of products by adding new items (for example, a yogurt brand starts producing other dairy products);
introduction of another service that will be of interest to the current target audience (a marketing agency, in addition to providing advertising services, is included in the SMM niche).
Conglomerate diversification is aimed at introducing a completely new product to the market that is unrelated to the current range. This strategy is similar to starting a business and is suitable for companies that are ready to significantly change their activities and explore other niches.
Read also!
"USP examples to help you come up with your own that's even better"
Read more
Choosing a Business Development Strategy
This long-term policy is aimed at developing an action plan that will help achieve a specific goal. To choose the method of its development, it is necessary:
conduct an analysis of competitors, target audience and product potential (will it be in demand, what value does it provide to consumers, does it solve their problems);
formulate tasks;
assess available resources.
It is necessary to perform an analysis of the company's capabilities in order to determine a realistic goal. For example, differentiation is a subtype of competitive strategy aimed at creating a unique product.
At the initial stage, it is necessary to develop a new offer for consumers and find out whether the company can continue to operate on the existing production base or whether it will need to be modernized. It is also important to assess whether there are enough labor resources for the tasks set. If you do not create a specific development plan with a detailed description of each step, it will be difficult to achieve the set goal.
The choice of a business development strategy should be a holistic and coherent answer to three key questions:
Where are the world and society heading?
What internal advantages (values, competencies, resources) does the company have on this path?
What do you see your business as in decades?
When answering the third question, it is important to consider the age of the enterprise. The strategy should be developed for a period equal to or exceeding the duration of the company's existence by 2-3 times. Thus, for a company that has been operating on the market for 5 years, the strategic plan should cover no more than 10-15 years.