Companies’ diversification
Three types of opportunities for sharing a sound basis for vertical integration are backward vertical integration, forward vertical integration, and disintermediation. Increasingly more companies are beginning to utilize the vertical integration strategies because it extends the company’s competitive advantage and operating scope (Gamble, Thompson, & Peteraf, 2017). Opportunities for sharing in vertical integration also relates to marketing, operating, and management referred. Vertical integration focuses on expanding a company’s range of value chain activities back into sources of supply or forward into end-users. There are some disadvantages to vertical integration, such as an increase in risk. However, there are a few companies that prove there is an opportunity within vertical integration.
First, the backward vertical integration relates to a company controlling the subsidiaries that produce the inputs used in the making of the company’s goods (White, 2013). An example of a market opportunity would be Disney’s acquisition of Pixar. Both companies required marketing support and were being distributed and marketed through the same channels. Another example of a marketing opportunity would be Google expanding into new markets that would allow the company to engage in multipoint competition, such as competing with Apple and Yahoo!
Next, forward vertical integration deals with distribution (White, 2013). Commonly, goods are sold in the forward vertical integration method. An operating and distribution-related opportunity example would be Honda developing ATVs and dirt bikes because they already manufactured automobiles. Since the products shared a similarity, Honda was able to use its previously known name to utilize an operating opportunity to expand its company.
Lastly, disintermediation is where the departments over purchasing take over the role of the wholesalers and act as the source of the products being sold and produced (White, 2013). Disintermediation and management related opportunities within vertical integration would be Citigroup Inc entering banking and insurance services under the same umbrella.