2 Responses 09/16
Saisharan Work:
Integration in terms of business means to acquire or to merge. So, on similar lines, Horizontal Integration means acquiring a company that operates on the same level of the value chain in the specific industry. However, they may be in the same or different industries. Whereas Vertical Integration is a strategy in which a company owns or controls its suppliers, distributors, or retail locations to control its value or supply chain. Horizontal Integration reduces competition between firms in the market. It is a tactic used by most companies to expand their size and achieve economies of scale due to increased production levels. This will help the company to approach new customers and market. Moreover, the company can also diversify its products and services. Vertical Integration is between two firms that are carrying on business for the same product but at different levels of the production process. The firm opts to continue the business, on the same product line as it was done before integration. It is an expansion strategy used to gain control over the entire industry (Khillar, 2019).
In 2012, Facebook acquired Instagram for an estimated $1 billion USD. The social media industry has thousands of applications and posting capabilities, but Instagram was a true competitor with Facebook for younger markets and for ad space. In the merger, Facebook strengthened its social media position and removed the competition from Instagram. As the structure of Disney and Pixar, Instagram still operates independently with its own teams, but it is owned by Facebook. With this acquisition, Facebook was able to focus development on improving Instagram and Facebook, instead of on competition between the two. This leads to larger profits and more user satisfaction on both platforms (Isom and Tiemann, 2014).
The advantage of Facebook acquiring Instagram is the popularity of today’s world which is heavily dependent Internet, which is growing increasingly and entitles a great interest nowadays. Facebook as a company, its general strategy, leadership, and future cases of business integration operations performed by this company that invests in new technologies and companies, not only to acquire talent but also to ensure its capability of growing in the long-term perspective and ensure its leading position in the social media and network market.
References:
FORBES 2017. How Much Would Facebook Be Worth Today If It Hadn't Bought
Instagram? (2017). [online] Available at:
https://www.forbes.com/sites/ericjackson/2017/04/30/how-much-would-facebook-beworth-today-if-it-hadnt-bought-instagram/#12e3e6d49d77
ISOM, PHIL & TIEMANN, DAN. (2014). M&A Growth Strategy: A New Approach
for Transforming Businesses. Abfjournal, November/December 2014. [online]
Available at: http://www.abfjournal.com/articles/ma-growth-strategy-a-new-approachfor-transforming-businesses/
JAY. (2017). Facebook IPO: The Top 10 Shareholders. (2017). [online] Available at:
http://thefirstmillionisthehardest.net/facebook-ipo-top-10-shareholders/
Khillar, S. (2019, October 18). Difference Between Horizontal Integration and Vertical Integration. Difference Between Similar Terms and Objects. http://www.differencebetween.net/business/difference-between-horizontal-integration-and-vertical-integration/
Samar Work:
Vertical and Horizontal Integration Strategy
Vertical integration refers to a strategy whereby a company streamlines their operations by taking direct ownership of the stages of production rather than relying on external contractors and suppliers. On the contrary, horizontal integration strategy is where a company seeks to offer their products or services in various markets to build their brand in the industry. Horizontal integration can be achieved by merging or acquiring another company that offering same services (Thompson et al., 2013). Vertical integration occurs when a chocolate producer for example, buys a company it buys beans from.
The research paper discusses crafting and strategy execution towards successful management as put forth by Thompson. Appropriate strategy execution has been pointed out as the leading hallmark in strategic management. One of the most visible cases of horizontal integration was Facebook’s move to acquire Instagram in 2012. The integration strategy is a competitive strategy that companies employ to create a stake in the market. Horizontal model is more chooses vertical integration takes full charge over the many stages in the processes of distribution of the product. (Hassan,2013).
While vertical integration is when a company controls part or the whole process horizontal integration occurs when businesses purchases its competitors. An example of vertical integration is a case where a company takes over control of more stages in the distribution process. The most recent example is Facebook acquisition of Instagram. Both were competing social media platforms used to share photos and updates. The firm employed the Thompson integration to strengthen their distribution and enhance production through horizontal integration by expanding the market. Netflix is a case of vertical integration. The firm began as a DVD online streaming firm. The films and movies were licensed from major studios.
References
Hassan, S. (2013). Concepts of vertical and horizontal integration as an approach to integrated curriculum. Education in Medicine Journal, 5(4).
Thompson, A., Janes, A., Peteraf, M., Sutton, C., Gamble, J., & Strickland, A. (2013). EBOOK: Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases. McGraw Hill.