KMB 301 – Strategic Management

Dr. Ashfaq Ali,

Associate Professor & Head,
(Faculty of Management Studies,
Shri Ram Group of Colleges, Muzaffarnagar, India)
Dr. A.P.J. Abdul Kalam Technical University Lucknow

e-mail: dr.ashfaqali.09@gmail.com, +91-99171-60786

 Dr. Ashfaq Ali, +91-99171-60786

UNIT- III

Strategy Formulation: Corporate,

Business, Functional strategy,
Concentration Strategies, Integration
Strategies: Horizontal & Vertical,
Diversification: Related & Unrelated,
Internationalization , Porters Model of
competitive advantage of nations,
Cooperative: Mergers & acquisition
Strategies, Joint Venture, Strategic
Alliance , Digitalization Strategies . 2
 Dr. Ashfaq Ali, +91-99171-60786

UNIT- III

Integration Strategies:
Horizontal & Vertical

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 Dr. Ashfaq Ali, +91-99171-60786

INTEGRATION STRATEGIES:
HORIZONTAL & VERTICAL
Integration Growth and expansion are
the two needs of every firm,
irrespective of its size and nature.
Firms can grow and expand themselves
by way of integration. There are two
major forms of integration, i.e.
Horizontal Integration and Vertical
Integration.
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 Dr. Ashfaq Ali, +91-99171-60786

INTEGRATION STRATEGIES:
HORIZONTAL & VERTICAL
Horizontal Integration is a kind of
business expansion strategy, wherein
the company acquires same business
line or at the same level of value chain
so as to eliminate competition to a
greater extent.

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 Dr. Ashfaq Ali, +91-99171-60786

INTEGRATION STRATEGIES:
HORIZONTAL & VERTICAL
Conversely, Vertical Integration is used
to rule over the entire industry by
covering the supply chain. It implies the
integration of various entities engaged
in different stages of the distribution
chain.

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 Dr. Ashfaq Ali, +91-99171-60786

INTEGRATION STRATEGIES:
HORIZONTAL & VERTICAL

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 Dr. Ashfaq Ali, +91-99171-60786

HORIZONTAL INTEGRATION
The merger of two or more firms, which
are engaged in the same line of business
and their activity level is also same; then
this is known as Horizontal Integration.
The product may include complementary
product, by-product or any other
related product, competitive product or
entering into the product’s repairs,
services, and maintenance section.
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 Dr. Ashfaq Ali, +91-99171-60786

HORIZONTAL INTEGRATION
Horizontal Integration reduces
competition between firms in the
market, as if the producers of the
product get combined they can create a
monopoly. However, it can also create
an oligopoly if there are still some
independent manufacturers in the
market.
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 Dr. Ashfaq Ali, +91-99171-60786

HORIZONTAL INTEGRATION
It is a tactic used by most of the
companies to expand its size and
achieve economies of scale due to
increased production level. This will
help the company to approach new
customers and market. Moreover, the
company can also diversify its products
and services.
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 Dr. Ashfaq Ali, +91-99171-60786

VERTICAL INTEGRATION
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. There are two forms of vertical
integration, as described below: 11
 Dr. Ashfaq Ali, +91-99171-60786

VERTICAL INTEGRATION
Forms of vertical integration Forward
Integration: If the company acquires
control over distributors, then it is
downstream or forward integration.
Backward Integration: When the
company acquires control over its
supplier, then it is upstream or
backward integration.
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 Dr. Ashfaq Ali, +91-99171-60786

VERTICAL INTEGRATION
z

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 Dr. Ashfaq Ali, +91-99171-60786

VERTICAL INTEGRATION
The cause of integration is to
strengthen the production-distribution
chain and to minimize the cost and
wastage of products at various levels.
The integration also enables the
company to keep upstream and
downstream profits and eliminate
intermediaries.
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 Dr. Ashfaq Ali, +91-99171-60786

VERTICAL INTEGRATION
Apple is the best example of vertical
integration; it is the biggest and a
renowned manufacturer of smartphones,
laptops and so on. It controls the whole
production and distribution process itself,
from the beginning to the end. Another
example of this is Alibaba, a Chinese e-
commerce company, that owns the entire
system of payment, delivery, search
engine and much more. 15