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Learning Objectives

This article explores the strategic aspects of horizontal and vertical integration in business. It covers the benefits and problems of both integration types, as well as alternative approaches such as cooperative relationships and strategic outsourcing.

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Learning Objectives

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  1. Learning Objectives • To know the strategic aspects of horizontal and vertical integration.

  2. Horizontal Integration • Benefits • Lower cost structure • Increasing product differentiation • Replicating the business model • Reducedindustry rivalry • Increasing bargaining power • Problems

  3. Vertical Integration • Full or taper integration • Investments in specialized assets • Enhancingproduct quality • Improved scheduling

  4. Vertical Integration (cont) • Possible problems • Increasing cost structure • Technological change • Demand unpredictability • Limits of vertical integration

  5. Alternatives to Vertical Integration: Cooperative Relationships • Short-term contracts and competitive bidding • Strategic alliances and long-term contracting • Long-term cooperative arrangements • Strategic outsourcing and the virtual corporation

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