preview

Disney Vertical Integration Essay

Decent Essays
Open Document

In a vertical integration, a company grows by taking over functions in the value chain that it relied on suppliers or other organizations. Vertical integration is also known as backward integration. This growth strategy makes operations more difficult for competitors, reduces costs, and ensures stability and quality of components. Studies indicate that vertical integration raises exit barriers for a firm the industry, decreases flexibility, and cuts off suppliers who may be competing for its business (Parola et al., 2015).
The vertical-integrated corporate growth strategy may also be forward integrated whereby the firm takes over the functions in the value chain that were provided by retailers, distributors, and manufacturers. When a company integrates in a forward manner, it asserts control over distribution as well as final products and services. An example of a company that uses forward-integrated vertical growth strategy is Disney’s. Disney’s has opened new distribution centers where consumers can get its products cheaper than if they were to get them from stores, such as Target.
Companies opt for vertical integration growth strategy to gain full control over the supply of its products’ raw materials. Vertical integration is suitable when the prices of raw materials are unstable or expensive. If the industry is expected to grow significantly, …show more content…

Concentric strategy creates a situation whereby the existing and new lines of business attain or share some advantages emanating from commonalities, for example, product or manufacturing similarities, distribution, customers, location, technology, and government access. This type of growth strategy is applied when a firm possesses a strong competitive position as well as distinctive competencies, but operates in a rather unattractive industry. As such, a company enters into an industry that is related to the current

Get Access
Related
Get Access