Vertical Integration Walmart Essay

1221 Words Apr 13th, 2013 5 Pages
Vertical integration is a business growth strategy for economics of scale. It is typified by one firm engaged in different parts of production example; growing raw materials, manufacturing, transporting, marketing, and/or retailing to expand business in existing market for the firm. It can function in two directions both forward integration and backward integration.
In Forward integration involves company to develop strategy to control the firm product distribution either through distribution centers or retailers. It is a necessary action when companies have potential benefits from handling, shipping of their own products directly to customers, or the retail selling their own products in brand stores.
In backward integration involves
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On the other hand Walmart, performs distribution and retailing activities, it has more control over the way the product is presented and at what prices it is sold in the market In relative to firm like oil and gas industry Esso mobile, it gain control through Asset specificity to produce internally.
Developing a vertical integration strategy solely increase advantages over competition and able to block competitors from gaining access to scarce resources or important markets. A retailer might buy a manufacturing company, for instance, to gain access to proprietary technology, patents or resources only available in the firm's local area. For instance Walmart acquired VuVu to gain access to the home entertainment business.
Integrate an organisation the work done by previous suppliers or costumers are also introducing or expanding the core competencies of your workers. That way you can be enriching some of your organisation jobs, leading to increasing satisfaction and motivation of your workers, which is an important benefit. For instance, Walmart employee is rotated to different work function that enable employee to acquired new skill and value add to their growth.
Vertical integration offers the opportunity to go even further. With specialized assets and having more control over inputs, it

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