BUSINESS ORGANISATION AND POLICY

Business Organisation and Policy

Business Organisation and Policy

Introduction

The main purpose of this paper is to discuss the advantages of horizontal integration and vertical integration. Now days many companies are switching from the vertical integration to horizontal integration and the reason behind is the growing demand of horizontal integration. This paper describes that how different environmental factors have effect on the corporate structure and strategy.

Discussion

Environmental factors have effect on the corporate structure and strategy. Organizations monitoring the external environment identify and use opportunities to achieve corporate objectives, while avoiding the threat of obstacles. This is achieved close study of the environment in the future, drawing up a list of opportunities and threats in the future will be used as opportunities, and to find effective responses to the challenges of the environment. The first step in the analysis of environmental factors is to collect information on social, economic, political and technological trends in changes, in the environment of the existence of organizations. These experts will provide periodic summary reports for management (top managers), responsible for organizing the study of environmental factors. In large organizations, such work is carried out continuously (Aaker, 2009, p. 137). Environmental factors can have a direct effect on the corporate strategies in such a way that the factors like political, economical and social can have effect on the strategies. For example, if the political situation changes in the country then many other factors can be influenced which lead to change in the corporate strategy.

Advantages of Vertical Integration

Vertical integration involves a set of decisions that, by their nature, are located at the corporate level of an organization. Such decisions are of three types: It defines the limits that a company should establish in terms of the generic activities of the value chain of production. It establishes the company's relationship with relevant audiences outside its limits, mainly suppliers, distributors and customers. It identifies the circumstances under which such limits and relationships should be changed to enhance and protect the company's competitive advantage. This set of decisions can characterize a company: what assets and capabilities are part of the business and what types of contracts are set with external agents (Buzzell, 2008, p. 102).

A company could be conceived as a chain of activities which may include the following factors: Administration, Production, Distribution and Commercialization. Administrative activity is responsible for organizing the remaining three activities, which from the point of view of the value chain are ordered from production through distribution to reach commercialization.

To measure the degree to which a company is vertically integrated, using four indicators:

Vertical integration has a direction of integration, which can be backward or forward. Given the characteristics of a company, a backward vertical integration is to approach a company to its suppliers incorporating them into their value chain. This means to take control of suppliers of inputs. A forward integration approach means more customers, with the company itself, as a whole responsible for providing the customer the final product regardless of outside companies to do such ...