HariShankar

Vertical Integration
It’s a business strategy where the organizations would be keen to integrate the business functions which were dependent on suppliers to
1.       Improve the quality
2.       Optimize cost
3.       Gain control of the market power and market share
4.       Expand its reach to the end customers/ consumers
Vertical Integration is of the following types
Backward Integration: In this strategy, Company A integrates the upstream processes in the supply chain function, this helps them to gain more control over the inventory, and procurement of raw materials all the way to the manufacturing of the raw materials.
1.       Reliance Industries is a classic example of Backward Integration as they were originally in the textile industry from which they entered precursor chemicals, plastics, petrochemicals, petroleum refining and finally oil and gas exploration and production.
2.       UK Supermarket chain Tesco took over the Booker Group which was the UK’s leading Food Wholesaler. This gave Tesco additional access to become a major supplier to competing small retailers, serving 125,000 independent convenience stores as well as 468,000 restaurants and pubs
Forward Integration: In this strategy, Company A integrates the downstream processes in the supply chain. This will give them an extended reach to take control of the distribution, sales and post-sales services of their product/ service.
1.       Telecom giant Airtel is to acquire ~97% stake in the Beetel Teletech a company that manufactures landlines and cordless phones
2.       Dell successfully manages the sales and distribution of their products without support from any partners as it gives full control over owning the services to its customers and consumers
Balanced Integration: In this strategy, the company decides to pick up both the upstream and downstream activities in the supply chain. This enables it to be in a strong position to source raw materials, design, develop, manufacture and manage the post-sales
1.       Apple is a classic example of balanced integration as it has tight control over sourcing the raw materials, manufacturing chips, opening its retail stores and managing post-sales service
2.       D Mart is another successful organization that had successfully implemented the balanced integration as it helped them to gain a significant market share in the hypermarket chain
Impact on Business Excellence Strategy
The business excellence strategy will have to be realigned to consider vertical integration. The company that performs the Vertical Integration will have an upper hand in defining, formulating, implementing and governing the business excellence roadmap for the combined organization. Below are the key priorities in such instances
1.       Define and achieve economies of scale, expand foot print
2.       Relook at the Cost structure as some of the fixed costs will now be variable costs, greater scope for implementing cost avoidance/ saving projects
3.       Cross-skilling of resources and redeployment of resources
4.       Consolidation of Tools, inventories and platform
Improve Employee and Customer Satisfaction levels

Horizontal Integration
It’s a business strategy for growth where companies either take over, merge or aim for expansion internally. Any of these upon successful implementation will result in
1.       Increased market share
2.       Balances competition
3.       Enhanced product coverage and growth
4.       Improves Customer Satisfaction
Take Over: In this strategy, Company A takes over all the activities of Company B including the customers of Company B. In the telecom industry in India during the period 2010-20 a bunch of new entrants were acquired by the large players as they couldn’t sustain the competition which involved huge investments to roll out as well as maintain the existing network. Without maximizing revenue investments became a huge question
1.       RCOM acquired SSTL
2.       Jio acquired the assets of RCOM
3.       Bharti Airtel acquired Loop Telecom
4.       Vodafone acquired C&WW (Cable & Wireless Worldwide) in the UK
Merger: In this strategy Company A merges with Company B and both jointly operate to deliver the services/ products to the customers. There is a clear demarcation of powers defined by the % stake one owns in the merger. There are quite a few examples in the telco domain again
1.       Vodafone Merged with Idea and jointly operates under the brand VodafoneIdea
2.       BT (British Telecom) and EE merged and operate under the brand BT EE they provide wireline and wireless services in the UK
3.       Virgin Media and O2 merged and operate under the brand VMO2 and provide wireline and wireless services in the UK
Internal Expansion: In this strategy, the company decides to deploy capital to expand horizontally create value for its customers, generate revenue and minimize dependencies on partners. Again there are quite a few examples in the telco space
1.       Jio started as a telco and deployed fibre to deliver wireline and wireless services how ever invested heavily in expanding horizontal services under Jio Consumer platforms which has
a.       Jio Money
b.       Jio Apps and Jio TV
c.       Jio Mart
d.       Jio Sign
2.       Airtel investing heavily in the data centre business under the brand Nxtra Data
Impact on Business Excellence Strategy
The business excellence function will be realigned towards the new organizational strategy, the existing projects/ initiatives will be reprioritized and more importance will be given to
1.       Ensure the combined business builds and gains momentum
2.       Leverage the synergies between both companies, pick up the best practices from each other and enhance a combined learning
3.       Define cross-functional and cross-company collaboration that helps colleagues to work towards a common goal
4.       Define a transformation approach and drive the colleagues to contribute to the transformation goals
In a situation where Company A acquired the Company B, there are higher chances to
1.       Stall the projects/ initiatives of Company B as more focus and priority will be given to drive the initiatives which were up and running in Company A
2.       Allocation of resources (Financial, people and logistics) to the existing initiatives under implementation in Company B