Use Industrial Economic Theory to Assess the Extent to...

Vertical integration is the process of combining firms, usually under a single ownership, that are different parts of a larger production scale. This could be anything from two firms to all of the firms that make up the supply chain. Due to combining multiple smaller firms, this form of integration has an effect on the market power that the firm(s) has (Riordan, 2008). This differs to horizontal integration which is the combination of firms or expansion of a single firm at one particular point of the production process (Black, Hashimzade, Myles, 2009, p. 206-7). Vertical integration is usually carried out in one of two ways. Upstream, which can be referred to as backwards, and downstream, or forward, and the definition is linked to the†¦show more content†¦248). As well as this they will benefit from having a reliable retailer that will have a consistent demand for their products. Although they will have a consistent buyer for their products the subsidiaries will have to receive a lower unit price for their products as a result of bringing down their costs after the integration. This is not a negative as the demand for their product is consistent and the fall in market price will be proportional to the fall in costs. As well as Smithfield, other meat and poultry production firms have benefitted from having highly integrated production chains such as Tyson, ConAgra and Swift (Pepall, Richards, Norman, 2008, p. 449). The integration of these firms is consistent with Lieberman’s views (1991, p. 452) of why upstream integration may take place. The main reason which is applicable to this situation is that if the inputs in question account for a large proportion of total cost (which animals being bred for meat will do) then the downstream firm is more likely to integrate. Although all these firms are highly integrated and could offer much lower prices than they already do to the consumers they choose not to. Having a higher mark up allows them to receive higher profit margins from the lower input costs while keeping similar market prices for their final output. This is a form of non-priceShow MoreRelatedGrowth Strategy10537 Words   |  43 PagesIntroduction Nature and Scope of Corporate Strategies Nature of Stability Strategy Expansion Strategies Expansion through Intensification Expansion through Integration International Expansion Summary Key Words Self-Assessment Questions References and Further Readings 9.1 INTRODUCTION Strategic management deals with the issues, concepts, theories approaches and action choices related to an organization’s interaction with the external environment. Strategy, in general, refers to how a given objectiveRead MoreValuation of Integrated Oil Gas Companies Msc Thesis33042 Words   |  133 PagesMSc in International Business and Economics: Cand. Merc Finance and Strategic Management (FSM) Copenhagen Business School Date 09/10/2008 Author: Irakli Menabde MSc Thesis: Valuation of Integrated Oil Gas Companies Irakli Menabde Abstract The paper examines a number of empirically utilised and academically established valuation methodologies in order to value Integrated Oil Gas Company’s common stock. By applying and comparing DCF, SOP and Real Options based valuation methodologiesRead MoreContemporary Issues in Management Accounting211377 Words   |  846 Pagesilluminate practice and to provide ways of improving it. Although always appealing to his economic understandings, he has been open to a wide variety of other ideas, recognizing their intellectual strengths and capabilities rather than making artificial distinctions between what is acceptable and what is not. He also has contributed widely to the accounting literature, taking forward the British tradition of economic theorizing in financial accounting as well as being a constant source of creative thinkingRead MoreCompetitive Advantage: Creating and Sustaining Superior Performance65536 Words   |  263 PagesAdvantage (p.165) 51 Section 1: Technology and Competition 51 Section 2: Technology Strategy 54 Section 3: Technology Evolution 58 Section 4: Formulating Technological Strategy 60 Chapter 6: Competitor Selection 61 Section 1: THE STRATEGIC BENEFITS OF COMPETITORS 61 Section 2: What Makes a â€Å"Good† Competitor? 64 â€Å"Good† Market Leaders 65 Section 3: Influencing the Pattern of Competitors 65 Section 4: The Optimal Market Configuration 66 Section 5: Pitfalls In Competitor selection 68 Read MoreQuality Improvement328284 Words   |  1314 PagesUnited States of America. 10 9 8 7 6 5 4 3 2 1 About the Author Douglas C. Montgomery is Regents’ Professor of Industrial Engineering and Statistics and the Arizona State University Foundation Professor of Engineering. He received his B.S., M.S., and Ph.D. degrees from Virginia Polytechnic Institute, all in engineering. From 1969 to 1984 he was a faculty member of the School of Industrial Systems Engineering at the Georgia Institute of Technology; from 1984 to 1988 he was at the University of Washington