Discuss the disadvantages of continual vertical growth and explain how this can be corrected to enhance horizontal growth
Answers
For example, Walmart operates their own distribution centers, giving them more control over the distribution process. A key part of their success has been state-of-the-art technology and establishing more efficient processes for loading and delivering products. The company continues to experiment with technology, such as virtual reality, hyperlocal distribution centers, and drones, in order to increase efficiency and cut costs even further.
Cutting costs have the added benefit of offering lower prices to consumers, which is another key to Walmart’s success.
Create new profit centers
Online stores such as Amazon and Chinese e-commerce giant Alibaba, now enable manufacturers to sell directly to customers anywhere, anytime, creating an entirely new center of earnings. Why lease and staff stores
Expand geographically
Vertical integration can allow your business to expand geographically by adding distribution centers in new areas or by acquiring a new brand. Generally, geographical expansion works best when expanding within a company’s own segment in the supply-distribution spectrum.
For example, Proctor and Gamble's acquisition of Iams pet foods expanded the company’s reach into worldwide markets. And Louis Vuitton, the manufacturer of fine leather goods, became a worldwide destination for women after opening their own stores in the fashion capitals of the world.
Maintain quality control
If you're a cake maker and manufacture your own cake mixes, you're not at risk of a supplier cutting down or substituting the eggs. If you're a manufacturer of salad oil and own your own olive groves, you're not at risk of mislabeling (which according to a UC Davis study was found to be the case in over two-thirds of extra virgin olive oil sold in stores.) Companies that have more control over the production process are able maintain higher quality standards.
Differentiate from competitors
Vertical integration may allow a company to set itself apart from its competitors. For example, a company that manufacturers electronics could establish itself as a retailer, providing an experience for its customers that its competitors cannot. For example, when Apple opened its first retail store in 2001, it was able to cater to customers in a way that Microsoft could not.
Protecting proprietary processes or recipes
In some cases, secret recipes are so valuable that they are maintained as true trade secrets and outsourcing their manufacturing would be unthinkable, such as with Coca-Cola.
Disadvantages of Vertical Integration
While vertical integration can lead to many benefits, it also comes with risks, such as:
Established distribution channels may be adversely affected
Let's assume you manufacture handbags and your established sales have been through independently owned gift shops. You are considering vertically integrating by selling direct to consumers on your website. Your plans for going into online sales must take into account potential loss of sales through your present avenues of distribution. Will you lose already established sales to gift shops?
Unprofitable outcome
In the end, you may end up losing money on your investment, and too often an acquisition mistake cannot be made profitable by working harder. As Warren Buffett has said, “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”
Obsolescence due to new technologies
Vertical integration could potentially hurt a company when new technologies evolve quickly and become available. The company is then forced to reinvest in the new technologies in order to stay competitive, which is costly and may require retraining of employees.
Higher cost due to lower volume
If you go into manufacturing, you may not be able to keep costs as low as independent suppliers who sell to many other customers. For example, when an auto manufacturer owns its own tire manufacturing, its production of tires is most likely limited to the needs of the parent firm, whereas a standalone tire company can sell to numerous auto manufacturers, achieving greater economies of scale.
Unforeseen labor issues
When a union company vertically integrates with a non-union company, labor issues can arise. For example, if a non-union company vertically integrates with a union supplier, there is a chance of the parent company shutting down the supplier and outsourcing the service to reduce costs. This, in fact, has been the trend in the airline industry where outsourcing maintenance to lower cost overseas shops has soared.
Through specialization, some companies are so good at what they do they almost remove themselves from the competition. Your company may be excellent at retailing its products, but ill-equipped to manage the manufacturing process. A vertical merger could put the success of the company in jeopardy and may change the culture permanently.
Continuous vertical growth of a plant results in the the decrease supply of the nutrient and difficulty in accessing the plant products due to height.
Explanation:
- the meristematic tissue is responsible for the height of a plant. As a result of this the dissociation of the meristametic tissue may result in the stoppage of the growth of the height of the plant.
- Auxin is a hormone which is present in certain plants which helps in the differentiation of the axillary node which results in the horizontal height of the plant. As a result of this there is is decrease in the height of the plant and increase in the horizontal distance covered by the plant
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Vertical growth in plants takes place by? - Brainly.in
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