Vertical Integration Walmart

Topics: Strategic management, Vertical integration, Wal-Mart Pages: 4 (1206 words) Published: March 29, 2013
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 company to develop strategy to control its supply of raw material by acquiring its supplier firm or setting up its own facilities to produce the material to achieve cost efficiency and enjoy economic of scale. Often it is learnt that the huge investment is required for firm to develop vertical integration, therefore, it is important for the firm to know beforehand whether vertical integration strategy add specific value to the company, and does it aligned with the overall strategy of the company, customer needs and wants. For Wal-Mart, it is better to develop vertical integration based on the firm establishment in the market and the firm is always looking into expansion. Walmart is a well-known hypermarket with 8500 stores across 15 different countries. It is in business of selling everything to customers’ needs in their everyday lives. Wal-Mart practices vertical integration strategy where it has developed its own name brand to sell products called Sam's Choice Today; Sam’s Choice extended its products like soft drinks, cereal, and dog food. While they still don't grow their own crops or raise their own livestock, it is still a form of vertical integration. In 2010, the company expanded to cater home entertainment by buying over...
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