To What Extent Is Growing Through Integration with Other Businesses a Good Way for a Firm to Increase Its Competitiveness?
To what extent is growing through integration with other businesses a good way for a firm to increase its competitiveness?
Growing through integration is concerned with mergers and takeovers of businesses. There are a number of different ways of integrating: Horizontal (same industry, same stage of production), backward vertical (same industry towards a supplier), forward vertical (same industry towards the customer) and Conglomerate (different industries).
Growing through integration can have a positive effect on the competitiveness of a business in that firms are able to buy out or merge with other large powers in the market to make a ‘super power’ in the market. This ‘super power’ gains a larger % of the market as the two original market shares of the firms are joined together. A recent example of this is the merger between orange and T-mobile in 2010. This merger saw two of the UK’s biggest mobile phone network providers join together and as a result gain a combined 30 million customers and overtake O2 as the market leaders with 37% market share. Along with this, the merge allowed customers of the two companies to be able to receive the signal of both of the networks helping to provide a better signal range for the whole of its customer base. The integration of the two businesses therefore helps both orange and T-mobile to provide a better service to their customers which could tempt customers away from their closest rival O2 and gain them even more market share. Therefore the merger has allowed orange and T-mobile to compete with O2 on quality making them more non-price competitive and more desirable to the consumer. Along with being able to compete on areas other than price the merger could mean that orange and T-mobile are in fact able to compete on price as well. The two companies may be able to benefit from further economies of scale thus being able to drive their average unit cost of production down and charge less for their products. This again will go
Growing through integration is concerned with mergers and takeovers of businesses. There are a number of different ways of integrating: Horizontal (same industry, same stage of production), backward vertical (same industry towards a supplier), forward vertical (same industry towards the customer) and Conglomerate (different industries).
Growing through integration can have a positive effect on the competitiveness of a business in that firms are able to buy out or merge with other large powers in the market to make a ‘super power’ in the market. This ‘super power’ gains a larger % of the market as the two original market shares of the firms are joined together. A recent example of this is the merger between orange and T-mobile in 2010. This merger saw two of the UK’s biggest mobile phone network providers join together and as a result gain a combined 30 million customers and overtake O2 as the market leaders with 37% market share. Along with this, the merge allowed customers of the two companies to be able to receive the signal of both of the networks helping to provide a better signal range for the whole of its customer base. The integration of the two businesses therefore helps both orange and T-mobile to provide a better service to their customers which could tempt customers away from their closest rival O2 and gain them even more market share. Therefore the merger has allowed orange and T-mobile to compete with O2 on quality making them more non-price competitive and more desirable to the consumer. Along with being able to compete on areas other than price the merger could mean that orange and T-mobile are in fact able to compete on price as well. The two companies may be able to benefit from further economies of scale thus being able to drive their average unit cost of production down and charge less for their products. This again will go