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Corporate-Level Strategy M & A: Horizontal & Vertical Integration

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CONTENTSINTRODUCTION CORPORATE LEVEL STRATEGIES HORIZONTAL INTEGRATION VERTICAL INTEGRATION EXAMPLE OF AT & T COMPANY REFERENCES3

Introduction

Corporate- Level Strategy should allow a company, or its business units, to perform the value-creation functions at lower cost or in a way that allows for differentiation and premium price.

Companies must adopt a long term perspective ?

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Corporate-Level Strategy: The Multi-Business ModelA multi-business company must construct its business model at two levels: 1. Business models and strategies. 2. Higher-level multi-business model.

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Repositioning and Redefining A Companys Business ModelCorporate level strategies are primarily directed toward improving a company's competitive advantage and profitability in its present business or product line. Merger & Acquisition Strategic alliances Horizontal Integration Vertical IntegrationNANDINI.R 6

Horizontal Integration Single-Industry StrategyHorizontal integration is the process of acquiring or merging within industry competitors in an effort to achieve the competitive advantages that come with large scale and scope.

What is single industry strategy ?

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Benefits of Horizontal Integration

Profits and Profitability increase when horizontal integration:

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Problems with Horizontal Integration

A wealth of data suggests that the majority of mergers and acquisitions Do Not create value and that many any actually DESTROY value.

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Vertical Integration Entering New IndustriesBackward Vertical Integration Forward Vertical Integration Full Integration Taper Integration

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Stages in the Raw Material to Consumer Value chain

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Raw Material to Consumer Value Chain in the Personal Computer Industry

Raw materials

Intermediate manufacturer

Assembly

Distribution

End user

Examples: Dow Chemical Union Carbide Kyocera

Examples: Intel Seagate Micron

Examples: Apple Compaq Dell

Examples: Computer World Office Max

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Full and Taper Integration

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Increasing Profitability Through Vertical IntegrationA company pursues vertical integration to strengthen the business model of its original or core business or to improve its competitive position.

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Problems with Vertical Integration

Companies may disintegrate or exit industries adjacent to the industry value chain when encountering disadvantages from the vertical integration.

Vertical integration can weaken business model when ?

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Case study - Horizontal and Vertical Integration

AT&T is one of todays largest industry for voice, video and data communication companies in the world. It is the market leader in local, long distance and internet services. It is said to be horizontally integrated because it has a wide range investments in companies, like General electric, Radio Corporation of America, Westinghouse, National Broadcasting Company. All these companies helped AT&T get closer and closer to be a global market dominates. Its ambition of monopolizing the market has appeared as early as around the time when radio was a new medium. Therefore it is quite easy to see that AT&T is horizontally integrated. NANDINI.R

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In addition, AT&T is vertically integrated as well, since it also has ownership over companies that transmit equipments, including stations, cable lines, telephones, etc. which tremendously helped AT&T in providing one stop services and products. Without paying AT&T for its entitled infrastructure, other companies would never be able to use or provide similar service or products which AT&T is said to be a dominating winning mix

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REFERENCESVipin Gupta, Kamala Gollakota, Srinivasan. R an Business Policy and Strategic Management. Charles W.L Hill / Gareth R. Jones an Integrated Approach of Strategic Management Theory. John Parnell an Strategic Management Theory and Practice. Jay B. Barney, William S. Hesterly on Strategic Management and Competitive Advantage.

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