Organizational Growth And Two Types Of Organic Growth

The obvious reason for horizontal expansion is the benefit of cost reduction. As the firm increases its scale of operation it generally experiences a reduction in long-run average costs. After the merger the company can rationalise its operation which leads to instant reduction in overheads. But it’s important not to become to big that leads to diseconomies of scale. Another reason for the reduction in costs is due to the benefit attributed to the learning curve. The learning curve was responsible for the reason why European plan manufacturers could not compete with Boeings’ production efficiency in the 1950s. A firm producing 100 units a day learn faster then a firm producing 10 units a day. A company can also improve its efficiency by merging with a company that already has benefited from the learning curve. The question is how easy the knowledge can be transferred?

Vertical integration is when one firm joins with another at a different stage of the same production process. Forward Vertical is when the other firm is at a later stage and Backward Vertical is when the other firm is at an earlier stage. Vertical integration as a whole allows for a firm to control key stages of the production process; guarantees access to a market; and gains control of supplies. Companies such as Zara and American Apparel are vertically integrated, especially at key stages of

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).

Andrew Carnegie, for one, built a giant steel empire using vertical integration, a business tactic that increased profits by eliminating middlemen from the production line. Conversely, John D. Rockefeller’s Standard Oil Company used horizontal

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.

Firms must consider many strategies when attempting to realize growth. Depending upon the stage of

Starting of reading this article, I was completely lost and wanted to quit. Vertical integration seemed too big of a concept to wrap my head around and the article had so many stats and figures I was going crazy. After dissecting the article parts by part and figuring out what vertical integration meant, the research started to make sense. To start off what the research talks about lets define vertical integrated. According to Adelman, it states that “a firm is vertically integrated whenever it ‘transmits from one of its departments to another good or service which could, without major adaptation, be sold in the market.’”. Ultimately a company is vertically integrated when “firms integrates activities in the value chain to produce its own inputs and/or takes care of its own

1. Explain two things that enabled the development of huge corporations. (Do not just give me two kinds of businesses. Explain what CAUSED business size to increase so much.)

b) Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form.

An example of vertical integration here in Florida is the new medical marijuana industry. Florida lawmakers created one type of license that allows the owners to cultivate, process, and sell medical marijuana. With less than 10 licenses granted the industry will be easy to observe and control. The licenses owners also benefit because they have a larger control over the Florida market and can sell their products cheaper because they avoid transaction costs that occur from business to business interaction. Vertical integration is a management tactic that benefits policy makers and firms in this situation,

A company creates or acquires production units for outputs which are either competitive or complementary.

The learning and growth perspective uses the organization’s resources to adapt to the changing wants and needs of customers. The organizations must ask itself whether it can continue to improve and create value for its customers (Kinney and Raiborn 2013, 11). An organization’s ability to innovate and improve their products or services directly affects its value. An organization can create economic growth by developing new products and services, improving existing products and services, and developing more efficient operations (Kaplan and Norton January/February 1992, 75).

Mergers and acquisitions can be classified in terms of the direction of the growth. A horizontal merger/takeover is the combining of two firms in the same stage of production, for example Well come Pharmaceuticals merged with Glaxo Pharmaceuticals. This sort of integration takes place to combat competition from the market and secure market domination; to reduce risks and increase financial strength; and to compete in

The Organic growth process for expansion of business because of increasing entire customer base, new sales, increased output per representative or customer or any of these combination that opposes merger and acquisition (Rumyantseva et al, 2002). This strategy is beneficial because it is cheaper and other strategies as acquisition, and this also includes management teams to be able to

1. Describe two major ways in which a company can grow. Give examples to illustrate the two ways of growing: