Strategic Management: Formulation and Implementation


Strategies for attaining materials and markets with no internal transfers and no ownership are like contracts. They are especially attractive when firms are reluctant to buy specialized assets, need to lower breakeven points because of underdeveloped demand, or can arrange delivery schedules with suppliers (or distributors) as though they were extensions of the firm's assets.


Quasi-integrated firms need not own 100 percent of the adjacent business units in the vertical chain. The bond between firms could take the form of cooperative ventures, minority equity agreements, loans or loan guarantees prepurchase credits, specialized logistical facilities or "understandings" concerning customary arrangements. Quasi-integrated arrangements place greater proportions of ownership equity at risk, but they also provide greater flexibility in responding to changing conditions than a contract may provide.