Strategic Management: Formulation and Implementation

Quasi-integration

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.

Taper Integration

Firms are "taper integrated" when they are backward or forward integrated but rely on outsiders for a proportion of their suppliers or distribution. Taper integration represents a useful compromise between desires to control adjacent businesses and needs to retain strategic flexibility. In this case, firms can monitor the R&D developments of outsiders, reduce vulnerability to strikes and shortages within their systems, and examine the products of competitors while enjoying the lower costs and greater advantages (and profit margins) or vertical integration.