Strategic Management: Formulation and Implementation

Full Integration

Full integration can be used effectively if price competition is not fierce, diseconomies from temporary imbalances are not significant, and little hardship occurs from being cut off from outside market or technological intelligence. Full ownership risks the greatest proportion of equity, but many firms believe it is easier to manage that contractual or quasi- integrated relationships and prefer it over them.

Breadth And Stages Of Integration

Being broadly integrated also offers firms opportunities to capture large profit margins. Firms that engage in several vertical stages for each integrated activity they undertake can enjoy synergies at several diverse levels within their organizations. Particular combinations of the breath of activities integrated, number of stages undertaken, degree of internal transfers, and form of ownership control are more likely to be successful for certain firms than other depending on: (1) the uncertainty surrounded sales growth, industry infrastructure, and other market traits; (2) the likelihood that the industry in question will undergo radical technological change, serve price warfare, or other structural changes causing competition to be volatile; (3) the power of firms to bargain, cajole, or pressure suppliers (or distributors) into performing value adding tasks for them; and (4) firm's strategy needs.