Strategic Management: Formulation and Implementation

Vertical Related Acquisition.

Vertical related acquisition (vertical integration) involves extending the production process back to the source of supply, or forward to the marketing are.

Four principal advantages are associated with vertical related acquisitions:

Vertical Unrelated Acquisition.

Vertical unrelated acquisition is undertaken with limited possibilities for transferring or sharing core competencies. In some cases, however, vertical unrelated acquisitions can result in vertical chain/horizontal scope economies, vertical chain innovations, and combinations of chain economies and innovations.

Managing vertically unrelated businesses can be associated with two major disadvantages:

Formerly, the term "merger" applied to the consolidation of two companies about equal in size, whereas "acquisition" implied a larger firm taking over a smaller one. Since this distinctions is no longer consistently observed, I use the words interchangeably.