Vertical Integration and Corporate Strategy †MyAssignmenthelp.com

Question: Discuss about the Vertical Integration and Corporate Strategy. Answer: Introduction: Vertical integration is a corporate strategy of expansion where the company itself owns a part of the supply chain. Generally, each participant of the supply chain contributes in making different product or market related services in vertical integration those channels are owned by the company. Any company expands its business operations in various steps of its production process, like the manufacturer own its suppliers or distributors. Vertical integration helps the companies decrease its costs and further bring improvement in its production efficiencies that can be done by reducing the expenditure of transportation, turnaround time. Often relying on the expertise and economies of scale of the different vendors is more beneficial rather than a vertical integration. Vertical integration occurs in those companies where company has control over various production and distribution steps that are involved in the process of production. Companies of different industries they opt for vertic al integration. The conversions of the raw materials into finished goods are defined along the different stages of the production (Harrigan 2015). The image above shows the various stages of production of production The value chain of UPS can be represented in a similar way, the picture below shows the value chain of parcel services that existed previously but the scenario has changed to a great extent. The value chain of present day parcel service is more customer oriented because the customers need timely delivery, their expectations have increased (Stevens and Johnson 2016). UPS stands for United Parcel service, it provides parcel services as well as it is a supply chain provider. It is an American company and its headquarter is in Sandy Springs Georgia. In this study the value chain analysis of UPS India has been taken. It is well known for providing courier, freight and logistics services. The company operates in the courier industry all around the world (Gereffi and Fernandez-Stark 2016). The picture below shows the value chain of modern day parcel services and that what United Parcel Service is practicing. The stages of value chain are not like the traditional ones rather now the value chain has few more stages, apart from the traditional, pickup, warehousing, transportation and delivery (Christopher 2016). In the modern parcel service value chain the stages are as follows Stages of Value chain of UPS Stage 1- Pick up- In the first stage the customers give their parcels to the company with the address where they want the delivery to be done. They also give their address as address of the sender. In this stage the order is taken by the parcel service, the pickup method of all the companies are almost similar. A slight difference is there that some companies go the customers address to pick up the parcels to be delivered while other companies do not provide this facility and the client has to go the parcel office to give their parcels that they want to deliver. Stage 2- Ware housing -The second stage is warehousing, in this stage the parcels of every day are collected and are sorted according to the address they are to be delivered. Those addresses that fall in the same geographic location are placed together, this helps the delivery man to provide quick delivery and save time. The warehousing time is not much just a day. Stage 3- Payment- The next stage is payment, mostly the payment in parcel industry is taken immediately, the clients now have the liberty to pay instantly, they can pay either in cash or through credit or debit cards (Rothaermel 2015). Stage 4- Web support/ e-commerce and platform provider- This is the most crucial stage for the clients with the help of modern web support they can track their parcel, a parcel id is given to the customers at the time of pickup this help both the sender and the recipient. Webb support helps also acts as customer grievances. This stage is the result of the customer oriented marketing that is mostly practiced by the companies these days. Having a website helps the companies to promote and advertise their brand. It is basically a need to have websites because it helps the companies to sustain in the competitive environment of modern day (Rothaermel 2015). Stage 5- Marketing- This stage is very important for the company to increase their customer base, create a good will in the market, create brand awareness, advertise and promote their brands. Stage 6- Delivery- This stage is the delivery stage where the recipient finally receives the parcel. Timely delivery is the most important criteria for the customer satisfaction. If the recipient gets the parcel in the time that was committed to him/her then the customer will be satisfied. He would suggest the brand to other people and hence the customer base will be increased with the help of word f mouth advertising therefore the timely delivery of parcels are very important for the service providers as well (Rothaermel 2015). Vertical integration helps in lowering the costs. It improves the quality. It helps in planning and scheduling. It helps in making investments in specialized assets. It secures the critical supplies and the distribution channel. Risks of Vertical Integration It increases the the costs. The quality can be reduced. The flexibility is reduced. It increases the legal repercussions (Kohli 2017). The other alternatives to vertical integration are diversification. For United parcel service, diversification is one of the most common and effective growth strategies, in this strategy the business usually expand their business either they expand their business into another country or start a new business unit or business line. There are many other ways of diversification as well like the synergies, acquisition and mergers. UPS can expand to other market as well, they can target other market as the growth strategy of their business. References Amit, R. and Livnat, J., 2014. Diversification strategies, business cycles and economic performance.Strategic Management Journal,9(2), pp.99-110. Christopher, M., 2016.Logistics supply chain management. Pearson UK. Gereffi, G. and Fernandez-Stark, K., 2016. Global value chain analysis: a primer. Harrigan, K.R., 2015. Vertical integration and corporate strategy.Academy of Management journal,28(2), pp.397-425. Kohli, R., 2017. Innovating to create IT-based new business opportunities at United Parcel service.MIS Quarterly Executive,6(4). Lahiri, N. and Narayanan, S., 2013. Vertical integration, innovation, and alliance portfolio size: Implications for firm performance.Strategic Management Journal,34(9), pp.1042-1064. Rothaermel, F.T., 2015.Strategic management. McGraw-Hill Education. Stevens, G.C. and Johnson, M., 2016. Integrating the supply chain 25 years on.International Journal of Physical Distribution Logistics Management,46(1), pp.19-42.