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1 – 10 of over 4000The purpose of the paper is to identify the main characteristics of vertical integration strategies and discuss the effects of those characteristics on companies' ability to…
Abstract
The purpose of the paper is to identify the main characteristics of vertical integration strategies and discuss the effects of those characteristics on companies' ability to compete. Using a sample of 316 parent companies, the study found that industry uncertainty affected companies' decisions regarding their levels of vertical integration, but not companies' decisions to change those levels. The study also suggests that a significant number of companies have disintegrated to become more competitive.
Raul Beal Partyka and Ely Laureano Paiva
This paper aims to present the vertical integration state-of-the-art and propose an expansion of the operations and supply chain management (OSCM) field by identifying gaps and…
Abstract
Purpose
This paper aims to present the vertical integration state-of-the-art and propose an expansion of the operations and supply chain management (OSCM) field by identifying gaps and bottlenecks.
Design/methodology/approach
This paper uses a systematic literature review based on a sample of 173 OSCM field articles, collected from Scopus and Web of Science databases.
Findings
There are no single factors, such as future costs, structures or skills development, in the decision to vertically integrate operations. It is necessary to combine the vision of production costs with the perspective of governance and transaction costs. In addition, it is essential to consider the competency perspective and its impact on capability building.
Research limitations/implications
Few studies have attempted to understand how vertical integration is used in terms of OSCM research themes and theories. Vertical integration can help companies face challenges and serve as a potential solution for achieving better prices, demand control and quality management.
Practical implications
The significant role of vertical integration mechanisms in supply chains is crucial for managers evaluating a firm's reconfiguration with more vertical operations. Policymakers interested in supporting the smoothness of vertical integration decisions in regulatory agencies play a key role as contingencies.
Social implications
In times of global challenges, vertical integration is a strategy known to be more effective for firms to obtain a competitive advantage, making them more resilient.
Originality/value
This paper addresses gaps in the vertical integration theme and provides insights for future research development.
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Wei Guan and Jakob Rehme
Strategic concentration is a key issue for manufacturing companies when designing a supply chain. As a corporate strategy and a supply chain governance strategy, vertical…
Abstract
Purpose
Strategic concentration is a key issue for manufacturing companies when designing a supply chain. As a corporate strategy and a supply chain governance strategy, vertical integration relates to organisational economics and strategic supply chain management. Numerous explanations have been created for vertical integration, and transaction cost economics (TCE) provides a theoretical basis to help understand the process. However, the current popularity of vertical integration seems inspired by something more than altering industry structure and minimising cost, which are the traditionally accepted explanations for vertical integration This paper aims to explore the driving forces for vertical integration, particularly downstream integration of distribution, and the consequences of vertical integration in a manufacturer‐distributor‐reseller chain.
Design/methodology/approach
This study adopted an exploratory case study approach to examine a Swedish‐based timber manufacturer that vertically integrated a distribution centre in the UK, which made it a direct supplier to DIY retailers and builders' merchants. Data were collected primarily through open‐ended, face‐to‐face interviews.
Findings
The study found that the most important factors driving the manufacturer's vertical integration of distribution were the demands of large retail chains and the manufacturer's decisions to focus on developing its positioning strategy in the supply chain. Vertical integration has transformed the manufacturer into a supplier to large timber products resellers, offering the firm a greater potential to provide integrated solutions and, therefore, become a strategic partner to its customers.
Originality/value
This empirical study examined a building material distribution channel, a subject that has rarely been studied. Study results add empirical evidence to explanations and impacts of vertical integration, especially the integration of customer interface.
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The purpose of this paper is to explain why some real estate companies choose to have a vertically integrated structure, instead of specializing in only stage of the production…
Abstract
Purpose
The purpose of this paper is to explain why some real estate companies choose to have a vertically integrated structure, instead of specializing in only stage of the production chain.
Design/methodology/approach
The first stage of the research was an extensive literature review to generate hypotheses. A case study method was then chosen, as more detailed knowledge about the companies were judged to be needed to evaluate the different hypothesis. Documents about the companies were studied and interviews carried out.
Findings
In the studies cases, there is no support for theories related to vertical integration as a way to monopolize a market and only marginal support for theories that focus on contracting problems related to the so called hold up problem. The most important factors for the companies were that vertical integration gives information and more options that are important in small number bargaining situations. The companies bargaining power increases when they are better informed about, e.g. costs and profits in nearby activities, and when they can use in-house units, if there are problems to find reasonable conditions on the outside market.
Research limitations/implications
The main limitation is that only three cases were studied.
Practical/implications
The study can be helpful both to companies that choose to integrate vertically and those that chose not to. There are similar problems related to information and bargaining power that needs to be handled.
Originality/value
This is the first study that test theories about vertical integration in the real estate sector.
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The aim of this paper is to develop a two‐stage decision model of vertical integration by breaking down integration decisions into two stages: extent of integration and direction…
Abstract
Purpose
The aim of this paper is to develop a two‐stage decision model of vertical integration by breaking down integration decisions into two stages: extent of integration and direction of integration.
Design/methodology/approach
The study uses price premium as a proxy for differentiation‐based competitive advantage. The relationship between the extent of vertical integration and price premium through a vehicle of consumers' brand perception is explored. A segmentation‐based analysis is performed to study whether different vertical integration configurations are related to price premiums at different levels.
Findings
Vertical integration relates positively to price premium set by apparel companies; consumers' perception of brand quality mediates the relationship. Findings also suggest that an organization should opt for integration if vertical integration generates greater effect on price premium as relative to the cost. Strength of internal and forward integration is related strongly to higher price premiums than integration balance.
Research limitations/implications
Further research is encouraged to test if the findings of this study can be generalized to other industries and/or other types of supplier relationship integration, e.g. partnership, strategic alliance and joint venture.
Originality/value
As a departure from extant literature, it is argued that vertical integration is a viable strategy that enables companies to gain differentiation‐based advantage. A conceptual model is developed and applied to the apparel industry, which explains critical issues involved in the design of supply chain structures.
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Sylvain Charlebois and Ronald D. Camp
The paper intends to identify and explain key managerial principles for vertical integration in the cattle industry during a key period of environment uncertainty.
Abstract
Purpose
The paper intends to identify and explain key managerial principles for vertical integration in the cattle industry during a key period of environment uncertainty.
Design/methodology/approach
Following Yin's advice on using case studies for exploratory theory development, this study builds on existing theories of vertical integration through a case study that explores potential prospects for cattle producers in a uniquely uncertain environment and the execution of a higher degree of vertical integration in a mature market.
Findings
The creation of NVF is a result of a well‐groomed uncertainty management scheme designed to attain a higher degree of vertical integration within an enterprising community. Some key managerial principles have been identified that can be applied to a thriving vertical integration endeavour in the cattle industry. History has proven that such an undertaking is taxing. Nevertheless, by looking at NVF's business model, it can be seen that environmental uncertainty can facilitate vertical integration projects in the cattle industry, given the right community‐oriented doctrine.
Research limitations/implications
This case study does not include cases where cattle producers were not so successful.
Practical implications
It provides advice for managing vertical integration by networks of small business owners in the cattle industry. The BSE crisis seems to have triggered efforts to decrease dependency, especially by outside stakeholders. NVF focused its members on building a business model and long‐term objectives beyond the specific uncertainties created by bovine spongiform encephalopathy (BSE), such as whether the border reopened or stayed permanently closed to foreign markets. Domestic consumers were their core marketing priority at the outset. In addition, future plans were set in motion to create a strategy to seek other foreign markets, including the EU.
Originality/value
The case study presented in this paper provides an example of vertical integration as a strategic response to market uncertainty enhanced by a political and economic crisis in a rural community. This paper also outlines key events of the Canadian BSE crisis, the Canadian beef industry and surrounding communities, and the relevance of past research on environmental uncertainty and vertical integration in explaining why vertical integration has been strategically unnatural to cattle producers but occurred in this situation.
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This paper shows that uncertainty is a multidimensional theoretical concept, which has empirical implications for the relationship with vertical integration. In a survey of…
Abstract
This paper shows that uncertainty is a multidimensional theoretical concept, which has empirical implications for the relationship with vertical integration. In a survey of empirical work that tests the relation between uncertainty and vertical integration, this paper demonstrates that performance ambiguity and general measures of uncertainty are positively related with vertical integration, technological uncertainty is negatively related, while market uncertainty and complexity are not systematically related to vertical integration.
Edward J. Nugent and David J. Hamblin
Vertical integration is a key strategic management decision which requires research support. Existing literature is extensive but is preoccupied with measures of the extent of…
Abstract
Vertical integration is a key strategic management decision which requires research support. Existing literature is extensive but is preoccupied with measures of the extent of vertical integration rather than the fundamental effectiveness of the strategy. The industrial community that the research seeks to benefit is left with an array of measures of integration and an array of widely differing conclusions regarding its potential benefit to a business. Research should be driven by customer need and the decision areas industrialists need to address should set the research agenda. Identifies the key issues relating to vertical integration and the extent to which these are addressed by existing methodologies. Develops a new methodology which avoids the intractable problem of measuring the extent of integration. Adoption of this methodology would enable more coherent and clear messages to be sent to management, thus enabling more informed decision making.
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Joseph Peyrefitte, Peggy A. Golden and Jeff Brice
Despite the indeterminate economic outcomes of vertical integration, several managers and researchers have questioned its viability. The article proposes that a better…
Abstract
Despite the indeterminate economic outcomes of vertical integration, several managers and researchers have questioned its viability. The article proposes that a better understanding of the relationship between vertical integration and economic performance may be made by considering the role of managerial capabilities in directing integration. It is argued that a lack of understanding of non‐core businesses and the managerial approach necessary for managing integrated activities contributes to poor integration outcomes. The magnitude of these knowledge deficiencies will be dependent on how far the company moves from its strategic core and on whether corporate managers can abate these deficiencies through knowledge acquisition. Through synthesis of the complex vertical integration literature, a managerial capability framework presents the issues and environmental contingencies involved in the success of the vertical integration effort.
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Xing Wan, Nianxin Wang and Ben Shaw-Ching Liu
This study takes the cinema industry as the research context and investigates the impact of online to offline (O2O) platforms on cinemas' performance. Specifically, the purposes…
Abstract
Purpose
This study takes the cinema industry as the research context and investigates the impact of online to offline (O2O) platforms on cinemas' performance. Specifically, the purposes of this paper are threefold: first, to study the influence of platform multihoming on cinemas' performance; second, to examine the interaction impact of platform multihoming and vertical integration; third, to investigate how the influence of platform multihoming varies with cinemas' performance.
Design/methodology/approach
This study collects data from 1918 cinemas in China, employs quantile regressions to estimate the model and test the proposed hypotheses and adopts an instrumental variable method to examine the robustness of our results.
Findings
The findings confirm the positive role of platform multihoming for cinemas' performance. However, when a cinema has low-degree platform multihoming, the cinema's vertical integration is positively associated with its performance; when a cinema has high-degree platform multihoming, the cinema's vertical integration is negatively associated with its performance. Furthermore, results from quantile regressions indicate that low-performance cinemas benefit more than high-performance cinemas from employing platform multihoming strategy.
Research limitations/implications
This paper extends previous research by investigating the impact of platform multihoming on heterogeneous firms and the impact of interaction between platform multihoming and vertical integration. The findings imply that the impact of platform multihoming on firms' performance depends on firms' performance attributes and their vertical relationships.
Practical implications
Platform multihoming can be a double-edged sword for local service firms. When multihoming platforms, a local service firm should think about the fit between platforms and its own attributes, and identify the potential conflict between platform relationships and traditional relationships of industrial organization.
Originality/value
There is a growing interest in understanding platforms' role in the digital economy. The impact of platform participation on local service firms' performance is not sufficiently investigated. Previous research rarely addressed the impact by incorporating local service firms' performance attributes and the existing relationships of industrial organization.
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