Munich Personal RePEc Archive

Impact of Vertical Integration

H. Luke, Erin (2021): Impact of Vertical Integration.

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Abstract

Vertical integration is a powerful, and complex business strategy that when used under the right conditions can positively impact an organization. A company’s strategists need to understand what dimensions of integration to use, and the best time to use it. De Beers is a company with a controversial history of being an anti-competitive monopoly. By strategizing into a vertical integrated company De beers has added value to its company by not only targeting the retail, and industrial market, but also the I.T. industry. Forward and backward integration has helped organizations like De Beers maintain control over its inputs and outputs. Rather than just buying all diamond mines, and stock piling the material in order to control the prices, De Beers has embraced change by focusing on new emerging industries. Through vertical strategy and new ownership De Beers is turning its company around in a very competitive luxury industry. Organizations should be aware of the costs of vertical integration when exploring its potential. Bureaucratic costs, and companies becoming too large and inflexible under certain environments can become a problem. Vertical integration is a powerful strategy, but it must always be under scrutiny, and redesigned when the external and internal environment deems change necessary.

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