vertical and horizontal integration

PRESENTED BY ABHIJIT PRUSTY GOVERDHAN KIRAN

Presented By :Goverdhan.R Abhijit prusty

What is horizontal integration?

The acquisition of additional business activities at the same level of the

value chain is referred to as horizontal integration. This form of expansion contrasts with vertical integration by which the firm expands into upstream or downstream activities. Horizontal growth can be achieved by internal expansion or by external expansion through mergers and acquisitions of firms offering similar products and services. A firm may diversify by growing horizontally into unrelated businesses.

Example of horizontal integration

Viacom 18 Media Pvt. Ltd. is a 50/50 joint venture operation in

India between Viacom Inc and the Network18 Group, (with interests in television, internet, filmed entertainment, mobile content & allied businesses, comprising brands like CNBC TV18, CNBC Awaaz, Newswire18, moneycontrol.com, CNN-IBN, IBN 7, Homeshop18 and E18 amongst others). channels - MTV, Nickelodeon, Vh1, COLORS, SONIC, Comedy Central and film business through Viacom18 Motion Pictures, that produces, acquires and distributes Hindi films, This apart, Viacom18 also runs Viacom's consumer products division in India.

Viacom 18 Media Pvt. Ltd. operates six general entertainment

Cont..

Cont
The Body Shop agreed to a 652.3 million takeover by L'Oreal

Cosmetics The Body Shop, has 2,400 stores in 61 countries. was founded in 1976 by Anita Roddick and is now part of the L'Oreal corporate group.

Cont
Adidas-Salomon agreed to acquire Reebok International Ltd. in a

deal valued at $3.8 billion. The transaction is likely to reshape the sports footwear and apparel industry.

Vertical integration
Vertical integration is the process in which

several steps in the production and/or distribution of a product or service are controlled by a single company or entity, in order to increase that companys or entitys power in the marketplace.

Types of Vertical Integrations

There are basically 3 classifications of Vertical Integration namely: Backward integration where the company tries to own an input product company. Like a car company owning a company which makes tires. Forward integration Where the business tries to control the post production areas, namely the distribution network. Like a mobile company opening its own Mobile retail chain. Balanced integration A balanced strategy to take advantages of both the worlds.

Tata Steel achieves vertical integration in electrical steels with cogent tech.

 Tata Steel has completed an important strategic project that

makes it only the second vertically integrated producer of grain oriented electrical steels in the European Union.
As a result of collaboration between colleagues in the

Netherlands and south Wales, grain oriented (GO) electrical sheet produced by Tata Steel subsidiary Cogent Power is now being manufactured using feedstock sourced from the companys IJmuiden works.

By fully integrating its GO production route, Tata Steel has removed constraints on quality development and output that had existed because of previous dependence on third-party sources. Among the benefits of this will be greater ability to expand in fastgrowing developing markets. The development will also enable all the value from the manufacture of this premium product range to be retained within the company.

VERTICAL INTEGRATION OF PEPSI AND COCA-COLA

On August 4, 2009, Indra Nooyi (CEO of PepsiCo) invited Ira Hall, director of Pepsi Bottling Group (PBG), to her home. Nearly four months had passed since PepsiCo began its campaign to acquire its two largest independent bottlers, PBG and PepsiAmericas.
It seemed that the negotiations had collapsed when the two parties met in Pepsis Westchester, New York, airplane hangar in July. But this time Hall, negotiating on behalf of both PBG and PepsiAmericas, and Nooyi struck a deal. At $36.50 a share, half in cash and half in stock, Pepsi brought its two largest bottlers in-house.

 Immediately after the acquisition, Coca-Cola Company

rejected Pepsis strategy. CEO Muhtar Kent asserted that he fundamentally believe[s] that the franchise model in its broadest sense is the best way to win in the marketplace.

2 BOTTLING PARTNER COMPANIES OF PEPSI CO.

Yet six months later, Coke purchased the North American operations of its largest bottler, and Kent confidently declared, Our new North American structure will create an unparalleled combination of businesses, which will serve as our passport to winning in the worlds largest nonalcoholic ready-to-drink profit pool.

With these acquisitions, the two industry leaders changed the structure of the carbonated soft drink (CSD) industry in North America. The former CEO of Pepsi Bottling Group, who became the CEO of Pepsis new in-house bottling operation (Pepsi Beverages Company), declared that Cokes decision confirms that this is the right move, the right strategy, the right model for North America.