Authoritative Russian and foreign scientists identify the following main motives for the formation of integration struct
Posted: Sun Dec 22, 2024 7:25 am
increasing economic and social advantages as a result of concentration of production and generalization of acquired experience;
increasing the efficiency of production activities (increase in production volumes, stabilization of the market position, transition to export, use of borrowed funds, reduction of costs for analytics, promotion, information support);
increasing the efficiency of financial activities (pooling financial resources, increasing the return on investment, increasing the value of shares, etc.);
increasing the efficiency of trade and intermediary activities (establishing relationships with suppliers, increasing the volume of transactions, implementing high-quality and timely deliveries);
positive consequences of monopolization;
reduction of actual business development canada mobile number costs due to the effect of scale;
obtaining a positive effect through the gratuitous transfer of technologies and patents into common ownership;
the positive impact of coordination of companies' activities on business results.
Increase Your Profits by 10X: 5 Key Metrics You Must Track
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
After working with over 300 online projects , I can guarantee: monitor these metrics weekly and your company will not only survive, but also increase its profits by 10 times!
In the context of sanctions and crisis, knowing the ROI of your advertising decides whether your business will be successful. Tracking these 5 critical indicators is the key to your prosperity.
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5 Key Metrics to Increase Profits by 220%
Advertising Channels Efficiency Calculator: Optimize Your Budget and Increase ROI by 70%
A Killer Commercial Proposal Template That Increases Conversion to Deals by 60%
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Types of company integration
In order to increase potential, large enterprises can resort to one of five types of economic integration:
Vertical integration
With this method, the holding is united with enterprises whose activities generally correspond to the production chain carried out within the holding, which ensures the creation of a closed production cycle.
The positive effect of vertical integration is manifested in a noticeable reduction in costs, mainly due to profits included in the cost of supplies of raw materials, materials and components from which the holding's main products are manufactured.
If a company takes over existing suppliers or organizations that will replace them, it retains the profit and overheads that were previously included in the cost of purchases. In addition, savings are achieved through effective management, optimization, standardization and strict control over the use of resources in the process of functioning of companies that are part of the holding.
Horizontal integration
Horizontal integration of companies is observed when, during the creation of a holding or during its operation, enterprises engaged in the production of similar products are included in its composition.
Horizontal integration
Source: shutterstock.com
The positive effect of horizontal integration is manifested in the increase of the holding's share of the market segment. In other words, a holding with horizontal integration is created, first of all, with the purpose of counteracting competition. In such conditions, it becomes easier to set market prices, and therefore, to receive higher profits.
At the same time, it is necessary to take into account the requirements of the Federal Law of 26.07.2006 No. 135-FZ "On the Protection of Competition". Also, in the case of horizontal integration, the holding has access to purchases of raw materials and materials at reduced prices due to the increase in the scale of transactions.
Independent integration
With independent integration, the holding expands by including enterprises whose goods or services are presented in different markets. The companies that form such a holding operate independently and produce completely unrelated products. A holding with independent integration may include metallurgical enterprises, construction companies, service organizations, etc.
As a result of independent integration, it is possible to reduce the risk of a critical drop in sales and demand in one of the consumer markets occupied by the holding. Risk factors include seasonality of production or demand, economic instability and increased competition.
Independent integration
Source: shutterstock.com
The areas of activity of the enterprises being merged with the holding company must be determined based on the fact that when a particular type of product begins to be in less demand, the sales volumes of the holding company’s other products must remain at the same level or grow at that time.
Therefore, if a holding includes a company offering expensive and prestigious goods, then along with this it should also include manufacturers of cheap mass-market products that are quickly sold in any economic situation. In the same way, the holding integrates with companies producing seasonal products.
In addition, risks arise when a serious competitor or group of competitors appears in one of the markets. Forming a holding company through independent integration helps reduce the impact of these risks and, in a sense, ensures mutual support for the enterprises related to it.
increasing the efficiency of production activities (increase in production volumes, stabilization of the market position, transition to export, use of borrowed funds, reduction of costs for analytics, promotion, information support);
increasing the efficiency of financial activities (pooling financial resources, increasing the return on investment, increasing the value of shares, etc.);
increasing the efficiency of trade and intermediary activities (establishing relationships with suppliers, increasing the volume of transactions, implementing high-quality and timely deliveries);
positive consequences of monopolization;
reduction of actual business development canada mobile number costs due to the effect of scale;
obtaining a positive effect through the gratuitous transfer of technologies and patents into common ownership;
the positive impact of coordination of companies' activities on business results.
Increase Your Profits by 10X: 5 Key Metrics You Must Track
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
After working with over 300 online projects , I can guarantee: monitor these metrics weekly and your company will not only survive, but also increase its profits by 10 times!
In the context of sanctions and crisis, knowing the ROI of your advertising decides whether your business will be successful. Tracking these 5 critical indicators is the key to your prosperity.
What you get for free:
5 Key Metrics to Increase Profits by 220%
Advertising Channels Efficiency Calculator: Optimize Your Budget and Increase ROI by 70%
A Killer Commercial Proposal Template That Increases Conversion to Deals by 60%
We have prepared all the documents and templates with formulas for you. And yes, it is FREE:
Download documents for free
Already downloaded
153114
Types of company integration
In order to increase potential, large enterprises can resort to one of five types of economic integration:
Vertical integration
With this method, the holding is united with enterprises whose activities generally correspond to the production chain carried out within the holding, which ensures the creation of a closed production cycle.
The positive effect of vertical integration is manifested in a noticeable reduction in costs, mainly due to profits included in the cost of supplies of raw materials, materials and components from which the holding's main products are manufactured.
If a company takes over existing suppliers or organizations that will replace them, it retains the profit and overheads that were previously included in the cost of purchases. In addition, savings are achieved through effective management, optimization, standardization and strict control over the use of resources in the process of functioning of companies that are part of the holding.
Horizontal integration
Horizontal integration of companies is observed when, during the creation of a holding or during its operation, enterprises engaged in the production of similar products are included in its composition.
Horizontal integration
Source: shutterstock.com
The positive effect of horizontal integration is manifested in the increase of the holding's share of the market segment. In other words, a holding with horizontal integration is created, first of all, with the purpose of counteracting competition. In such conditions, it becomes easier to set market prices, and therefore, to receive higher profits.
At the same time, it is necessary to take into account the requirements of the Federal Law of 26.07.2006 No. 135-FZ "On the Protection of Competition". Also, in the case of horizontal integration, the holding has access to purchases of raw materials and materials at reduced prices due to the increase in the scale of transactions.
Independent integration
With independent integration, the holding expands by including enterprises whose goods or services are presented in different markets. The companies that form such a holding operate independently and produce completely unrelated products. A holding with independent integration may include metallurgical enterprises, construction companies, service organizations, etc.
As a result of independent integration, it is possible to reduce the risk of a critical drop in sales and demand in one of the consumer markets occupied by the holding. Risk factors include seasonality of production or demand, economic instability and increased competition.
Independent integration
Source: shutterstock.com
The areas of activity of the enterprises being merged with the holding company must be determined based on the fact that when a particular type of product begins to be in less demand, the sales volumes of the holding company’s other products must remain at the same level or grow at that time.
Therefore, if a holding includes a company offering expensive and prestigious goods, then along with this it should also include manufacturers of cheap mass-market products that are quickly sold in any economic situation. In the same way, the holding integrates with companies producing seasonal products.
In addition, risks arise when a serious competitor or group of competitors appears in one of the markets. Forming a holding company through independent integration helps reduce the impact of these risks and, in a sense, ensures mutual support for the enterprises related to it.