To What Extent Is Growing Through Integration with Other Businesses a Good Way for a Firm to Increase Its Competitiveness?
To what extent is growing through integration with other businesses a good way for a firm to increase its competitiveness?
Growing through integration is concerned with mergers and takeovers of businesses. There are a number of different ways of integrating: Horizontal (same industry, same stage of production), backward vertical (same industry towards a supplier), forward vertical (same industry towards the customer) and Conglomerate (different industries).
Growing through integration can have a positive effect on the competitiveness of a business in that firms are able to buy out or merge with other large powers in the market to make a ‘super power’ in the market. This ‘super power’ gains a larger % of the market as the two original
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Integration of two businesses may result in staffing problems as there will be a bring together of two workforces. For example in the case of Indian firm Tata taking over Jaguar Land Rover in 2008 there was a cost cutting plan put into place in which 2000 employees of the company lost their job. Later as the recession hit the Indian firm closed the west midland factory and outsourced the production overseas. Such a reckless takeover and huge redundancy plan may have a negative effect on the rest of the workforce. Other employees may be in fear of losing their job which could have a direct link on the level of motivation in the staff that continue to work for the firm. This in turn could then result in the quality of the final product that is being produced not being up to standard and therefore the customer may not be satisfied with the cars that are being produced. Customers may then decide to brand switch and buy the products of other rival companies and therefore Jaguar Land Rover will not be as competitive as a result of the takeover.
Also the integration of businesses may result in the loss of USP which again could put them at a disadvantage to the competitors in the industry. The USP of a company is the feature that distinguishes them from their rival firms; it is usually the thing that attracts customers to buy from them rather than competitors. In the case of the takeover of