A Case Study on the Impacts of Vertical Integration on Competitive Advantage

• Main Authors: Yu, Shun Po, 游絢博
• Other Authors: Chiu, Yi Chia
• Format: Others
• Language: zh-TW
• Online Access: http://ndltd.ncl.edu.tw/handle/00509797392842899398

碩士 === 國立政治大學 === 經營管理碩士學程(EMBA) === 102 === Profile rail guide industry progressively adopts mass production to reach economies of scale in order to increase its price competition. In addition to the feature of its rapid business cycle, long supplying chain and intensive capital, profile rail guide manufacturers actively work on strategic and vertical integration to enhance their price competitiveness as the best way to increase company competitiveness. On the other hand, business plan focuses on building relationship with downstream distributors and end users. This kind of vertical business expansion has become a new famous doctrine for profile rail guide manufacturers. However after passing through global financial and European debt crises, the integration management cost has been higher than the actual benefits it brings. For example, the management costs will increase after integration and operational leverage, which brings non-efficient internal supplying cost and loss. Therefore, many manufacturers started to review vertical integration strategies, including the benefits and costs it could cause in order to increase their competitiveness in the industry. After considering current macro economy and industrial structure of profile rail guide industry according to the statements above, here are three key points concluded in the study to find out the problems: 1. What is cost-benefit of vertical integration strategies? 2. What are the concerns of adopting vertical integration? 3. What are impacts of vertical integration to competitive advantages? By thinking over business strategy of integration cost-benefit through two theories of “boundary” and “vertical integration”, the conclusions are summarized as below: Vertical integration strategies should focus on maintaining maximum benefits and avoid unnecessary costs. Enterprises need to further evaluate if potential costs will be higher than benefits it will create and select the best fit integration level and scale to ensure the advantage positions of bringing positive benefits. Beside of thinking about “cost and autonomy optimization”, enterprises should also evaluate how to maximize suppliers’ “competence” of allocating their internal resources in dynamic environment and how to develop new products or to enter new market in order to obtain brand-new competitive strengths. In addition, to decrease non-efficient cost with “identity” that developed and recognized by members inside the organization and to gradually form organization category that an enterprise should have through the interaction between internal and external environment. Among industries with high similarity and standardization, enterprises adopt vertical integration strategy to control key process, stable material supply, set up barriers to entry and to control each value stream on the vertical supply chain through beneficial management structure. The target is to obtain higher market share percentage and reach economies of scale and scope by offering the cheapest prices or creating differences. If we analyze it base on the points of “boundary”, it is the extension of “autonomy” concept. Key words: boundary, vertical integration, profile rail guide industry