Forward and Backward Integrations...

Forward and Backward Integrations Forward and backward integrations are two integration strategies which are adopted by organizations to gain competitive advantages in the market and to gain control over the value chain of the industry under which they are operating. These strategies are one of the major considerations when developing future plans for an organization. Together these two strategies are known as vertical integration.  The process of backward and forward integrations is shown in Fig 1 Fig 1 Process of backward and forward integration Vertical integration is the degree to which the organization owns its upstream suppliers and its downstream buyers for further product processing. Contrary to the horizontal integration, which is a consolidation of many organizations that handle the same part of the production process, vertical integration is typified by one organization engaged in different parts of production (e.g. production of raw materials, manufacturing, transporting, marketing, and/or downstream processing of end products. Vertical integration describes when an organization purchases or starts a company that it either buys from or sells to and integrates this new business into its own. In case of forward integration the organization integrates its businesses toward the end customer while in case of backward integration the organization integrates its activities in the direction away from the customer. Backward integration can be a part of the organizational strategy due to the competitive benefits it provides. Organizations which governs the entire value chain are, however, very rare. Some organizations choose to adopt for forward integration while other organizations opt for backward integration. Also some other organizations continue to operate disintegrated depending on the environment under which these organizations are operating and also depending upon the future strategic planning which these organizations have done for their future operations. Forward integration extends organizational...

Core Competencies

Core Competencies  Core competencies’ is deep proficiency in the organization that enables it to deliver unique values to the customers. It embodies organization’s collective learning especially coordination of the diverse production skills and the integration of the multiple technologies. ‘Core competencies’ is hard for competitors to copy or to procure. Core competencies’ creates sustainable competitive advantage for the organization and helps it to branch into a wide variety of related markets. It contributes substantially to the benefits of the organization’s products offer to the customers and hence effectively helps in the businesses of the organization. Understanding of core competencies allows the organization to invest in the strengths that differentiate it from others and set strategies that unify the entire organization. Core competencies’ is a concept in the management theory which was introduced by CK Prahalad and Gary Hamel in 1990 through their article ‘The Core Competence of the Corporation’.  Success of an organization depends on acquisition of core competencies and development of core products. The concept as explained in the article is summarized here. This concept of core competencies provides advantage to the organization. It is found in the ability of the management   to consolidate organization wide technologies and production skills into competencies that empower the individual businesses of the organization to adapt quickly to the changing opportunities. The ability of the management to identify, cultivate, and exploit the core competencies makes the growth of the organization possible. Decentralization in the organization makes it difficult to focus on core competencies and in such case there is increasing dependence on outsiders for critical skills. Core competencies’ is not necessarily about outspending rivals on research and development, sharing costs among business units and integrating vertically. These actions themselves are not sufficient in building of core competencies...