Business

Vertical vs Horizontal Integration: What Are The Key Differences?

Arnab

Business Oct 06, 2023

Growth and expansion are the fundamental aspects of any business. It is a universal truth, and you cannot negate it from your standpoint. You cannot sway away the reality from your endpoints. Vertical vs Horizontal integration is a business model that most businesses adopt.

Horizontal integration is when a business acquires the same line of business at the same level of the value chain. It eliminates the competition to a greater extent. On the other hand, vertical integration includes ruling over the entire industry by covering the supply chain.

It all depends on the organization and which form of integration they would like to adopt. You need to identify the key factors of each process that can help you to make your decision wisely.

Key Differences Between Vertical Vs Horizontal Integration

There are several points of difference between vertical vs horizontal integration you cannot negate these points from your end.

Basis Of Comparision	Horizontal Integration	Vertical Integration
Concept	When two firms mix with each other due to their same product lines and products, it is horizontal integration.	Vertical integration is that stage of an organization when one company acquires another company staying at the same stage or path.
Objective	Enhancing and increasing the size of the business.	Developing the supply chain of the company.
Consequence	Your company gains maximum market share by eliminating the competition.	Reduction of the wastage and cost.
Capital Requirement	The requirement of capital here is higher.	The requirement of capital here is lower.
Self Sufficiency	No, it is not a self-sufficient approach.	Yes!! It is a self-sufficient approach.
Strategy Used To Control	Market analysis	Industry requirements

After getting the tabular format of differences between the two concepts, let’s get the core insights of it as well.

1. Meaning

Horizontal integration takes place when two firms combine with each other when their products and production levels are the same. In the case of vertical integration, the objective is to acquire the shares of the other company.

You need to go through the meaning of the two integration processes to make the application in your organization. Once you follow the process, things will become easier for you.

2. Objective

Horizontal integration aims to increase the size of your business. On the other hand, vertical integration aims at smoothening and strengthening the production process.

You need to be well aware of the objectives of vertical vs horizontal integration. You cannot make your choices all of a sudden. Read the objectives behind it for your organizational development.

3. Consequences

Horizontal communication eliminates the chances of competition. In other words, it wipes out the competition from the market. On the other hand, Vertical integration lowers the wastage and cost of production.

You can use horizontal integration to improve your brand presence in the market. Again in the case of vertical integration, you can use it to reduce the wastage in your production and distribution process.

4. Capital Requirement

The capital requirement in the case of horizontal integration is high compared to vertical integration. You cannot negate the investment part in the process of your brand development. The marginal cost will be less.

You need to have enough capital with you to initiate the process of horizontal integration. On the other hand, in the case of vertical integration, minimum capital is enough to initiate the process with ease.

5. Self Sufficiency

The chances of self-sufficiency in the case of horizontal integration are not there, whereas in the case of vertical integration, the chances of self-sufficiency are present. You need to get through the two integration processes to make your final business decisions.

If you want to do business independently, then horizontal integration can be a loss for you. On the other hand, Vertical integration can be a great option for you if you like to do independent business. As per the experts, self sufficiency is important.

6. Controlling Factor

Vertical integration can assist you in gaining control over the whole industry. You can gain control over the entire market with the help of horizontal integration. The chances of growth in the case of vertical integration are higher compared to horizontal integration.

Vertical vs horizontal integration can make your journey easier in the process of controlling the business. You cannot make things happen all of a sudden.

What Is Vertical Integration?

Vertical integration is that stage of an organization when one company acquires another company staying at the same stage or path. Vertical integration occurs when a company expands its operations by acquiring or merging with businesses along its supply chain or distribution channels. You need to consider the inventory turnover ratio.

Advantages Of Vertical Integration

There are several advantages of vertical integration that you must know at your end. Some of the key core benefits of it are as follows:-

Vertical integration can help you to achieve cost efficiency. It can help in bulk purchases and reduce the cost of transactions.
Distribution cost is reduced as it cuts off the requirements of the middleman in the process of integration.
Your organization’s products can meet the desired quality level if you make the application of vertical integration.
Price fluctuations of the suppliers can be reduced greatly due to the presence of vertical integration.
Synergies between different stages of production and distribution can lead to increased overall efficiency. Your network marketing can grow due to this integration.

Backward Vertical Integration

In backward integration, a company acquires businesses that supply it with essential raw materials, components, or services. This allows the company to have more control over its supply chain, reduce costs, and ensure a stable supply of inputs. For example, an automobile manufacturer acquires a steel company to secure its source of steel.

End Of The Integration Process

Hence, from the mentioned discussion, I think the differences between vertical vs horizontal integration are clear to you. You need to understand the process that can make things easier and more effective for you in the long run.

You can share your views and opinions with us in this regard. It will help us to know your take in this regard. Try to convey your feedback to us from time to time.

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Arnab

Arnab Das is a passionate blogger who loves to write on different niches like technologies, dating, finance, fashion, travel, and much more.

Periodic Inventory System: What Is It, How It Works, Applications, And More

The periodic inventory system is the method through which a business does a valuation of its inventory. Here, the business updates its inventory account at the end of each accounting period and not after each sale, wholesale, or purchase. The main advantage of this system is that it helps the business track its beginning and ending inventory within an accounting period. In this article, you will learn about what a periodic inventory system is in general. Apart from that, you will also learn how a period inventory system works. In addition to that, you will also learn the difference between a periodic inventory system and a perpetual inventory system. Finally, you will learn how to use such a system in your business model. Hence, to learn more about this system, read on through to the end of the article. What Is A Periodic Inventory System? Investopedia defines – “The term periodic inventory system refers to a method of inventory valuation for financial reporting purposes in which a physical count of the inventory is performed at specific intervals. As an accounting method, periodic inventory takes inventory at the beginning of a period, adds new inventory purchases during the period, and deducts ending inventory to derive the cost of goods sold (COGS).” The best thing about a periodic inventory system is that it is easier to implement. Apart from that, it is also a cost-effective option for companies that are usually small in size. Another major advantage of a period inventory system is that it helps the business manage risks in the supply chain better. It is an accounting technique where the accountant updates the count of the physical inventory at specific intervals. One can execute a period inventory count monthly, quarterly, and annually. Here, the accountant does not update the account regularly or after each sale of products and services. However, this system of accounting is a great option for small businesses only. When it comes to larger companies, they use the perpetual inventory system. Here, the companies update their inventory lists regularly (or after each sale). How Does A Periodic Inventory System Work? The inventory of a business is nothing but the goods that the company has in its hand, and it can make them available for sale. In general cases, a business holds inventory in the normal course of business. Furthermore, the inventory is also one of the most valuable assets of the business. This is because those inventories create the primary source of revenue for the business. According to FreshBooks.com, “In a periodic inventory system, no continuous record of changes is kept. The yearly inventory purchases are recorded in the purchases account, which is a ledger listing all inventory purchases and their costs. At the end of the year, a physical inventory count is done to determine the ending inventory balance and the cost of goods sold.” In this accounting system, the business keeps a physical count of inventory at certain periods of time. With the periodic inventory system, the time is mostly monthly, quarterly, or annually. This means that the company that uses this system tracks its inventory at hand both at the beginning and the end of a specific accounting period. Here, the company does not track its inventory on a regular basis or during sales. With this inventory system, the company also finds it easier to track the costs of all the goods sold. This inventory updating system is popular among smaller companies that do not have the necessary tools and manpower to conduct regular updates of inventory. Also, these companies have smaller quantities of inventory. Periodic Inventory System Vs. Perpetual Inventory System In the periodic inventory system, the company does not have full information regarding its levels of inventory. Apart from that, it also does not know all the costs of goods sold until the completion of the physical count process. Hence, this system is the best option for businesses that have a smaller number of stock-keeping units (SKUs). Furthermore, the company also needs to operate in a market that plods. In other cases, the perpetual inventory system is a better option for all. The following are the major differences between a periodic inventory system and a perpetual inventory system: The perpetual inventory system updates the inventory asset ledger on a regular basis or after each sale. As a result, the management gets an instant view of the inventory. On the other hand, the periodic inventory system is more time-consuming and does not get updated information. With the help of the perpetual system, the company can always keep its COGS updated. On the other hand, the periodicity of the periodic system makes it less useful when it comes to staying updated. The perpetual system tracks individual items in the inventory. Hence, it is easier to locate defective items quickly. However, the periodic system does not help in this regard. When To Use A Periodic Inventory System? According to Netsuite.com, “Any business can use a periodic system since there's no need for additional equipment or coding to operate it, and therefore it costs less to implement and maintain. Further, you can train staff to provide simple inventory counts when time is limited, or you have high staff turnover.” However, the periodic system is most suitable for small companies with a low number of SKUs. This is because such a business is not concerned fully about scaling its business at the given moment. Apart from that, based on your needs and the types of products you deal with, you can use a periodic system along with a perpetual inventory system. Furthermore, if you have good control of your supply chain system and you sell only a few products, then the periodic system is the better option for you. Wrapping Up The periodic inventory system is the best option for only those companies that deal with only small quantities of goods. Apart from that, companies that are not looking for scale at the moment and have only a limited number of employees must use this inventory accounting system. Do you have more suggestions on how to use the best inventory accounting system? Consider sharing your ideas and opinions with us in the comments section below. Read More By Clicking Below!! What Is Bottleneck In Business? Everything You Should Know About It What Is Free Alongside Ship? Essential Things To Know About It Cost Insurance Freight? Everything You Should Know About It

Top 7 Best Business To Start In Less Budget In 2021

Are you planning to start your own business within a limited budget? If yes, then you must consider certain essential things in the light of this matter. You must decide in advance which is the best business to start for the first time. Proper development of the business model is the most useful thing you must focus on from your end to developing your business within a limited budget. You must understand that you must start with less budget to maximize profitability if you want to be successful in your business or your entrepreneurship model. Best Business Ideas In 2021 There are several business ideas that you must consider from your end. Therefore, less explore some of the essential facts in the light of this matter. Therefore, let’s get into the details to get a better insight into it. The best business to start in 2021 is illustrated below. 1. DropShipping Dropshipping is the most influential business model that most of the new-age entrepreneurs are now opting for. It does not require any heavy investments from your end. You may want to buy, or you may want to sell the products online, but it may happen that you may not have the money to sell the products online. All you have to do is set up an online store with your partners and suppliers. You do not have to do the product research from your end; you just need to sell the existing high-value products, and you can earn a lump sum amount of commission from it. It is one of the best business to start in 2021. 2. Translation The translation is the most influential business model that you start doing from your end. It is one of the best business to start in 2021. You must understand that if you are developing your business model, you must start a business within a limited budget. Proper translation can help your business to grow in the right direction. It can help you to improve your revenue earning capacity in the right manner. Ensure that your business model must be lightweight, and it can help your business grow in the right direction. You need to monetize your skills to earn more because multilingual people are in high demand right now. 3. Virtual Assistant One of the most successful business ideas is the virtual assistant services that can help the solopreneurs develop their brand image. Managing the day-to-day management of your business’s solopreneurs may require help. They do not have enough time left to manage every affair of the business in a better manner. You must develop the business models that can help you grow in the right way. The solo-prenuers use virtual assistants for attending the meeting, answering emails, and performing other administrative duties. You must not compromise on the quality of choosing virtual assistants. Your business model must support the people who are looking for virtual assistants. You need to develop your brand image in the right direction. 4. Website Flipping Website flipping is one of the best business to start in 2021. The best thing about website flipping is that it can help your business grow in the right direction. It is the most lucrative option to earn money. You can purchase one website that you are already running, and you need to improve the design and features of your website. After that, you can sell the website at a higher price. You need to develop your website flipping business by seeking the best clients who can pay you well. Shopify is an excellent marketplace for exchange as it allows you to buy e-commerce websites. 5. Online Tutoring Online Tutoring is another best business to start in 2021. You need to develop your business in such a way that it can help your organization to grow in the right direction. You may be an expert in the Arts, Mathematics, and in another subject, but you need to develop that skill to help your business grow in the right direction. Online Tutoring is the new age business domain that can provide you more revenue at a minimum expense. You must have the constructive knowledge and the skills to develop your brand image in the best possible manner. 6. Content Writing Content writing is the best business to start in 2021. The reason is we live in the digital world. Within every second, a new website is launched in the market, and it requires articles and blogs every time. You need to understand these facts while you develop your business. You need to understand that you must write quality content that can help your website rank well in the SERP for improving your business ranking in search engines. Copywriting or content writing is the most influential business model that can help you to earn more revenue at a lesser cost of investments. 7. Career Coaching Career coaching is the most influential business model that can help you to earn more revenue in a short time frame. The best thing about this business model is you just need to guide the students about their aspiring career path to achieve their career goals in the best possible manner. For developing your business, you must explore the options that suit you the best. It will help you to achieve your goals in a better manner. You must not make a filthy choice from your end. Your approach must be in a positive direction. Conclusion Hence, if you want to select the best business to start your career, then you must select from the above option. You must develop your business understanding so that it can help you achieve your business goals in the best possible manner. The most important fact here is whatever business model you choose must meet your requirements. Ensure that your business model must meet your requirements in the best ways to reach your goals. The only thing that you must consider from your end is that the business model you have selected must quickly reach the break-even point quickly. Read Also: Top 7 Best Types Of Marketing On Which You Should Focus In 2021 Top 5 Types Of Business That Are Giving More Profits To The Sellers How To Get Sponsored For Your Brand? The Best Guide For Beginners In 2021

The Benefits Of Migrating From Monolithic To Composable Ecommerce

The world of eCommerce is constantly changing, and businesses everywhere are looking for ways to stay ahead of the curve. One of the newest trends in the industry is migrating from monolithic to composable eCommerce. This move is beneficial to businesses of all sizes, as it allows them to optimize their current structure and create a more efficient process for their customers. The composable approach allows for the construction of smaller, more focused eCommerce solutions that are tailored to each business’s specific needs. Additionally, businesses can use composable eCommerce to create a unified customer experience across all of their channels. With a composable approach, businesses can reduce costs, increase agility, and streamline their processes, all while delivering a better customer experience. All of these benefits make migrating from monolithic to composable eCommerce an attractive option for businesses looking to stay ahead of the competition. What is monolithic eCommerce? According to the dictionary, the term "monolith" describes a large mass of stone. Similarly, a monolithic application is constructed from one piece or block, functioning as an integrated and undivided unit. This form of an app is characterized by a single, tightly-knit codebase and a single database. This is a widely-used traditional method for developing applications, but it has the potential to create major issues over time, potentially leading to unmanageability. The illustration below shows the components of this architecture: a user interface on the client side, an application on the server side, and a database. All of these components work together as a single unit, so any changes to the codebase necessitate an update of the entire application. So, monolithic eCommerce refers to an eCommerce solution that’s built on a single platform. Such platforms include Shopify, Amazon, or other known shopping cart systems. In some cases, an eCommerce solution is built on a single platform — without the help of a third-party vendor. The drawbacks of monolithic programs include a lack of scalability, resulting from the fact that the entirety of the application needs to be scaled instead of individual components. Furthermore, this type of software has reliability issues, since any minor problem could cause the whole system to crash. Additionally, the components of the application are closely intertwined, making it difficult to introduce modifications. This lack of flexibility restricts users to a single technology and makes it expensive and time-consuming to rewrite the application. As the program becomes more extensive, the structure becomes increasingly complex and hard to comprehend. What is composable eCommerce? Instead of having a single, rigid structure, microservices architecture splits applications into multiple, independent components and decomposes the program into its essential parts - each part is known as a service. Each job is handled by these components as a standalone service and each is self-contained; this implies that if one service fails, it won't affect the other services. In simpler terms, the application is created as a collection of services, where each service has its own logic, database, and capacity to perform specialized tasks. Composable eCommerce is the transition from a monolithic system to a composable one. It’s a gradual move from a single system to a composite one. In this way, the organization reduces costs and increases agility by using a headless front end (FEaaS) to support all of the best-of-breed integrations such as the commerce platform (backend), payment channels, content management, and any other 3rd party tools it needs. Benefits of migrating from monolithic to composable eCommerce Monolithic eCommerce, on the other hand, can offer all of these benefits, but can also come with limitations. For example, monolithic eCommerce allows for scalability, but these benefits must be carefully managed. Likewise, a single platform can increase agility and reduce costs, but these benefits must be managed as well. Composable eCommerce, on the other hand, offers all of these benefits, but can also come with fewer limitations. 1. Cost savings As monolithic eCommerce systems become more complex, they tend to become more expensive. However, when transitioning to composable eCommerce, businesses can use a variety of applications. This allows them to reduce costs by using an inexpensive platform. Plus, composable eCommerce platforms tend to be much less expensive than monolithic eCommerce platforms. Another way for businesses to save money with composable eCommerce is to use a lower-cost alternative to the underlying technology. For example, using an open-source shopping cart or an inexpensive cloud computing service can help businesses save money. 2. Improved customer experience Monolithic eCommerce systems can often feel outdated, and they can also feel slow. This can lead to a poor customer experience as customers might be forced to wait longer than they’d like. The combination of a complex system and a slow customer experience can lead to unhappy customers. As businesses migrate to composable eCommerce, they begin using various best-in-its-class applications. This allows them to improve their customer experience by providing a clear path for customers. Moreover, businesses can also optimize their workflow by using a different platform for each stage of their customer experience. 3. Increased agility Monolithic eCommerce systems often have many processes that have been in place for years. These processes can make it difficult for businesses to react quickly to changes in the market and/or customer needs. As businesses migrate to composable eCommerce, they begin with a single platform. This allows them to improve their agility by using this platform to support a variety of processes. For example, businesses can use a separate platform for marketing campaigns so that they can provide campaigns that are relevant to the customers’ needs. 4. Streamlined processes Monolithic eCommerce systems can often feel like a maze. As a result, it can be difficult for businesses to easily track and manage how their processes are unfolding. As businesses migrate to composable eCommerce, they begin with a single platform (frontend or backend) and add other applications via APIs. This platform is then used to support various business processes. This allows businesses to streamline their processes by using a single platform with an API layer. For example, businesses can plug in a platform for order management so that they can quickly track orders and manage orders. Wrapping up Monoliths can be beneficial when you have a small team and a basic application; however, they can't meet the needs of a growing business. Meanwhile, microservices are more suitable for complex, changing applications that need to be frequently and quickly released and are especially beneficial when the existing architecture is unmanageable. It all comes down to the specific requirements of your business and the skills of your team. If you opt for microservices, it is crucial to use a feature management tool to follow the flags in your system and how the features are performing. Read Also: Speed Up Your Funding: A Quick Guide To Business Loans How To Get A Mortgage As A Small Business Owner The Resources You Need To Start Your Business

5 Reasons To Work On Your Customer Service

The customer is always right, so keeping them happy should be at the top of your priority list. One of the best ways to do so is to provide excellent customer service that they’ll never forget. With so many options available to consumers nowadays, great customer service has really become a way for businesses to stand out above the crowd and leave a lasting impression. This is why you need to spend some energy improving your customer service this year. Need more convincing? Keep reading for more. Improve Customer Satisfaction Great service leads to satisfied customers, and satisfied customers will always come back for more. By working on your customer service and improving your customer contact centers, you can ensure that customers are receiving prompt assistance, personalized interactions, and quick and practical problem-solving from your team. This will encourage loyalty and positive feedback that will boost your business. Build Customer Loyalty A satisfied customer is also a loyal customer, or so the statistics say. When customers are treated well, responded to in a timely manner, and have their problems solved, they develop a sense of trust and connection with your brand. Developing and managing customer loyalty can make a significant difference to your business. Loyal customers are more likely to make repeat purchases and recommend your brand to their friends and family too. Gain A Competitive Edge As we mentioned, great customer service has become a way to stand out in the crowd, and in this digital age, this is a crucial factor to consider. Great customer service is often the only difference between two competing businesses, so make sure that you have the upper hand. By investing in your customer service strategy, you prove to your customers that their experience matters to you, leaving a positive lasting impression. Increase Your Revenue It might not feel like it, but improving your customer service can have a direct impact on your revenue. As we’ve already explained, customers who have a positive experience are more likely to come back and even recommend your products. This means that by working on how your handle customer queries, complaints, and feedback, you can drive revenue growth and boost your profitability. If this isn’t a great incentive to start working on your strategy, we don’t know what is. Gain Valuable Insights Finally, remember that you can use a good customer service strategy for your own benefit too. When your customer service is managed well, you’ll be able to gather plenty of feedback and other data from your consumers. This information might pertain to their perception and experience of your business, as well as their buying behaviors. By analyzing this data, you’ll be able to make better decisions, refine your products and services to better suit your audience, and contribute to long-term success for your company. Final Thoughts Customer service might be the last thing on your mind in such a fast-paced environment, but we hope that this article has shown you why it should move to the top of your list. Improving your customer service is a smart strategic move that will see lasting benefits for your business. Read Also: How To Improve Energy Efficiency In Your Data Centre Money Tap Loan App: Information, Eligibility Criteria, Interest Rates, Review & More Virtual Data Rooms: What They Are And Their Critical Importance For Businesses

Vertical vs Horizontal Integration: What Are The Key Differences?