Vertical and horizontal integration strategy - Assignment Example

Teacher Ford Vertical and Horizontal Strategy Traditionally, Ford’s corporate strategy has been vertical integration with Henry Fordhimself stockpiling parts and materials for production. This strategy of vertical integration involves the control of company of the entire production cycle of their product (which in this case, automobile) from acquisition of supplies, production to distribution. This was done by Ford Company in the 1920s when Henry Ford bought coal and iron mines, timberlands, rubber plantations, a railroad, freighters, sawmills, blast furnaces, a glassworks (Vossoughi, 2012).

At the end of this integration is the factory plant at River Rouge, Michigan where all these parts are assembled to become an automobile that will be later distributed in the market and sold. For a time, this strategy became very effective and contributed to Ford’s success. This strategy of vertical integration however eventually became obsolete as supply chain became complex and competition became stiffer. The introduction of new supply chain and inventory control such as Toyota’s Just-in-Time rendered vertical integration out of fashion.

The recent recessions also exposed the vulnerability of vertical integration to economic and cyclical downturns. Thus, the strategy evolved to horizontal integration which is more appropriate for its global market. Horizontal integration as a strategy involves the acquisition of the production whose products are the same – either complementary or competitive (www.theeconomist.com, 2009). The classic example of this strategy is buying competitors who sell the same product. In the case of Ford this is the acquisition of Lincoln, Mercury, Mazda, Jaguar, Land rover, Volvo and Aston Martin which was sold as an option of the company’s restructuring.

References“Moving on up." The Economist. The Economist Newspaper, 27 Mar. 2009. Web. 10 May 2014. .Copy & Paste | ParentheticaVossoughi, Sohrab. "Todays Best Companies are Horizontally Integrated."Harvard Business Review. N.p., 14 Dec. 2012. Web. 10 May 2014. .