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PQBI Product Quality Business Integration
In microeconomics and managing management, the term vertical integration
describes a style of ownership and control. The degree to which a firm owns its
upstream suppliers and its downstream buyers determines how vertically
integrated it is. Vertically integrated companies are united through a hierarchy
and share a common owner. Usually each member of the hierarchy produces a
different product or service, and the products combine to satisfy a common need.
It is contrasted with horizontal integration. Vertical integration is one method
of avoiding the hold-up problem. A monopoly produced through vertical
integration is called a vertical monopoly, although it might be more appropriate
to speak of this as some form of cartel.
One of the earliest, largest and most famous examples of vertical integration
was the Carnegie Steel company. The company controlled not only the mills where
the steel was manufactured, but also the mines where the iron ore was extracted,
the coal mines that supplied the coal, the ships that transported the iron ore
and the railroads that transported the coal to the factory, the coke ovens where
the coal was coked, etc. Later on, Carnegie even established an institute of
higher learning to teach the steel processes to the next generation.
Three types
Vertical integration is the degree to which a firm owns its upstream suppliers
and its downstream buyers. Contrary to horizontal integration, which is a
consolidation of many firms that handle the same part of the production process,
vertical integration is typified by one firm engaged in different aspects of
production (e.g. growing raw materials, manufacturing, transporting, marketing,
and/or retailing).
There are three varieties: backward (upstream) vertical integration, forward
(downstream) vertical integration, and balanced (horizontal) vertical
integration.
In backward vertical integration, the company sets up subsidiaries that produce
some of the inputs used in the production of its products. For example, an
automobile company may own a tire company, a glass company, and a metal company.
Control of these three subsidiaries is intended to create a stable supply of
inputs and ensure a consistent quality in their final product. It was the main
business approach of Ford and other car companies in the 1920s, who sought to
minimize costs by centralizing the production of cars and car parts.
In forward vertical integration, the company sets up subsidiaries that
distribute or market products to customers or use the products themselves. An
example of this is a movie studio that also owns a chain of theaters.
In balanced vertical integration, the company sets up subsidiaries that both
supply them with inputs and distribute their outputs.
If you view McDonald's, for example, as primarily a food manufacturer, backwards
vertical integration would mean that they would own the farms where they raise
the cows, chickens, potatoes and wheat as well as the factories that processes
everything and turns it all into food. Forwards vertical integration would imply
that they own the distribution centers for every area and the fast food
retailers. Balanced vertical integration would mean that they own all of the
mentioned components.
Examples
Oil industry
One of the best examples of vertically integrated companies is the oil industry.
Oil companies, both multinational (such as ExxonMobil, Royal Dutch Shell, or BP)
and national (e.g. Petronas) often adopt a vertically integrated structure. This
means that they are active all the way along the supply chain from locating
crude oil deposits, drilling and extracting crude, transporting it around the
world, refining it into petroleum products such as Petrol/Gasoline, to
distributing the fuel to company-owned retail stations, where it is sold to
consumers.
Problems and Benefits
There are internal and external (e.g. society-wide) gains and losses due to
vertical integration. They will differ according to the state of technology in
the industries involved, roughly corresponding to the stages of the industry
lifecycle.
Static technology
This is the simplest case, where the gains and losses have been studied
extensively.
Internal gains:
Lower transaction costs
Synchronization of supply and demand along the chain of products
Lower uncertainty and higher investment
Ability to monopolize markets throughout the chain by market foreclosure
Internal losses:
Higher monetary and organizational costs of switching to other suppliers/buyers
Benefits to society:
Better opportunities for investment growth through reduced uncertainty
Losses to society:
Monopolization of markets
Rigid organizational structure, having much the same shortcomings as the
socialist economy (cf. John Kenneth Galbraith's works), etc...
Dynamic technology
Some argue that vertical integration will eventually hurt a company because when
new technologies are available, the company is forced to reinvest in its
infrastructures in order to keep up with competition. Some say that today, when
technologies evolve very quickly, this can cause a company to invest into new
technologies, only to reinvest in even newer technologies later, thus costing a
company financially. However, a benefit of vertical integration is that all the
components that are in a company product will work harmoniously, which will
lower downtime and repair costs.
Vertical expansion
Vertical expansion, in economics, is the growth of a business enterprise through
the acquisition of companies that produce the intermediate goods needed by the
business or help market and distribute its final goods. Such expansion is
desired because it secures the supplies needed by the firm to produce its
product and the market needed to sell the product. The result is a more
efficient business with lower costs and more profits.
Related is lateral expansion, which is the growth of a business enterprise
through the acquisition of similar firms, in the hope of achieving economies of
scale.
Vertical expansion is also known as a vertical acquisition. Vertical expansion
or acquisitions can also be used to increase scales and to gain market power.
The acquisition of DirectTV by News Corporation is an example of vertical
expansion or acquisition. DirectTV is a satellite TV company through which News
Corporation can distribute more of its media content: news, movies, and
televsion shows.
Are you interested in
mult-player online internet games? Such as runescape and neopets?Internet
Game Online-games, tips, cheats and kids forumsAnother
good forum is the Internet Junction For Gamers IJFG.COM
Internet Junction For Gamers, Runescape Market and
More IJFG.COM Jokes, Pranks, Runescape and other cool games at IJFG.COM.
RuneScape is set in a medieval fantasy world, similar to "Guild Wars" or
"EverQuest", where players control character representations of themselves. As
with most massive multiplayer online roleplaying games (MMORPG), there is no
overall objective or end to the game. Players explore, form alliances, perform
optional tasks, and complete quests for rewards and to build character's skills.
RuneScape has often been one of
the top massive online role playing games. It is a unique game. But, with a
unique game, comes unique players. Players get bored, and then try to develop
cheats....autos or bots that will help them achieve success in their beloved
games of Runescape 2.
RuneScape is a virtual world which
is divided into two part: Members Areas and Non-Members areas. People who pay to
play (p2p), receive access to the special areas. They also have access to the
free areas. The members' places are much larger, offer "better" items for the
gameplay of rs2, and much, much more. The character that you create when you
first start playing runescape, moves around the game on foot; either by running,
or walking. Players are challenged to their utmost skills by fighting new
monsters, completing difficult quests, and manipulating marketing. As Runescape
2 is an RPG (Role playing game), there is no set path a person must take to play
rs. They can choose what to do, and when, whether it be training their
money-making skills, or fighting another player. Players usually interact with
each other by chatting through public chat, or private chat.Internet
Junction For Gamers, Runescape Market and More IJFG.COM IJFG.com was a
runescape 2 based site. They have now, however, taken another look....
Of course the king of all game
cheating websites is
trick
the trik (otherwise known as RPG Cheats Site), where you can find cheat
forums, mmorpg topsite, arcade games and any mmo game related topics.
The master of massive multiplayer
online role-playing games (MMORPG) cheats can be found at Trik.com
Trik.com; this site is one of the best today. The forum section,
Trik.com forum, originally came from IJFG.com (Internet Junction For
Gamers) , which was one of the best websites that discussed various gamers'
issues. The full name was Internet Junction For Gamers, Runescape Market and
More. This site had Jokes, Pranks, RuneScape and other cool games. RuneScape is
set in a medieval fantasy world, similar to "Guild Wars" or "EverQuest," where
players control character representations of themselves. As with most MMORPG,
there is no overall objective or end to the game. Players explore, form
alliances, perform optional tasks, and complete quests for rewards and to build
characters' skills.
Trik.com continues IJFG.com's
success, but Trik.com has more to offer. Trik Topsite can be found at
Trik Topsite; the TopSite is a great addition if you want to find the best
MMO RPG site(s) or raise your site in the rankings. Trik.com also has a
viciously competitive Arcade. If you want to be the #1 Arcade on Trik, then come
prove yourself at Trik.com arcade:
Trik arcade. Trik.com ?Trik.com/topsite ?Trik.com/forum/arcade.php
With the rising popularity of
commercial MMORPG games came the desire from ardent players of these games to
run their own servers beside the ones run by the game's creator. Since the
original server software is not usually available, the behavior of the server
has to be re-engineered. This can be done by analyzing the data stream with the
original server, or by disassembling and analyzing the client which is
available.
Ultima Online was one of the first
large MMORPGs. Due to its openness in implementation, server emulators arose
very quickly, even during the beta stage of development. The destination to
which the client connects was changeable by simply editing a text file. In beta
stage the client-server data stream was not encrypted yet. The term server
emulator became known through Ultima Online server reimplementation such as UOX,
which was the pioneer. Many forks and reimplementations followed UOX, because
its source code was released under the GNU General Public License relatively
early. RunUO is today the most widely used UO-server emulator. After RuneScape
implemented anti-cheating measures, many gamers left and started their own
private servers. The best place to discuss the private server is at
Trik- The Master of Private Server.
Another useful site is
Rune
Web ruwb.com . This site is about more serious RuneScape gold trading,
account exchange, gold for real life cash and many services. It includes tips on
how to avoid getting lured/scammed while using the marketplace. For programming,
visual basics, java, C/C++, scar and all other languages such as PHP, HTML, ASP,
Delphi. There are also sections for graphics talents, plus many cool videos and
fun stuff.
A defining moment in internet
gaming history was when a group of gamers called (hygo 7) decided to start an
ultimate game forum, which they named
hygo.com. It has the best financial backing, the friendliest game community,
and the highest quality of information. Currently Hygo.com has entered a new
phase...Hygo.com is offering the best private server game. With thousands of
members, Hygo.com is your next place to visit, as they have an amazing game with
a community and economy.
Hygo.com - The Online Adventure Game. is definitely one of the top sites you
want to join right now!
EZud is another popular site.
ezud.com. It has the best runescape bug abuse, bugs and trik.
ezud.com - The runescape bugs. is definitely one of the best sites you want
to join right now!
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