Horizontal/vertical integration (1 Viewer)

[KAty]

Hey guys,
i was wondering if someone could explain what horizontal and vertical integration means
and also about derivatives and transfer pricing
please help me

 

[truly-in-bliss]

- Vertical integration occurs when a business expands at different but related levels in the production and marketing of a product.

When a business integrates with one of its suppliers this is referred to as backward vertical integration eg: a bakery takes over whole farm.

Forward vertical integration is when a business integrates with a firm it sells to. Eg: a bakery could merge with a supermarket chain that sells its bread.

- Horizontal integration occurs when a bus takes over or merges with another firm that makes similar products. Eg: Top Line bakery takes over or merges with Golden Crust Bakery.

-Diversification or conglomerate integration occurs when a bus takes over or merges with a bus in a completely unrelated industry eg: when a bakery merges with a furniture manufacturer.

a transfer priceis basically how much it cost to transfer goods/services among busiensses and its subsidiaries..

for stuff abt hedging/derivities check this out...

http://www.boredofstudies.org/community/showthread.php?s=&threadid=9579

 

[Seraph]

yes hmm you know with Diversification

Why would a business merge with a totally unrelated industry??

yes i know its something to do with minimising risk , but how exactly would that benefit the bs . like the example u gave a bakery merging with a furniture store ......

 

[cro_angel]

umm just going off the top of my head.. if the market is saturated in that particular industry they might try to broaden their horizons and take a chance with a market that is lacking in whatever product they are buying.. to you know eventually make money

 

[BillyMak]

They can also use one to promote the other.

eg. Coles taking over Shell petrol stations, they offer discounts on petrol if you shop at Coles.