Ep 10. Forward and Backward Integration

Forward and Backward Integration is the 10th episode of the first season of the show Critical Business Skills for Success. In this episode, the audience is introduced to the concept of horizontal integration, which involves the merger of two companies that are in the same industry, and vertical integration, which involves the combination of two companies that operate in different stages of the supply chain.

The host explains that horizontal integration can lead to economies of scale, increased market share, and the elimination of competition. The viewers are introduced to a case study of the merger between American Airlines and US Airways. The two companies were horizontal competitors, but the merger allowed them to increase their market share and reduce costs.

The show then delves into vertical integration, which can be backward or forward. Backward integration is when a company merges with a supplier, while forward integration involves merging with a distributor. The host explains that vertical integration can lead to greater control over the supply chain and increased efficiency.

The viewers are introduced to a case study of Ford Motor Company, which in the early 20th century vertically integrated by purchasing the raw materials and the factories that produced them. This allowed Ford to control the entire production process and reduce costs, leading to increased profits.

The show then explores the advantages and disadvantages of vertical integration. The host explains that vertical integration can lead to greater control over the supply chain, higher quality products, and increased efficiency. However, it can also lead to reduced flexibility, increased costs, and decreased innovation.

The viewers are then introduced to a case study of integration in the tech industry. The host explains that many tech companies have been integrating forward by purchasing music and video streaming services. The example of Netflix is discussed, which vertically integrated by creating its own content to reduce costs and increase control over the supply chain.

The show concludes by emphasizing the importance of careful consideration when making integration decisions. The host explains that companies must weigh the benefits and risks of integration and consider alternatives such as outsourcing, partnerships, and joint ventures.

Overall, Forward and Backward Integration is a informative episode of Critical Business Skills for Success that provides valuable insights into the world of mergers and acquisitions, and demonstrates how integration can impact a company's success.