Why might vertical integration be considered a closed system in the systems theory? Essay Example
Vertical integration is a model that can be applied in supply chain management. Supply chain management is a systems approach and firms have found this concept to be very interesting because of their desire to be competitive in today's business environment. The performance of the firm's supply chains also reflects the overall performance of the firm. Business organizations have engaged in a war using supply chains as weapons.
The importance of effective management of supply chains has acquired a greater significance because of globalization.However, modern business practices do not permit the effective implementation of vertical integration. This impossibility is attributed to issues of ineffective communication and trust. The ineffectiveness of vertical integration is also caused by limited information and knowledge.
Most business organizations would be glad to share information like forecasts if only they know
...the outcome but in reality, they do not. The internal systems of business organizations have inefficiencies in which employees are busy resolving conflicts and other operational issues.Variability will result in the supply chain and it causes instability within the supply chain. 3. Which systems model is most applicable to horizontal integration and why? Horizontal integration combines a company’s existing and new products that are also similar to its previous products.
The new products may be versions from the current product range of the company (Sawyer 1985). Horizontal integration may result from the merger or acquisition of a competitor company.Firms that implement vertical integration want to gain more knowledge and expertise from the companies that they acquire. The expertise may come from the nature of products and their marketing techniques. Once the knowledge and expertise has been transferred to the company,
the new ideas can be applied to other areas of the firm.ReferencesCox, A.
(1999), "Power value and supply chain management", Supply Chain Management: An International Journal, Vol. 4 No. 4, pp. 167-75. Sawyer, M.
, (1985) ‘The economics of industries and firms’, Routledge
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