Strategic Management Report: Integration, Diversification Strategies

This report delves into the realm of strategic management within networked industries, focusing on the critical strategies of integration and diversification. It begins by defining and differentiating between vertical and horizontal integration, providing examples like Carnegie Steel Company to illustrate the practical application of these strategies. The report then explores diversification strategies, including concentric and conglomerate diversification, with examples from the financial services sector. The discussion highlights specific circumstances where integration becomes crucial, such as managing chaotic data and aligning ERP and CRM systems. The importance of people policies in the integration process and the role of diversification in product variety and market penetration are also examined. The report also touches upon the impact of diversification on an organization's technical capabilities, emphasizing the need for research and development. The report references several academic sources to support its analysis and conclusions.

Running Head: STRATEGIC MANAGEMENT IN NETWORKED INDUSTRIES
STRATEGIC MANAGEMENT IN NETWORKED INDUSTRIES
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Strategies associated with integration and diversification
Integration refers to the business strategies that are used by the companies for
consolidation of their position among the competitors. In business strategies, integration is of
two types, vertical as well as horizontal integration. By means of vertical integration, the
organization takes total control over the multiple stages of production as well as distribution
stages of the product. Organizations adopt vertical integration in order to ensure that they are
having complete control over the supply of raw materials needed for the fundamental aspect of
production. A suitable example of vertical integration can be that of the Carnegie Steel
Company. The organization bought iron mines in order to ensure the raw materials supply, but
then also took over the railroads for strengthening distribution of the final products. This strategy
helped the organization in production of cheaper steel and also empowers their product in the
marketplaces (Shirodkar and Mohr 2015). Another aspect of integration is horizontal integration
that refers to the acquisition of related businesses. For evidence we can speak of a restaurant
chain catering fast food trying to merge with a similar business in a different country so that they
can set their foot in a different business periphery.
Diversification strategies help in the expansion of the operations of the firms by addition
of markets, services, products, as well as stages of production with the existing business.
Diversification allows the businesses to enter in to business domains that are different from their
current operations. When the new business venture is trying to strategically relate to the current
line of business, this is referred to as concentric diversification. In case of diversification where
there is no common strategic fit between the modes of operations that the same organization is
trying to acquire, it is referred to as Conglomerate diversification (Kim and Chai 2016). The
merger between banks and the major financial services firms are examples of business

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diversifications. Notable examples of this category of diversification include the collaboration of
JP Morgan with Chase Bank or that of Meryll Lynch along with the Bank of America. Even
insurance firms like the State Farm as well as the Allstate offer banking products along with the
limited investment products.
Discussion of Circumstances
There are specific instances when the process of business integration becomes very
important. That is why; organizations should be conceiving one integration strategy. One of the
most important instances that provoke a company for developing a business integration strategy
is that moving data can be chaotic as well as tedious. It is impossible to control the business
without a properly placed strategy. There are high chances that the ERP as well as the CRM data
might not match. In fact the APIs of individual applications might not correlate with each other
and this can lead to situations of chaos, repetition of files and so on. Again, at times, the task of
choosing the right strategy can be difficult as well as confusing. As highlighted by Yuen and
Thai (2017), one of the biggest problems is that the organizations often do not understand how
much they should integrate and at what pace they should process with the process of integration.
Often people policy also needs to be evaluated and that is where integration becomes important.
Integration of people policies needs a step by step directive regarding what process the
employees need to undergo so that they are well trained and they undergo transition to a post
integration scenario.
Diversification helps businesses to turn up when they lack product variety and thereby lose
customers because of that.

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The organizations are more empowered when they have more products under their belt and
thereby a larger market to target. Although, aftermarket and product diversification, Indore
organisation would need to penetrate new markets which would in curve for the costs.
However, after penetration the organisation will be able to gain natural profits. Hence,
diversification can also be considered as a suitable market penetration strategy.
The technical capabilities of organisations also have such as an impact of diversification. Which
further diversification, the organisation needs to invest more time and resources on research and
development, which in turn needs for the technical improvements (Basile 2016). The company
would need to implement new research and development for development of latest technologies
which would be used to design and develop new product under various product categories.

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REFERENCES
Shirodkar, V. and Mohr, A.T., 2015. Explaining foreign firms’ approaches to corporate political
activity in emerging economies: The effects of resource criticality, product diversification, inter-
subsidiary integration, and business ties. International Business Review, 24(4), pp.567-579.
Kim, M. and Chai, S., 2016. Assessing the impact of business uncertainty on supply chain
integration. The International Journal of Logistics Management, 27(2), pp.463-485.
Yuen, K.F. and Thai, V., 2017. Barriers to supply chain integration in the maritime logistics
industry. Maritime Economics & Logistics, 19(3), pp.551-572.
Basile, E., 2016. Local-global integration, diversification and informality: long-term change in
Arni during the late twentieth century. In Middle India and Urban-Rural Development (pp. 29-
64). Springer, New Delhi.