Topic/Area for Discussion
STM is a leading textile company established in 2008. It is vertically integrated organization covering complete range of operations from spinning to retailing. The management of STM Company has been facing a decline in sales and profits for the last nine months due to strong competitors. Now the management has decided to restructure the company. For this purpose you have been appointed as a management consultant. You are required to guide them about the possible actions the management should take while restructuring the company.
Solution: In business, horizontal integration is a strategy where a company creates or acquires production units for outputs which are alike – either complementary or competitive. One example would be when a company acquires competitors in the same industry doing the same stage of production for the creation of a monopoly.
- Ensure the company has enough liquidity to operate during implementation of a complete restructuring.
- Produce accurate working capital forecasts.
- Provide open and clear lines of communication with creditors who mostly control the company’s ability to raise financing.
- Update detailed business plan and considerations.
vertical integration is an arrangement in which the supply chain of a company is owned by that company. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need.
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