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Topics Covered
- Transaction costs
- Market contracts
- Quasi-vertical integration
Talk Citation
Grant, R. (2022, April 27). Corporate strategy: vertical integration [Video file]. In The Business & Management Collection, Henry Stewart Talks. Retrieved October 8, 2024, from https://doi.org/10.69645/NDXA4577.Export Citation (RIS)
Publication History
Other Talks in the Series: Key Concepts: Introduction to Strategy
Transcript
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0:00
Hello and welcome to this series
of introductory talks
on business strategy.
My name is Robert Grant.
I'm a professor of
strategic management
at Bocconi University
in Milan, Italy.
I'm also the author of
'Contemporary Strategy Analysis',
a leading strategic
management textbook
used in business programmes
throughout the world.
0:22
In this talk, we are
shifting our focus
from business strategy
to corporate strategy.
In terms of what I want to
achieve with this talk,
the first thing is to
comprehend this distinction.
Corporate strategy
is concerned with
decisions over the
scope of the firm.
One of the dimensions of
corporate scope is
vertical integration.
Then I would like
you to appreciate
the benefits and costs
of vertical integration
and be able to identify
whether vertical integration
or outsourcing is better under
particular circumstances.
Finally, I would like
you to recognise
the potential for
hybrid arrangements.
What is often called
quasi-vertical integration,
to combine the benefits of
vertical integration
and outsourcing.
My talk will follow
the same sequence.
Starting off by explaining
the distinction
between business and
corporate strategy,
then considering the benefits and
costs of vertical integration
and the circumstances
that determine
the balance of these
benefits and costs.
Finally, examining
hybrid arrangements to
vertical integration that
emerged in recent decades.
1:30
In this series, I noted
that a firm strategy could
be described in terms of the
answers to two questions,
how the firm competes
and where it competes.
These two questions also
define two areas of strategy.
Business strategy is
concerned with how a firm
competes within a particular
industry or market.
It is concerned with how
the firm can establish
a competitive advantage within
that industry or market.
Corporate strategy is concerned
with where the firm competes.
In other words, the scope
of the firm's activities.
This relates to its
vertical scope,
how far it extends
along its value chain,
its geographical scope,
how local or international
is the market that it serves
and its product scope.
How specialised or diversified
are its offerings?
The distinction
between the two also
corresponds to the
organisational structure
of large companies.
Consider Sony Corporation.
Corporate strategy is to preserve
the corporate headquarters.
Business strategy is mainly the
responsibility of the divisions,
such as the games division, music
division or the motion picture division.
The classic case for
vertical integration