Vertical integration strategy: Usha Martin Company
Vertical integration involves the amalgamation of the production chain to accommodate the different products that the company deals in line with the market-specific demands. Usha Martin Company boasts of a strong backward vertical integration in its industrial organization.
From a single location, the company controls it’s designing, cutting, manufacturing, distribution, and marketing process for its steel wire pipe products. The product segments such as raw material acquisition, power plant operation, and coal mining, actual production, and distribution are segmented and disfranchised within a systematic control system that monitors production progress (Bloomberg, par. 7).
Reflectively, the backward vertical integration strategy has shielded the company from market swings which create fluctuations in the supply chain, in terms of input availability and price. As opined by the chairman of Usha Martin Company, the vertical integration strategy has enabled the company to save more than one billion Indian rupees over the last five years. Besides, the company has been in a position to have full control of the quality of inputs used in manufacturing the steel wire pipes.
Since the company operates and fully owns its sub production branches, instead of franchising any production or distribution channels, it has been able to benefit from the aspect of cost competitiveness in production and final price of the products (Worthen, Tuna, and Scheck, par. 8).
The backward vertical integration process has allowed the Usha Martin Company to produce, design, sell, and distribute its products globally within a short period. This is possible due to the internalization of direct and complete control of the distribution and production process for its steel wire pipe brands. The vertical integration process at Usha Martin includes the aspect of cost, dependability, speed, quality, and flexibility in the production cycle (Bloomberg, par. 4).
Acquisition or Merger: Rio Tinto Group
Rio Tinto Group has used an acquisition strategy to expand the product line and its market. The group is the fourth largest mining company in the world. It is listed in both London Stock Exchange and Australian Securities Exchange. Profit for the year 2013 amounted to $15,184 million while the total assets amounted to $112,402 million. The main business of the group is processing minerals such as copper, coal, aluminum, and borax, among others.
Since its formation, the company had concentrated on the production of copper. The business thrived until the First World War. World War affected the relationship between the US and Europe. Therefore, the profitability of the company went down. The management had to come up with strategies of increasing the profitability of the group. One strategy adopted was acquisition (Hoyle, par. 6).
In 1970, the group made its first acquisition, which was the Rhodesian copper mines. This acquisition enabled the company to prosper. After the acquisition of Rhodesian copper mines, the group acquired U.S Borax in 1988. Other acquisitions included Kennecott Utah Copper, BP Australian Coal, NSW operations of Coal & Allied Industries (which produces coal), Nerco, Northern Limited, and Cordero Mining Company. The latest largest acquisition was Alcan Incorporation, which was in the year 2009.
This acquisition amounted to $38.1 billion. Incorporation of Alcan, a company located in Australia. It specialized in the production of aluminum. Currently, the group has over 35 subsidiaries located across the world. Also, more takeovers, acquisitions, and merger negotiations are ongoing. Through the acquisition, the company has been able to diversify its products (Hoyle, par. 4).
Works Cited
Bloomberg. Usha Martin: News and Press Releases. 2014. Web.
Hoyle, Rhiannon. Boasteel, Aurizon Bid for Australia’s Aquila Resources. 2014. Web.
Worthen, Ben, Cari Tuna, and Justin Scheck. Companies More Prone to Go Vertical. 2009. Web.