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Pros And Cons Of Vertical Integration

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A theory on vertical integration suggests that vertical integration may have a number of efficiency improving effects that ultimately lower prices, improve product quality, and thus increase consumer welfare (Chipty, T. (2001). In the case of Netflix these would all be pros for the company. Lowering prices are good for any company and if Netlix can gain access to newer content quicker that would be improved product quality. Netflix has the potential to replace cable providers like Time Warner, Comcast, and Brighthouse. Netflix delivers directly to the consumer like a cable provider does so if they can vertically integrate with a company that provides programming content like Nickelodeon or CBS they should be able to benefit from all of the
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By creating innovative ways such as this sets themselves apart from their competitors in order to affect the buying power by making it more attractive to buyers. Their supplier level is low since buyers have several choices on who they want their provider to be. There are several providers for cable, internet, and mobiles making price and quality of product reasons that buyers decide on a particular product. Depending on the product that is offered the threat of substitute products or services can be either high or low. The threat to cable tends to be the highest since there are alternatives ways to watch the shows or movies people would like.

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Andrew Carnegie used vertical integration in the steel business to great profit. His operation controlled every step of the process from mining the ore, mining the coal, shipping the ore and coal to the foundry, actually making steel from the ores, owning and operating ships and railroads to transport the raw materials and finished goods, etc. What better way to make your business profitable than to arrange for much of the money it spends to be paid to another one of your businesses? Keeps the money in the family, prevents some other company from putting the screws to you by cutting availability or raising prices, and the peripheral businesses (such as railroads and shipping) may be stronger competitors for other business because they have

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Lawmakers now claim that they are looking out for the consumers’ and competitors’ best interests, so as not to hinder any competition or new innovations. Others have weighed in on the debate such as Senator David Perdue, who claimed that this merger is simply an example of capitalism. President-elect Donald Trump claims that this type of merger will be blocked. Lastly, consumer groups have rejected the portrayals of AT&T and Time Warner as being weaker rivals, claiming that the merger of these two companies will create a powerhouse that every network and cable company will need to compete and negotiate with, all while pushing out smaller streaming services such as Sling TV and Hulu. Consumer groups ultimately fear that this merger will extinguish new

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This is because they look to interact directly with the final customers. The book states that a firm should vertically integrate business activities where they possess valuable, rare, and costly-to-imitate resources and capabilities. With competition consistently playing a factor, Verizon had to find a way to gain a competitive advantage. In this case, network reliability, products and services, customer service, and familiarity are the different paths Verizon has chosen to differentiate products and secure a competitive advantage. The forward integration strategy stands to benefit the larger cellular providers more.

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Disney pursues vertical integration by increasing its distribution channels for its products in house. This allows Disney to not only have control over the entire product my beginning to end consumer, but it also allows for Disney to increase its profits by cutting costs. An example of this in the case is that Disney creates its own content in-house for its channels like ABC. When Disney first acquired ABC, ABC had deals with Dreamworks, which was a rival company created by a former Disney employee, to finance jointly the cost of developing new TV shows. For Disney, this deal made no sense for them once they purchased ABC because Disney has their own production studio.

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In addition to synergies another strategy is to control all creative and physical possess in the production of media, evidence of this is Warner Bros, they can buy a script only entrusting it too companies they own to film, produce and distribute the finished product. Allowing Warner Bros to profit from all stages, this form of market dominance is described as vertical integration. With the current global reach of conglomerates to dominate in this way it is easy to see how media concentration has occurred and how media companies have managed to diversify into other markets, this is seen by Virgin that not only provide media but financial services, healthcare and spaceflight (Just, 2009). However, these conglomerates are under threat from new media platforms and technological convergence. This means that the tech giants like Apple and Google can produce the technology that will allow you to view media but will always give the media they control an

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Netflix now has less users and is making less money, and would thusly have to increase the price of their subscriptions to compensate for this. Overall this translates to disastrous costs for consumers and the transformation of everyday online services into expensive

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The difference between horizontal and vertical integrations is that vertical integration typically expands into another product stage rather than merging or acquiring the company in the same production stage. For example a company is vertically integrating if it expands from manufacturing industry to retailing industry. In the other hand Horizontal Integration would mean buying other firms in the same manufacturing industry. Advantages of horizontal integration are lower cost, in a large company like Quaker and PepsiCo that produces more products world wide. The higher output leads to better economies of amount and higher competence.

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Although there exist valid arguments for legislating joint enterprise, there are concerns with the idea. Fundamentally, it is unconventional as it is a creation of the common law therefore, it would be untraditionally to legislate on the doctrine. Likewise, the common law allows more detail in its prescription, and its flexibility is one of its distinguishing features. Furthermore, it joint enterprise was governed by legislation, if that legislation needed to be altered, a considerable amount of time is required, as it can be a lengthy process.

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It is essentially a pro if Netflix acquired any sources that would give them some independence in the supply or distribution field. Ferrell and Hartline (2014) explains that distribution and supply relationships are one of the most important decisions to any organization. Creating partnerships that would allow their customers to have some of their favorite content from certain providers would not only expand they company’s ability to reach customers and grow. Similar to its partnership with Dish Network that potentially created new customers, creating more partnerships can ultimately do the same (Luckerson, 2014). Not only developing partnerships with cable companies are can be pros, but kiosk could provide a different market for a target audience.

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NETFLIX VS BLOCKBUSTER Netflix was able to gain a competitive advantage over its chief rival Blockbuster. Discuss the Netflix value proposition and how it successfully gained an advantage over Blockbuster. a) Accessibility, affordability, and availability Netflix is affordable as it charges $7.99 per month while blockbuster charges $19.99 which is quite expensive. The company also does live streaming online of videos making them easily accessible and highly available as compared to blockbuster which does not operate virtually but uses physical stores (Guina, 2017). b) Customer retention

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408 Words | 2 Pages

Vertical and horizontal integration are an activities allowed companies to gain competitive advantages, First the vertical integration is the complain of firms at a different level of production or distribution in the same industry ,When the company distribute its work in different areas but in the same way of production like when Zara have a retailer and supplier this can help Zara to reduce the cost and improve the quality from decreasing the cost of transporting and the time that take it ,But some time it good for the company to depends on the specialized knowledge and economic of scale from another companies(4) , On the other side the horizontal integration known as the companies between the company in the same level of production or

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661 Words | 3 Pages

The two firms combined will be the country’s dominant cable and Internet provider. Cohen’s rebuttal to the negative feedback of this news was that Comcast already has competition to worry about such as Amazon, Netflix, and Apple. Cohen is right to the extent that these corporations are giving Comcast some form of competition. But the competition isn’t remotely as effective as having a newly merged company with control of roughly 40 percent of the high-speed broadband Internet market. Cohen mentioned 3 companies that don’t even dabble in the cable business at the current time.

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EU is by far the ‘ most advanced and developed project of regional integration in the world’. It has various competent institutions and over half a century of integrative struggles among its growing number of members which initially was six and then it has increased to twenty eight, it has achieved a number of economic, political, financial and peace keeping objectives. The Single European Act (SEA) in 1986 was prominently important as it created a single market without frontier for free movements of goods, peoples, services and capital with the enforcement of article 47 of the Treaty on European Union (TEU). EU has acquired legal personality with an independent entity in its own right.

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Blockbuster was bought by Viacom in 1992 for $8.4 billion. Back in 2000, Netflix was just an emerging company, and offered to be sold to Blockbuster for only $50 million while Blockbuster’s worth then was $3.5 billion, but Blockbusters declined the offer to buy Netflix more than once then it reached its peak of power in 2004 with almost 9,000 global stores and 60,000 employees in the United States. By then Netflix started to grow enormously and blockbuster realized how successful Netflix is decided that Blockbuster wanted to buy Netflix now, on a conference call with Reed Hastings, Netflix CEO had mentioned Blockbuster more than 20 times, and also admitted that Blockbuster is stealing their costumers and they had not formed a plan to stop tem and also said " Blockbuster had thrown everything at us but the kitchen sink". Blockbuster responded by sending a large box the next day that contained a used kitchen sink at Hasting's office with a note from Nick shepherd , blockbuster's COO that says " Here’s your sink”. In 2008 Blockbusters launched their own by mail DVD service that Netflix has already dominating that market after that blockbusters started launching new products that were already launched before and not that attractive to costumers

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