Connecting the classroom to the "real world"
Companies More Prone to Go ‘Vertical’ – WSJ.com
Interestingly, today’s Wall Street Journal contained a trio of articles that all relate to how companies are handling their value chain partners and positioning themselves for the future. I’m going to make a post for each article because it will make it easier for me to tag/categorize but I think reading all three and understanding how these moves relate to each other is quite interesting.
The first article from page A1 is about how companies are embracing vertical integration — a practice that fell out of favor in recent years. Specifically mentioned are Oracle’s purchase of Sun Microsystems and Pepsi buying back some bottlers it had spun off a decade ago.
Mr. Ellison is among the executives reviving “vertical integration,” a 100-year-old strategy in which a company controls materials, manufacturing and distribution. Others moving recently in this direction include ArcelorMittal, PepsiCo Inc., General Motors Co. and Boeing Co.
The reasons vary. Arcelor, the world’s largest steelmaker, wants more control over its raw materials. Pepsi wants more authority over distribution. GM and Boeing are moving by necessity, to assure quantity and quality of vital parts from troubled suppliers. Some are repurchasing businesses they only recently shed.
Companies More Prone to Go ‘Vertical.’ Ben Worthen, Cari Tuna, Justin Scheck. Wall Street Journal (Eastern edition). New York, N.Y.: Nov 30, 2009. p. A.1
