Business Policy and Strategy

Business Policy and Strategy

Presently within the trading world, integration of business establishments has been notably high as acquisitions are conducted within a global scale for market expansions. Although the process is highly beneficial to the mother company, caution has been necessitated with researchers indicating that at least seventy-five percent of all integrated businesses tend to have an adverse effect on the shareholder worth (Allen, 2008). Various strategies have been formulated towards overcoming this problem with the vertical approach majoring on the allocation function. The forward mechanism focuses on the establishment of private distribution outlets solely owned by a company through direct and indirect allocation measures.

The forward strategy is best employed within small and medium sized enterprises that are constrained in terms of their capital bases in a bid to reduce the cost of setting up the business and the effectuality of business processes (Allen, 2008). It can also be used in new business establishments due to its favorable cost structure for the establishment of solidity within the organization. As a company assumes a direct position in its distribution channels, it enhances its strategic capability as the function of anticipating future demand is enhanced by the direct participation in the supply function. With the inclusion of retailers, a businesses returns and revenues are enhanced as both upstream and downstream turnovers are accorded.

Distributors allocate a product in bulk and thereby capture the upstream profits, while retailers tend to focus on the downstream proceeds as they focus on household levels. The latter therefore provides a good outlet for a company’s excess production units and consequently higher sales and revenues. This process therefore creates security and stability within a business organization as the heightened returns accord a sustainable increase in the capital base, and thereby the ability for adequate expansion, establishment and continuity against other business rivals (Goldman, & Cecile, 2008).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Allen, K. R. (2008). Launching New Ventures: An Entrepreneurial Approach. Clifton Park, NY: Cengage Learning.

Goldman, G., & Cecile, N. (2008). Strategy: Sustaining Competitive Advantage in a Globalised Context. Cape Town, South Africa: Juta and Company Ltd.