What does it mean to develop horizontally and vertically?

In economics, the business layout that occupies several links along the industrial chain is called vertical integration. Vertical integration is a strategic plan, which is a form of expansion of an organization's core competencies within the enterprise, along with a horizontal integration strategy and a strengthening strategy. VLB Exam Network.

Vertical integration, also known as vertical integration, refers to the strategic form of combining production and raw materials, or production and product sales, and is a development strategy for enterprises to expand existing business in two possible directions.

It is a strategic system that expands the company's business activities backward to raw materials ** or forward to the point of sale. Including backward integration strategy and forward integration strategy, that is, the strategy of in-depth development of the business field. VLB Exam Network.

The forward integration strategy is that the company will further further process the company's products, or make comprehensive use of resources, or the company will establish its own sales organization to sell the company's products or services. For example, iron and steel enterprises roll various profiles by themselves, and make profiles into various different final products, which belongs to forward integration. VLB Exam Network.

Backward integration is the production of all or part of the raw materials or semi-finished products required by the enterprise itself to produce existing products or services, such as the iron and steel company owns its own mines and coking facilities; The textile mill spins the yarn by itself, washes the yarn, etc. VLB Exam Network.

The purpose of vertical integration is to strengthen the control of the core enterprises over the whole process of raw materials, product manufacturing, distribution and sales, so that enterprises can take the initiative in market competition, so as to increase profits at each stage of business activities. VLB Exam Network.

Vertical integration is a strategic system often chosen by enterprises, but any strategy is inevitably risky and insufficient, the original intention of vertical integration, is to establish a strong scale production capacity to obtain higher returns, and through the strategy for the end of the sales to obtain direct feedback from various information in the market, so as to promote continuous improvement of products and reduce costs, to obtain a competitive advantage. VLB Exam Network.

Horizontal development: The development trend is not impressive.

stop at no growth, or slow growth; There is also negative growth.

The differences between the horizontal and vertical development of the company are as follows:

1. The concept is different.

Horizontal development refers to the formation of the same type of enterprises, and at the beginning of the horizontal formation of industrial clusters, enterprises are more likely to show competitive relations, that is, the products belong to the same kind. Horizontal development refers to the horizontal formation of industrial clusters. According to the relationship between enterprises in industrial clusters, the formation of industrial clusters is divided into vertical formation and horizontal formation.

The vertical development model refers to the fact that the parent company and its subsidiaries produce different products and operate different businesses, but these products and businesses are closely linked and connected with each other to form a production chain.

2. The reasons for the formation are different.

In many cases, there are large enterprises in a certain region, and some small and medium-sized enterprises as their supporting facilities, forming an industrial cluster with close cooperation between leading enterprises and supporting enterprises.

The vertical formation of industrial clusters is related to the length of the industrial chain, and the extension of the industrial chain has a certain relationship with the characteristics of the industry. At present, many places in China are advocating the development of such industrial clusters.

At the beginning of the horizontal formation of industrial clusters, enterprises are more likely to compete with each other, that is, the products belong to the same kind. A horizontal industrial cluster is produced in a certain region, and the demonstration effect of the first batch of enterprises is particularly large, so that more enterprises imitate it.

3. Different development directions.

Horizontal development is to broaden the scope of work, and all work goes hand in hand. Vertical development is to let a certain work gradually deepen and strive to achieve results. Vertical integration refers to the joint operation of the enterprise with the users of the company's products or the first unit of raw materials or its own expansion to these business areas, which refers to the development of the upstream or downstream of the existing business on the basis of the existing business, and the formation of production, production and marketing or the integration of supply, production and marketing, so as to expand the business scope of the existing business.

Horizontal development is to broaden the scope of work, and all work goes hand in hand.

Vertical development is to let a certain work gradually deepen and strive to achieve results.