Essay on Shipping Business part 2
Essay on Shipping Business part 1
The horizontal integration allows companies operating in the shipping industry to expand the scope of their shipping operations, through purchasing new means of transport and entering new segments of the market. For example, a company specialized on the automobile transportation acquires or mergers with an air transportation company. In such a way, the company integrates its operations within the shipping industry. The horizontal integration helps the company to enhance its position in the market due to new acquisitions but still the company does not move beyond the shipping market that apparently limits the scope for its marketing manoeuvres (Peters, 2012). The company relies on companies selling their goods to customers, instead of acquiring such a company to integrate sales and shipping, as is the case of the vertical integration.
The horizontal integration contributes to the increase of the market share of the company but this growth is limited because the competition grows tighter and, at certain point, the company expanding horizontally stops growing. Today, the horizontal expansion is still significant due to the globalization of the world economy and elimination of barriers between countries. The globalization opens larger opportunities for the horizontal integration because companies can expand their business entering international markets. For example, a shipping company operating in the US can open its affiliates in Canada, Mexico, and other countries. In such a way, the company conducts the horizontal integration uniting its operations internationally and remains within its market specialization.
Moreover, new technologies open opportunity for long distance transportation that requires the horizontal integration to make shipping companies more effective, especially when different means of transportation have to be used to deliver goods to customers. Therefore, company have better opportunities for the closer horizontal integration within the shipping industry. At the same time, the scope of the horizontal integration is limited in a long-run perspective, because, at the moment, large companies, such as UPS, DHL and others have already become the major players in the global market and raised barriers to entry as well as opportunities for horizontal expansion for other companies.
The vertical integration in the shipping industry
The vertical integration in the shipping industry may involve the growing integration between units of the company operating in different fields. For example, the vertical integration may include the following elements of the organizational structure: the automobile transportation; the automobile parts and equipment supplies; the automobile repair stations; the customer call centre; the online company offering shipping services and other units that may be further vertically integrated to expand the scope of operations of the shipping company. In fact, the vertical integration may vary and the aforementioned model is just an example, whereas the real world vertical integration of a shipping company may be deeper or shallower depending on the marketing strategy and goals of the company.
The vertical integration is complex but it may be very efficient in terms of the accelerated business development. For example, a large electronic commerce company, like Amazon, needs shipping services. The vertical integration allows shipping companies to integrate into such companies or integrate minor electronic commerce companies to expand their business and take advantage of their electronic commerce and shipping which may be cheaper compared to rivals because the company does both sales of products and their shipping without outsourcing shipping services as other electronic commerce companies normally do.
The vertical integration opens new opportunities for shipping companies to boost their business development because, in face of the tight competition in the shipping proper, they can improve their competitive position through the vertical integration, which involves the acquisition of a company manufacturing automotive supplies used by the shipping company as well as other forms of the vertical integration that increase the efficiency of the performance of the shipping company. The vertical integration contributes to the emergence of new directions for the further business development of the shipping company and its steady transformation and diversification to the extent that the company may evolve and offer customers multiple services under its brand or, alternatively, create multiple brands offering diverse services from sales to shipping items to customers.
The vertical integration is more efficient and has better prospects in the contemporary market compared to the horizontal integration because the fast progress of e-commerce, international trade, and progress of technology stiffen the competition in the shipping industry and force companies to develop closer cooperation with companies operating in other industries or at a different market level. The vertical integration helps shipping companies to enter new prospective markets and make their shipping business more balanced due to the integration with closely related industries or businesses, which can boost the business development of shipping companies.
Conclusion
Thus, both horizontal and vertical integration can contribute to the successful business development of companies operating in the shipping industry but the vertical integration is more prospective and beneficial for companies operating in the shipping industry in light of the economic globalization, fast growth of e-commerce, progress of technology and changing demands and expectations of customers. The horizontal and vertical integration contribute to the market expansion and growth of companies as well as they help to maintain their competitive position. On the other hand, shipping companies should always be aware of the importance of the focus on the integration that meets their own business goals and long-run marketing strategies to ensure that the integration they choose will be successful.
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