Beruflich Dokumente
Kultur Dokumente
Integration
Abstract
Veterinary expenditure has been on an increasing trend due to the increase in pet ownership in the United
States. Bergerac is a company producing equipments used for testing pet patients in the veterinarian
clinics. Omnivue is one of the most successful equipments produced by the company, which is priced at a
competitive rate to attract lower and middle sized veterinarians. The production of Omnivue involves the
use of plastics and chemical reagents supplied by two major suppliers, GenieTech and Elsinore. The
management of Bergerac is planning to take control over its suppliers to reduce the production fluctuation
and overhead costs of the firm. There are three strategic alternatives for the company to implement its
future plans. It can opt for forward integration strategy by controlling its distribution channels; it can
implement backward integration strategy through acquisition of building its own plant. Bergerac also have
the option to operate the way it is currently operating to avoid risks arising from forward and backward
integration.
cost
of
opting
for
the
strategy
of
forward
integration.
Hence,
involved in supplying the raw materials used in the production process of the firm.
Raw materials, intermediate manufacturing and assembly are controlled by the firm
whereas distribution to the end customer is done by a third party company. In this
way, company increases production efficiency and gains a competitive advantage
by lowering its production cost.
Bergerac can opt for the buy option and implement its backward integration by
acquiring GenieTech. GenieTech can provide the company with eight efficient
molding machines for the acquisition price of $ 5.75 million. The price includes
experienced labor force and management. Bergerac can fulfill its chemical reagent
demand by using 4 out of 8 moulds provided in the acquisition. Rest of the presses
can be used in the expansion process or can be used to meet the demand of a third
party. This investment can result in the reduction of overhead expenses by twenty
six percent per unit. Bergerac can pay the amount over a period of five years
making the project feasible for the company.
Vertical integration can also be achieved by making the chemical reagents at
Bergeracs own plant located at Parsippany. GenieTechs acquisition would provide 8
molding presses exceeding the requirement of the company by 4 presses. Contrary
to that, Bergerac can attain its own presses and achieve greater efficiency and
productivity through proper training of labor and management of the plant.
such as Omnivue. It can direct the potential investment into research and
development to maintain a competitive advantage in the market. However,
Bergerac can face the shortage of supplies as it faced in the past due to production
issues from the supplier side. It can also lose the authority to lower price of the
products due to a number of overhead and transportation expenses.