We all should aspire to grow and expand. In the words of the artist J. Cole, “if you aren’t aiming too high, then you’re aiming too low! “. I say if you’re not getting better, then you’re getting worse. In the words of James Cameron, “If you set your goals ridiculously high and it’s a failure, you will fall, but above everyone else’s success.”
All organisations should seek to expand, especially once they’ve been restructured. After restructuring (I posted the steps on our website http://hbc.org.ng/2015/11/12/how-to-create-a-structure-for-your-businessorganisation / please see archives), then comes expansion. This can be done either through its processes of production or in its distribution. And they usually do this either through forward or backward integration. But what does this really mean?
Let me explain.
Forward or Horizontal Integration is looking at the value chain of a business and going into it. Take for example, it’s Rhythm93.7 FM starting a TV station called Silverbird TV. It’s a road side buka woman who sells beans and then deciding to sell bread. It’s the road side Hausa Mallam who sells cigarettes deciding to sell matches. It’s Apple and its chains of I’s (I-Pod, I-Phone, I-Pad, I-Mac)
On the other hand, Backward or Vertical Integration is different. Other than expanding, it creates an upstart. An upstart is a startup from an already existing business (SBU). So, it either starts up or buys up the value and supply chain of what it does to reduce dependency. It is more like the opposite of outsourcing. Take for example, if Cold Stone Ice Cream decides to buy a milk company or even a dairy. Since it has a brand for ice cream, if people love the ice cream, they might also love the milk. And also, in the advent of scarcity, they can have constant supply of milk and will not be dependent on third party suppliers and market forces.
Vertical/backward integration occurred when Amazon moved from being an online bookstore into publishing. It happened when Star Bucks bought a coffee bean farm in China.
So the question is, Backward or Horizontal Integration which one will be best for your plan on expansion or restructuring?
What does it take to restructure and expand your business? And what are you restructuring and expanding exactly?
Well, when restructuring and expanding, you can either restructure or expand the following:
· Product lines
· Operations (People, Process, System) or
· Finance (For better Book Keeping, For Investors/ for Mergers/ Acquisitions/Buyouts) etc.
