The thesis summarized in this document is aimed at analyzing the environment in which the manufacturing company operates and the changes that have characterized it from the fifties to the present. Benefits of integrating a business over the years. The organizational structure of the companies was in a state of need to make changes and adaptations arising from the changing needs of the market. This need has arisen especially since the mid-1990s, given the saturation of the Italian intermediate goods market, consisting of companies that have worked with an excessively high level of specialization.
One of the elements, which, as we will see later, had the greatest impact on changes in the corporate structure, is represented by the definition of new goals that should be set by the management of the company; The goals were no longer aimed at minimizing costs, but at improving the quality standards offered by strengthening control over the production chain. The central theme is “Get the most out of your business integration”, which describes the company’s actions to expand its business at different stages of the same production process and advantages of business integration.
Get maximum profit from business integration. A company may be integrated “upstream” if it includes in its activity a passage preceding an already completed one; instead, integration is “downward” if the company controls the step next to what is already done within it. Consideration of the integrated structure is the main element of a modern enterprise, therefore it can give the organization a competitive advantage that allows it not only to differ positively from other production companies, but also to guarantee continuity in the implementation of activities and the future prospect of prosperity.
The first concerns investment protection and coordination. In the event that investments are made in highly specific activities, the companies undertake to train personnel in understanding and supporting the acquired new tools. Another benefit is reduced use of results-based incentives. The direct participation of those who were previously external suppliers or employees in distribution systems makes corporate results a driving force in achieving good results. Another favorable element that arises from vertical integration is the reduction of distortions caused by the presence of monopolies.
In fact, if someone works in a market access system, situations may arise where the supplier has strong bargaining power against the company, forcing him to accept transactions that are ineffective for the latter. Again, one of the advantages is the seizure of the provider’s rent, that is, non-payment to suppliers, which the company should instead make in case it works, turning to the market. Entrance barriers are also an important advantage, because very often integrated companies have such a huge market potential that they can determine the quality, size or price standards that other companies that want to enter the same market cannot reach. Finally, with regard to the literature of 900, which accompanies the development of theories regarding the processes of interaction between companies, one should consider the possibility of reducing transaction costs by eliminating the uncertainties and connection costs associated with exchanges.
Obviously, as already mentioned, the numerous advantages of integrating a business that characterize a vertically integrated organizational structure are sometimes accompanied by disadvantages. Let us briefly list them relatively: difficulties with switching to new suppliers (sometimes leading to imprisonment of investments, the so-called blocking effect); increase in fixed costs due to the increase in the size of a verticalized company; strengthening barriers to exit and slow adoption of new technologies; increase in agency costs associated with situations in which the principal and agent have different interests. The small companies that were part of it represented a high interdependence from each other.