VERTICAL INTEGRATION AND ITS IMPORTANCE

Vertical integration and its importance

within media institutions

Vertical integration is where a company overseas the planning and making of a product through to the marketing, advertising and distribution and then onto the retail of the product. When a company is vertically integrated it possesses control over all of its stages of company life. When it comes to film institutions this means that they have control over the three main processes of production these are production, distribution and exhibition.

The types of vertical integrations include backward integrations which can be where one company like a car company owns a tyre companies. Forward integrations id where a company opens its own retail chain. Balanced integrations are both which means there is a balanced amount that allows there to be the advantages taken firm the two.

Vertical integration is good because it allows a company to achieve a larger gap in the market as by expanding one firm and getting lots of well know large firms to join together and receive the most customers. It also allows a company to have more control. They achieve this control over the production process and the distribution of the product. By expanding this it also allows there to be control over how the products are presented to the market and the prices that they are going to be then sold at.

When two or more large firms join together this allows the quality control to increase this happens because the subsidiary company then has a quality control system that then ensures the quality of all of the products and the way that they are then distributed.

Communication is key when firms join because by merging this allows a clear structure of the parent company. By joining the communication is then e3nhanced because this means that by working together this will allow the businesses to create better profits and increase all of their revenue and their gap in the market.

The supply chains coordination is improved as there will be a better distribution process over certain areas as this will allow them to be able to provide enough of their product to certain areas. This also means that the businesses will be able to have a clear distribution process that will be efficient enough to provide the best series to the customers.

The joining of firms would also allow there to be a decrease in costs which could either result in the firm making more profits however this could allow the firm to lower their prices which means that they could attract more customers to their products. The merging of these businesses means that the customer is then able to receive either lower prices for the products that thy ear receiving or this could also mean that the businesses quality is then increased which means that the firm is also benefited by their increase in quality and popularity.  

Vertical integration affects smaller institutes because multi national media institutes are then enabled to push out the competition.  Independent film studios will not have the same advertising space as HBO or Warner Bros. Warner bros films is seen as a superior film studio as they have more finances and a larger space in the market that allows them to potentially have a better gap in the market.

Vertical integration benefits society because it provide3s many with better opportunities for investment. This means that growth and expansion not only benefits those internally but also externally. This is because those within the business will be benefited because they are fewer redundancies made as they require more staff for their expanding businesses. Furthermore by expansion this allows there to be and improvement upon not only the structure of the firm it’s self but it also contributes to the structure of the employee’s system.

People are benefited internally as there is a large decrease in the transaction costs between the firms working together. This also links to the fact that the supply and demand chain is then benefited as the chain becomes synchronized and begins to flow in a better structure. Higher investment contributes to this as well because by merging these companies together this allows them to have a better end product as they are capable of creating better end products. By working together these companies are ten able to become whole and allow them to define a structure between all of the companies and how they produce and distribute their products effectively and evenly.

Vertical expansion is good for the businesses economy as the growth of the business means that they are capable of producing goods that are need and are able to make them specific to the market that the product is then distributed to. Expansion then ensures the supplies and the demand for them as the large business expansion means that the business is then well established as the business conglomerates are all well know. This finally results in a much more efficient business that also has lower costs and then can achieve more profits.

Finally many media conglomerates own television programs. These channels then show and help to produce content from these parent companies. These help to advertise the main parent company as they show advertisements on these stations this then allows there to be more publicity about the stations. This also then helps to eliminate the other competitors in the market as they can get free advertising.