June 15, 2015 Amara

Diversification & Growth in Business – Part I

When companies get good at what they are doing, I mean really good, I imagine the next viable step would be to expand vertically.  Introducing you, Brand X-traordinary, to the markets that have eagerly been anticipating your arrival, so they may experience that one SUPERB thing you do that makes you special.  However, for some, expanding horizontally seems to be the new course of action.  For example, the crowd-sourced taxi cab company Uber is testing a delivery system for groceries, couriers and meals in select cities.  So how do you know which course of action to take?  Today we’ll take a quick look at the pros and cons of vertical growth, with a follow up on horizontal growth on our next post.

Vertical integration is where a company envelops or creates departments that they have previously outsourced so they are less dependent on outside companies.  This allows the company to cut costs and have more control overall.  It can include various resources such as production, distribution, logistics and marketing.  The company’s best bet to expanding the business is to dig deep into their existing clientele and contacts, while also sharpening their skills and becoming a specialist in their industry.

This is where a lot of entrepreneurs that run on structure and repetition succeed.  They do what they do well, so well that they become known for that one product, service or experience.  Expansion within their market share is key.

An example of vertical growth in recent years comes from Boeing.  They chose to purchase a factory that was making parts for their 787 Dreamliner.  That move will help to reduce the amount of supply and assembly issues that has knocked the Dreamliner more than two years behind schedule.

Vertical growth isn’t for everyone, stay tuned to learn more about horizontal growth and see if it’s the next step for you.

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