10 Ways to Beat Competition: Way 8 – Using Business Integration
Integration can be explained as a process of attaining close and seamless coordination between several units to form a bigger unit. In a more simple term and for the purpose of beating competition, we can refer to integration as coming together of small businesses who are inter-dependent to form a larger business; such that individual unit’s customers become every member of the unit’s customer.
As earlier stated, ‘the battle against competition is epic and it is crucial to business survival’, and considering this, business should be willing to test the limits to stay ahead of competition. Testing limits in this case, means the willingness to go into agreement with other small businesses who are on the same horizontal or vertical chain with it, for the purpose of increasing market share and staying ahead of competition.
Types of Integration and how they help stay ahead of competition
- Vertical Integration: Wikipaedia defines Vertical Integration as an arrangement in which the supply chain of a company is ‘owned’ by that company. There is a kind of inter-dependency that ensures that the output of one business is the input of the other, such that a single customer has to pass through each of these businesses. Implementing this strategy as a means of beating competition, requires one small business to enter into business arrangement with other small businesses on the supply chain.
For example, on a supply chain for poultry farming we have: Battery Cage maker – hatchling sellers – Vaccine sellers – Feed sellers — Chicken Buyer
In an integrated settings, some small businesses in this field come together and create a league of business, such that they have a synergized referral system; for every customer that comes in contact with one, is served by all. This referral system ensures that each of this small business stays ahead of competition in that business class by claiming a larger share of the market.
- Horizontal Integration: Wikipeadia defines horizontal integration as the process of a company increasing production of goods and services at the same part of the supply chain. This is different from vertical integration in that even though the businesses are inter-dependent, customers can request for one without necessarily needing the others. To beat competition, small businesses within same industry can come together to form a league of business and increase their market share based on referrals.
For instance, the fashion industry comprises of different small businesses such as; photographers, videographers, makeup artists, event planners and fashion designers. These small businesses can come together and reach an agreement to do strict referrals amongst themselves, such that rather having individual customers, they end up with an aggregated number of customers. One customer can end up patronizing all of them, if they have a strong referral bond, like a single business.
The strength of integration is in the referrals. For example if business A has 6 customers, business B has 10 customers and business C has 7 customers, if they integrate their businesses (strict referral policy) and become a league of business, then each business ends up with 23 customers; increased market share, putting them ahead of competition within individual business’ niche.
Integration takes a lot of trust and compromise, but if the business is to survive some sacrifices have to be made. Stay tuned for more when 10 ways to beat competition continues with way 9.