Horizontal Integration

Overview:

The introduction of the company Davis Service Group; which is the biggest company in the UK and Europe in the provision of textile maintenance service (in the main) along with the wash room services, laundry, dust control mat and work wear rentals. Besides that it worked even in the US (Davis services Group) and their focus to grow was very straight forward that is why they give preference to horizontal integration in 2002 and take over Berendsen company (leader of the market of Europe in the same nature of business), the acquisition of the company was helpful as it was not much difficult for the Davis group to take over the Berendsen but also Berendsen was the market leader but not well off like Davis Group.

The leading company of the textile in Europe is berendsen with 80 service stations and 7300 employees. The work of these service stations is to manage the laundry, maintenance, textile rental, and supply. It also has the supply and manufacturing basis in Sweden and Estonia.

Information about Berendsen

Two major ways on which company may grow

Horizontal integration:

The horizontal integration in the normal words can be expressed as the expansion of the existence business into the same nature of the business, for example if the business is running in some particular field like trade of some particular goods or services is extended into the same sort of product called horizontal integration. We can give the example of the merger of Morrison’s with subway (can be a good example of horizontal integration), hence this is the best known Britain’s horizontal integration merger in Feb, 2004. Which was according to growth and expansion of the business was the right and wise decision.

(Flouris, T. G. And Oswald, S. L., 2006)

Examples of horizontal integration of any company

Horizontal integration of the business can be understandable as the companies which are working throughout the world when ever these are merging or taking over the other companies, firms or bodies actually these or they are buying the shares of the company and become the owner of the company happened in the same sort of business. There are few examples of such companies below, which did the integration both horizontally as well as vertically. Though I discussed earlier example of the horizontal integration i.e. Morison’s with the subway. Forgetting the after affects regarding the situation in the stock market the integration made the positive result in the expansion and growth of the business.

Vertical integration

the vertical integration can be illustrated as the expansion of the business in some irrelative nature of the business, means the expansion in some other nature like a company involves in selling the goods only and expanding the business in providing some services means add services as a part of their business is called vertical integration.

Examples of vertical integration of company

Examples of the companies which have extended their businesses in non similar way of business are called vertical integration of the companies; the example of such integration made by the company wall mart and its takeover to the Asda and then merger of kingfisher also is the example of the vertical integration of the companies. This take over was the example where three different type of the businesses joined together to put the business grow further ahead, like Davis Services Group did before with sunshine and other units of the business.

Option available to Davis Company in making growth strategy

During making the decision of the company of Davis services the company had several options available to grow but the company chose to go for the horizontal integration where they carry out the business in full strength as the acquiring of the Berendsen company by Davis Services Group really become helpful for the Davis group of company to grow in already strengthen gripped up market by Berendsen.

the options available to Davis was first of all to see that which markets were the most suitable to them to carry out the business, which should be suitable regarding the market analysis like, language, currency, traditional and cultural differences etc. though they had to take the decision after passing out from all these points. It is the law of the business that I should be running according to the demand of the customers. So they had choices of expanding accordingly the order they used to follow in their nation and they succeeded as European union is the most reliable market for the business growth.

How these options would benefits the company

The company having the same nature of business running but not very much profitable as Davis is in the Britain. Hence there was the financial assessment of the company were taken by the Davis completely where the company is being watched in the way to its financial responsibilities, current assets, current liabilities, companies good will etc is being calculated after that Davis group assumed the present condition and manage the funds by selling the share of £150 million as well as £425 million borrowed from the new bank.Q2: Business grows when they have the resources to expand and opportunities exist for growth. Explain how the acquisition of Berendsen provided such a good opportunity for the Davis Service Group.

How businesses get the growth

The Davis services Group were the leader in their own market in UK, the need to expand was the great opportunity to get growth even beyond the limit of one nation. For that reason the company had an opportunity to grab the already working firm names berendsen.

Financial requirements

Capital needed to start and capitalise the business is the basic requirement, we should know how capital will use in business also the equity that will be provided for the business. The source should be well known if the loan for initial capital is taken on security replacement of equity.

Current business position

It is also necessary to determined the current position of the business at the time of buying the business, hence same strategic step has been taken by the Davis group as per on acquisition of the company berendsen.

DVSG‎ – Davis Service Group PLC, The(LON)‎
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Disclaimer
Digital Look, Davis Service Group (DVSG), viewed 13 July 2009, http://www.digitallook.com/companyresearch/10168/Davis_Service_Group/company_research.html

Major achievements

It includes the detail of the developments in the company which includes patents and prototypes of the company and any crucial contracts that needs to be in place of product development. Statement of purpose, Make it easy for the reader to realize at first glance both your needs and capabilities.

Entrepreneur, Elements of a Business Plan, viewed 13 July 2009, http://www.entrepreneur.com/startingabusiness/businessplans/article38308.html#ixzz0LVWlPcRU

Acquisition of the berendsen by Davis was really a good decision

After getting followed up with all the necessary elements of growth to a businesses of any nature it is necessary to see the acquisition of the berendsen and Davis weather companies took really a good decision or what outcomes showed it decision wrong.

According to Mr. Roger dye the whole of the acquisition was very pleasant and basic reason for the takeover was to lead and grow the market, he said the reason why they chose berendsen was that

It was leader of the Europe market, just like Davis Group in UK.

He said that geographically still UK is the main market but the European market was growing rapidly and still doing so.

The offered qualities of the company are

Moreover he said one of his another interview where he was briefly discussing the company’s performance

Strategic Growth Concept, The Elements of the Business Plan, viewed 13 July 2009, http://www.strategicgrowthconcepts.com/services/Business-Information-Articles_I33/Article-The-Elements-of-the-Business-Plan_A30.html

“Competence in the operations that we manage – a safe pair of hands (what we say we are going to deliver, we will deliver). Ethically very strong, high levels of trust etc. A well supported progressive dividend policy. I think these are the sort of things that come to mind.”

ROGER DYE, FD of Davis Service Group says key challenge and opportunity is to deliver on Sophus Berendsen acquisition, viewed 13 July 2009, http://www.twst.com/notes/articles/lys024.html

Q.3

What aspects of European Union markets have particularly encourage any of the growth strategies?

Discuss how the European Union markets encouraged the strategies of growth

Business strategically growth of the Davis group after the acquisition of the berendsen company, how it is being supported by the European Union for the better growth of the strategic business.

The European Union market encourages the growth of Davis Service Group with the berendsen in Europe very much.

If you are going to put setup of the business overseas it enables you growth specially if it is EU, with500 million potential customers and single market of 27 countries. As common currency is used in the whole market of currency it is easily doing the business (buying and selling) in much of the EU and a skilled workforce. Expansion overseas business has to take a number of factors into account. These include:

I. Peace and stability

Before becoming a real place of peace for the first half of the 20th century one can’t think Europe as a united state, only one person have thought about it.

French foreign Minister Robert Schuman give idea originally given by Jean Monet, on 9 May 1950, proposed establishing a European Coal and Steel Community (ECSC). Its production is dealt under the high authorities of the union.

II. Safety and security

To make the region work suitable to work, business and the living standards, lots of efforts are under observations specially the effort of combine work of the police from different countries are the effort to meet any terrorist activities. Hence this was also the very strong point to work in the area from the growth point of view in strategic thinking.

III. Economic and social solidarity

Basically it is made to bring change in political stability and solidarity but now EU has become the icon of economic and social solidarity as a rapid and fast growth is going on.

To meet their contingencies the EU made funding to meet any future unexpected loss. Thus providing better access to outlying regions and boosting trans-European trade.

IV. Values

EU stands for a view of humanity and a model of society that the great majority of its citizens support.

The Davis decided to grow its industry in the EU (European Union) Market. It sold other parts of the business to put more effort to make textile business well especially in the market like EU. This allows company to re-invest their profits and expanding the business.

(Swann, D., 1992)

Q no. 4

If the company were to expand into new areas of the globe, where would you recommend and why? What factors might encourage or discourage this choice?

Which areas would be more focused or suitable for the company’s expansion?

If the company has to expand somewhere in the near future, to me it will be expanding the china market because the market in china is having a lot of scope even more than the European Union market.

Factors that encouraging the choice of expand

here I am going to talk about the important factors which are necessary in the expansion of any company weather it is the type of integrations (vertical or horizontal), besides the thinking of merging and taking over we are to discuss some of the factors which can be effective in making the expansion use full as I discussed above the market which I think is most suitable worldwide for the expansion of the business.

Davis needs to see some company at china for merging or taken over as the Chinese companies also will be quite very much cheaper than the rest of the world .

Factors discouraging the choice of expand

Globally managing the staff is quite a big problem as the distance of china and Britain is very far.

The timing difference according to me is the biggest problem in the assessment of efficiency of work and better communication

Due to big difference in the region the shipment charges can cost high.

Q.5 how would you advice the company to go about making a decision on their strategic choice?

Company’s choice of making decision should be strategic

When a company forms it is passing from the different several phases at the time when it reaches to its peak in term of business development as well as profit ability and the market grip. The strategically approach of the business tells to do the expansion hence if the company like Davis Service Group which was the market leader in its field which I already discussed in early tasks of the report.

If we see that choice of making decision towards the expansion of the business in some new market, it could be either the emergence of new system or merging/ taking over to some already working firm. Hence in both cases the major discussion is that, the decision of expanding the business in some new market is strategic. Being an analyst we have to make sure that all the strategies should work together to improve the position of the business.

Suggestion in making strategic choice, could they do expansion or not

If the company suppose going to take the decision for expansion in some new markets they have to make few points very clear from the top to bottom. Means the company should have first of all resources to buy share or to merge the other company (resources include all the expenses even after buying the business), market situation should be already favour able to company even if need of improvement is there. Try to observe the few positive aspects of the business expansion try to go to a reason able place to expand. Try to grab either new market where no similar sort of business done before or find someplace where the chances of the growth are expected more as per reason of experience (Market like china providing good development chances).

The question that could they do that expansion or not are very important to be understand because the phenomenon of expansion is really belong to the present condition of the market situation. Hence present market situation of the company is quite very good the market grip of company over the business is too strong nothing wrong can be said because there share price also rises all the sectors where the company is working, the work is going very efficient following diagram could show us the clear view of situation of the company.

(Johnson, G. and at all, 2008)

Q.6 As a strategic consultant to the company, what other or alternative strategic measure would you have recommended to the company and why?

Recommendation to the company at strategic point of view

The company though is working efficiently along with that the areas where the company makes its decisions to get more growth is work ware uniforms 33%, hotels and restaurants 19%, health ware 29%, facilities 10% and sales and production is 9%. Hence the company is working in this kind of situation where it needs to make a concentration on so many things together at a time/ multi tasks like that but in the same nature of the business.

Compete successfully: The competition with the other competitors of the business either the big one or sets of small ones is very necessary such business strategies should come under considerations so that the market situation is all the time become under control of the company and hence the market capturing factor of some other company to grow also be kept under consideration to it.

As a strategic consultant of the company

As a strategic consultant of the company we have to follow few main points through which we can offer the company few good choices to make it well in its work.

Suppose the company is working all over well but there is one competitor arose to the market and becoming famous. Basically that happens because of the bad policies and not to having a good eye on the competitor’s activities, so the analysis for the competitor is very much advise able on the routine basis. Like the company Pepsi and coca cola almost making the same sort of brand cold drink and there is very tight competition between those two.

For meeting this level of observation the company must work hard even in order to look what is happening in the competitor’s mind as well as analyze it at early stage and try to rectify it with their better policies.

Reference

Flouris, T. G. And Oswald, S. L. (2006), “Designing and executing strategy in aviation management”, Ashgate Publishing, Ltd.

Price, V. C. and at all (1999), “The enlargement of the European Union: issues and strategies”, Routledge

Swann, D. (1992), “The Single European market and beyond: a study of the wider implications of the Single European Act”, Taylor & Francis

Johnson, G. and at all (2008), “Exploring Corporate Strategy”, Pearson Education

www.entrepreneur.com/startingabusiness/businessplans/article38308.html#ixzz0LVWlPcRU assessed on 13th July 2009

www.twst.com/notes/articles/lys024.html assessed on 13th July 2009

www.strategicgrowthconcepts.com/services/Business-Information-Articles_I33/Article-The-Elements-of-the-Business-Plan_A30.html assessed on 13th July 2009

www.digitallook.com/companyresearch/10168/Davis_Service_Group/company_research.html assessed on 13th July 2009

www.development.thetimes100.co.uk/case-study–davis-service-group–111-278-0.php assessed on 13th July 2009

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