In this article we will try to explain what the forward integration, how it is applied and what benefits it can bring us in practice. Forward integration It is the one acquired by any company or manufacturer that decides to take part in the final stages of the production process, such as the distribution. This integration means that companies eliminate intermediaries and have direct contact with retailers.
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The consequences of forward integration are easily deductible, as is the case with a considerable reduction in costs in the distribution channel. The distribution chain typical that is usually applied is that the production company sells its goods to companies or clients wholesalers who sell them to retailers and ultimately make those goods reach the consumers. This model of distribution chain belongs more to the last century since in recent decades it has been possible to verify that a The company can perfectly assume the role of intermediary, reducing costs both for the manufacturer and for the final consumer and having superior control of the distribution chain and having a more direct contact with the consumers.
As we can see, the advantages of forward integration are several, but it is not a hegemonic strategy because not all companies can apply this type of strategy. Vertical integration, although it supposes a saving in distribution costs, previously supposes that the company has to make a large outlay of money to be able to assume that control over the chain of distribution.
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As we mentioned, not all companies are capable of applying this strategy, either because of their capital, or because of the experience they have. The lack of experience in certain points of the distribution chain is one of the main reasons why not all companies are able to include the integration strategy towards go ahead. In order to implement this strategy, it is necessary for the company to have people who have experience in wholesaling and retailing, or who know about it. If this is not the case, the company must hire people who have this knowledge previously or who allocate a part of their capital to train company people in these areas and that in this way the company can introduce this strategy in the future.
