Question

You are a private tuition teacher who conducts one-on-one home tuition in economics for senior college students. You are considering to grow your business. In particular, you are considering vertical and horizontal integration. Using the theory of the optimal boundary of the firm, discuss the make-or-buy decision as well as the scope for horizontal integration and diversification of your business. What stages of the vertical chain should you consider conducting inhouse? What other horizontal markets may you integrate into?

Answer 1

Horizontal Integration means, if a company wishes to grow it should acquire the similar company in the same industry. Through this integration the company should increase its size, diversification of service offering and economies of scale. This can help to produce more efficiently than being independent. Reduction of competition by horizontal integration leads to unavailability of choices to consumers. As a private tuition teacher, I can elaborate the teaching level, like expand the subjects which I taught. Create a high level confidence level among the consumers will attract more students. When I am becoming a part of the chain of tuition teachers will enhance the public concern towards upon me.
If I am planning to follow vertical integration, I will acquire the production process in same industry. Through this the supply chain strengthen, production cost can be reduced, capturing of high levels of profits and acquire new distribution channel. While following this vertical integration I can improve the quality of service provided. It will increase the profit level and also guaranteed for the efficiency in production. Providing new materials with different prices, low level of tuition fees and new mode of study will help to expand the production level in the industry.
The other horizontal markets which I should approach are the book manufacturing companies in low cost, companies which give new modes of technologies in education system, e-media devices etc. The horizontal integration attracts new customers and vertical integration can expand the overall production process.