FE 4 of 4: Marketing and Business

Marketing and Business
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Forward integration refers to a business concept in which a company (for example, a manufacturer) makes a decision to carry out retail or distribution functions by selling products directly to consumers. This business model is normally termed as “do away with the middle men” since manufacturers avoid using wholesalers to distribute or sell products directly to retailers or avoid using retailers to distribute or sell products directly to consumers. Tradition distribution channel refers to a process in which manufacturers distribute products to wholesalers who distributes the products to retailers who finally sell them to consumers. Rudolf, Dela and Francois (2013) say that in 21st century, supply chain management has evolved and as result businesses directly distribute their products to end consumers. A better illustration of forward integration is a case whereby farmers are selling their farm products at the local market, but not selling their products through distribution centers.
The functions of forward integration in strategic management are crucial for business development. It is a vertical integration that integrates business cores with its customers. It eliminates competing suppliers; develops greater capacity to come in contact with end customers; and is able to directly influence end customers. Selling company’s products directly to end customers; therefore eliminate its competitors’ products from such form of channel. This strategy develops a kind of monopoly in a market segment or local region and it is most likely to develop much attention of the company supplying its products directly to customers (Rudolf, Dela and Francois, 2013). A company can use forward integration to gain more control or ownership of customers over competitors, retailers or distributors in local markets. For example, many manufacturers nowadays are using forward integration to develop websites to sell products directly to buyers.
According to Rudolf, Dela and Francois (2013), forward integration is important in strategic management when available distributors are unreliable or expensive thus cannot fulfill a company’s distribution demands; qual...