BUSINESS INTEGRATION STRATEGY

Business Integration is a strategy of expanding a companies profile into manufacturing or retailing based on company's current portfolio. There are a few integration strategies which we will discuss in this topic as mentioned below :

1. Forward Vertical Integration
2. Backward Vertical Integration
3. Horizontal Integration

FORWARD VERTICAL INTEGRATION

This can be defined as a business strategy that involves forward integration where in the company expands into direct distribution and sales of its products. An equipment manufacturer wants to retail their products through their branded stores instead of giving them to a third party retailer is a good example for forward integration.
A manufacturer would take this strategy for the below benefits :
- Have complete control on inventory movement from manufacturing to retailing
- Increase profit margins
- Pass on the benefits of portion of the retailer margin to end customers by retailing goods on competitive price
- Remove middle men to improve supply chain efficiency
- To gain better control on market and product segment
- To improve customer experience
- To better understand and fulfil customer needs

This is very effective in retail when manufacturer wants to open Category Killer stores.
Please refer to blog on Types of stores to understand category killers

BACKWARD VERTICAL INTEGRATION

This can be defined as a business strategy that involves backward integration where in the an organisation expands into manufacturing of its goods. A retailer wants to manufacture their products is a good example for backward vertical integration.
A retailer would take this strategy for the below benefits :
- Cut on additional margin cost levied by the manufacturer
- Improve the quality of the products
- Improve control on supply chain and timely supply of goods
- Become more competitive in the respective product segment
- Gain better control at times of higher demand for products in market
- Ensure hindrance free supply at times of shortage of component parts or raw material

HORIZONTAL INTEGRATION

This can be defined as a business strategy that involves expansion of business by acquiring other players in the same or similar field or discipline. A company acquires huge stakes in a competitor's company or takes over the competitor's company for the below benefits is known as horizontal integration :
- Increase the market share
- Enter new market
- Create a monopoly
- Gain better control over the product segment
But this strategy is quite risky for both the organisation and the consumers. A successfully monopoly could lead to disaster because of increase in product pricing and lack of competitors to stimulate innovation in the product line. If the take over transition has frictions leading to loss of talents and resources, this can cause huge damage and financial loss to the parent organisation.

RETAIL STORE FORMATS

Retail stores fall under multiple formats. We will discuss the major classifications in retail store formats based on their line of business and product assortment.

- Chain Stores
- Department Stores
- Category Killers
- Store on Wheels
- Dark Store
- Mom and Pop store / Kirana stores

CHAIN STORES:

These are a set of retail outlets managed centrally, working for the set of goals which the organisation has put forward. They share the same business standards, management policies and operation procedures. This retail approach has wide reach across various geographic locations or even worldwide. Chain stores share the same brand and franchise retail model is also common among chain stores. A few good examples of chain stores in food retail are Subway, McDonalds, etc.

DEPARTMENT STORES: 
These stores are multi brand retail outlets catering to wide range of products at multiple price points for customers to choose from. The products range will include general merchandises, toys, jewellery, grocery, electronics, electrical, food, bakery products, home needs, baby care, etc. Good examples of department stores are Wal-Mart stores, Landmark's Centre Point and More Hypermarkets.
Department stores are further classified into supermarkets and hypermarkets based on their size and product assortments.

CATERGORY KILLERS:

These are speciality stores offering multiple brands and multiple range of products under one category of merchandise such as electronics (Croma) or Baby Products (Baby Shop Concept) or Sporting Goods (Decathlon). Offering very wide assortment in a single category at lower price points will make them "Killers" in their retail category by taking away sales from other retailers. Category Killer stores also set the industry standards and bring about changes in trends in their category.

STORE ON WHEEL:
These are moveable stores set on vans or buses catering to a special occasion or an event. For example during a Rally championship the viewers would like to purchase eatables and drinks, to cater to their needs a supermarket retailer can set up a small moveable retail store on wheels with limited set of products. Such temporary stores are low is operational cost and ensure high returns for the retailer.

DARK STORES:

Also known as dotcom centre, these are retail outlets or distribution centres that caters exclusively for online shoppers of that particular retailer. Its a large warehouse that can either be used to facilitate a "click-and-collect" service whereby a customer collects an item they have ordered online, or as an order fulfilment platform for online sales. It is not open to the public and it resembles a cash and carry supermarket where is products are arranged in slotted angles under different aisles. Usually information of orders placed online along with customer details are sent to these stores. Here picking is done for the ordered products and home delivered to the customers.
Tesco opened a "fourth generation dotcom store" in Erith in October 2013, with a much larger product range – 30,000 lines – and higher degree of mechanisation that brings items to pickers rather than requiring them to collect individual products manually (CREDIT : Wikipedia)
A good example will be Flipkart's distribution centres in India.

MOM and POP STORES / KIRANA STORES :

These are small, family run stores and the product range can be varied as per the requirement from the locality the store caters to. These are individual stores run by family members or individuals and they try to make the best business out of the individual store. These stores are usually smaller is selling area.

POP UP STORES:

There is also an emerging trend where in facility management institutions are leasing mall store space for a short period to brands for selling their merchandise. The fixtures, space and at times employees are all provided by the facility management company. Systems and merchandise are brought by the retailer. This ensures rotation of retail space and also provide fresh collection to the customers every time they step in.

Pop up stores can also be used as experimental stores to understand the catchment’s response to a retailer’s assortment or a product brand.  Or they can be setup for a holiday season or a fare.