Horizontal vs. Vertical Growth as a Corporate Strategy

Subject: Strategic Management
Pages: 6
Words: 411
Reading time:
2 min
Study level: Bachelor

A company focused on further growth might have employed horizontal or vertical strategies presupposing different methods to generate benefits. The first one involves expanding existing products and services to new markets hoping to acquire new clients and guarantee an advantageous strategic position. Additionally, companies might try to enter a new business domain in an attempt to increase their power and influence. This growth strategy has several advantages and disadvantages that a company should consider before its use. First of all, it might be highly beneficial and ensure that an organization can enjoy a more powerful position because of the income from new markets. Second, the expected return on investment can also be high and create the basis for the further rise of the company.

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At the same time, the disadvantages include the need to perform an in-depth analysis of a new market and its associated challenges. It demands additional investment, experienced specialists, and the creation of a detailed plan of expansion. Moreover, the high level of competition peculiar to other markets might deteriorate outcomes and precondition the need for new, more effective tools to generate a competitive advantage.

Vertical growth is another type of strategy that companies might employ. It presupposes that a unit focuses on scaling products or services inside the existing market by adding new options, qualities, or features to existing offerings. This approach is widely used by companies that devote much attention to constantly upgrading their products and services. The advantages include becoming a more influential player in the existing segment and overcoming the rivalry. Moreover, it is viewed as one fast and effective way to create the basis for new projects.

However, the model has some drawbacks, such as the demand for high investment and the need for trained and skilled workers. They should be ready to generate new ideas about the already existing products and ways to implement them. At the corporate level, it might demand strengthening of already existing management patterns to ensure the more stable and effective functioning of various institutions and the necessity to distribute tasks effectively to guarantee new models are offered.

Altogether, both horizontal and vertical strategies have their advantages and disadvantages. It means that the choice of the way to grow depends on the company, its current position, and the plans for future expansion. The correct understanding of the situation might help the firm to evolve by employing one of the approaches and create the basis for the next achievements.