The Impact of Forward and Backward Integration on Microsoft’s Performance and Sustainability in America

 

Introduction

In the course of developing this dissertation, I will be the impact of forward and backward integration on Microsoft′s performance and sustainability in America.  The paper will be focusing on investigating how vertical integration may influence the operating performance and sustainability of an organisation in the contemporary business world. According to Joyce and Paquin (2016), Vertical integration (VI) which encompasses both forward and backward integration strategies is frequently used in overcoming market challenges and thus boosting the performance and competitiveness of an organisation. Thus, the focus of the dissertation will be to determine the correlation between vertical integration on performance and sustainability following a case study of Microsoft Inc.

Background

In this dissertation project, three themes will be investigated to determine the effects of vertical integration on a firm are which are performance, inventory turnover, and sustainability. With respect to performance, the impact of vertical integration on the performance of a firm is a subject that is often addressed in economic and management studies. However, the conclusions are contradictory as some studies find a negative impact while others indicate a positive one on operational performance. Vertical integration is a business model that fell out of tech companies' favour since companies such as Microsoft have achieved immense success in specialising in their value chain are highly competitive. Hence, there is a need to establish how the shift from the horizontal to vertical business model might affect the firms’ performance.

Inventory turnover is another theme that the research project will seek to explore. One of the main challenges that are faced by tech companies in manufacturing as well as distribution lies in managing inventory and more specifically inventory turnover. Vertical integration is considered an effective approach to alleviating the challenges that are associated with the supply chain. From the management perspective, large companies including those in the tech industry are pursuing vertical integration to refine their management of inventory. The third theme that will be investigated through this research project is sustainability. While operational efficiency is vital in boosting the performance of a firm, there is a need to focus on achieving sustainability by retaining a competitive advantage. Thus, the study will seek to establish the influence of vertical integration on Microsoft’s sustainability.

Problem Statement

In today’s 21st century, businesses are operating in a globalised market that is characterised by intense competition as firms compete for a significant market share. Both forward and backward integrations allow organisations to determine how to structure their operational strategies to achieve a competitive advantage. Vertical integration is a business model that is adopted to gain control over the organisation’s supply chain leading to operational efficiency, increased production, and competitiveness. The supply chain approach allows a company to achieve the objective of attaining a sustainable supply chain. Vertical integration is a paradigm that is focused on improving all the core competencies of a business, which leads to cost-saving, competitiveness, and improved performance. However, even though vertical integration strategy leads to an increased organisational performance by creating efficiency in the supply chain, existing literature shows the lack of consensus on the applicability of the model to tech manufacturing companies compared to service firms. Therefore, the research project will seek to establish the validity of these doubts by following a case study of Microsoft being a tech manufacturing firm.

Aim and Objectives

Research Aim

• To investigate the impact of forward and backward integration on Microsoft’s performance and sustainability in America

Research Objectives

• To determine the impact of forward and backward integrations on Microsoft’s performance in America
• To determine the impact of forward and backward integrations on Microsoft’s inventory turnover in America
• To determine the impact of forward and backward integrations on Microsoft’s sustainability in America

Research Questions

• What are the impact of forward and backward integrations on Microsoft’s performance and sustainability in America?

Literature Review

Introduction

Vertical integration is an influential business model, which is an empirically noticeable trend in the global market, particularly in the manufacturing industry. The literature on the adoption of Vertical integration in the business world and its implication is extensive. The objective of this literature review is to provide an in-depth critical analysis of existing literature. This section provides empirical findings from existing literature on the effects of vertical integration on the performance and sustainability of a firm. The focus is to establish the strengths and weaknesses of the model in influencing performance and sustainability. However, the formerly dominant approach has recently been abandoned in the last two or so decades after tech firms and manufacturing companies realised that focusing on their competencies while outsourcing on others also leads to competitiveness and sustainability. However, the findings of recent literature indicate that vertical disintegration has not attached the anticipated performance outcomes.

Vertical Integration and Organisational Performance

Empirical evidence supports the notion that vertical integration creates different economies, which influences operational and organisational performance positively when utilised under market failure conditions such as market uncertainty, demand variability, and transaction cost. However, reviewing the existing literature on vertical integration, it is evident that the findings on its effects on performance are contradictory. In a systemic review study by Kaiser and Obermaier (2020), a negative correlation between vertical integration and performance was established. The study established that it is only through vertical disintegration that continuous performance increase is achieved. Andreou, Louca, and Panayides (2016), however, argued against this citing that vertical integration is vital in enabling a firm to establish how to structure its operations in a way that enhances its competitiveness. The evidence supports that while core competencies might allow the companies to increase their performance, most of them are unable to sustain the development as a result of a competition which disrupts this business model. Ataseven and Nair (2017) also supported the findings that vertical integration has a positive contribution to operational and organisational performance, citing that it improves the overall management of the supply chain. In today’s business setting where firms are operating on a large scale, vertical integration appears to enhance their ability to effectively manage their supply chain.

According to the resource-based view (RBV), the success of vertical integration is determined by the competitive advantage of an organisation within its supply chain. In the study involving manufacturing firms in the U.S, by Wan and Sanders (2017) found that vertical integration hurts performance for firms that lack predominant capabilities and resources within their supply chain. Therefore, capabilities only lead to increased operational performance if they are unique, rare, and not imitable. Heeringa et al. (2020) supported the finding citing that well-established companies can mainly benefit from the vertical integration model based on their resourcefulness and capabilities. Operational performance is achieved by providing high-quality control and standards on both input and output. A high level of vertical integration can boost operational performance and competitive advantage.

Vertical Integration and Sustainability

The application of vertical integration is to enhance the competitiveness of an organisation leading to sustainability. For globalised companies, managing the supply chain is one of the most important aspects of the business as it determines its overall performance. The study by Helfa and Campo-Rembado (2016) found that in the manufacturing industry, vertical integration contributes to improved coordination and integration of the supply chain which leads to improvement in operations, inventory management, and ultimately financial performance. The essence of integrating the supply chain is to ensure that a firm has a smooth production process.  Sutduean, Singsa, Sriyakul, and Jermsittiparsert (2019) support the findings citing that the objective of adopting vertical integration is to scrutinize the supply chain system. By diminishing the challenges associated with supply, lead to effectiveness in managing production and operations.

Ponomarenko and Sergeev (2016) agree that the impact of vertical integration on sustainability is huge although it takes place discriminatively. Vertical integration not only improves the performance of organisations but also counters the overall impacts on competitiveness and sustainability. Sroufe (2017) argues that sustainability is mainly achieved by small firms given that large and established firms are well-positioned. Hence, competitiveness is determined by the nature and size of the business.

The literature findings illustrate that vertical integration has a significant impact on a firm’s performance and sustainability. The model helps in boosting the performance of the organisation by increasing the efficiency of operations which leads to increased production (Bonilla et al., 2018). On the other hand, sustainability is achieved based on the ability of the organisation to retain operational efficiency and high financial performance (Siva, Gremyr, and Halldórsson, 2018). 

In conclusion, in the last two or three decades, the model has been used widely in boosting the management of supply for large organisations which are seen as a driver for competitiveness and increased financial performance among firms. As posited by Joyce and Paquin (2016) in the globalised business landscape, value chain efficiency and increased use of vertical integration have been dominant business strategy over the years.

Methodology

Introduction

This chapter will provide a description of the research methodology to be occupied by the dissertation. In detail, this section will outline the conceptual philosophy, research strategy, data collection process and methods, data analysis, and ethical considerations.

Conceptual Framework/Philosophy

The study will occupy interpretivism since it is qualitative research. The basic advantage of the approach is that it provides a comprehensive description as well as analysis of the subject of research without narrowing the scope of the study and the extent of the participants’ responses (Alharahsheh and Pius, 2020). The objective is to interpret the concept of vertical integration and to determine its impact on performance and sustainability. For the inductive approach, I will begin by making a specific observation, which will allow the production of generalised theories and conclusions. An inductive approach is beneficial as it considers where the effort of the research lies and is suitable for a small study sample.

Strategy

An unstructured survey is the selected strategy. An unstructured survey is deemed as appropriate as it helps in maximizing the collected data. Also, it does not limit the scope of the research given that it offers the researcher flexibility and it, therefore, becomes easier to capture the information that was not intended but aligns with the needs of the study. The strategy will therefore help in gathering maximum data hence ensuring that the study is credible and reliable.

Data Collection

In-depth interviews and semi-structured questionnaires will be utilised as the data collection tools. The tools are easy to use and they lead to the collection of maximum data in support of the research subject. Besides, the methods are appropriate as they provide flexibility while ensuring that the researcher builds positive relationships that prevent resistance which might affect the credibility of the study. The questionnaire will be used as the guide for the interviews.

Data Analysis

Content or thematic data analysis will be used to analyse data collected from the interviews and questionnaire. The thematic analysis involves summarizing, analysing, and classifying data into specific themes and sub-themes in alignment with the aims of the study (Belotto, 2018). Therefore the data will be classified into three themes, performance, sustainability, and inventory turnover.

Proposal Plan

Gantt chart

Some of the tasks that I identified as critical in the accomplishing the goals of the research project include topic development, research proposal, literature review, methodology, data collection, data analysis, results and discussion, proof reading the paper and submission. The tasks are in the given order as they will take place chronologically as illustrated. The objective is to ensure that with the successful completion of one task, this builds a foundation for the other. The tasks must be completed in order for the project to be successful. The most important is the topic selection and proposal development. The proposal will serve as the guide for the entire project and it is therefore important to ensure that the selected topic is not only relevant but also feasible. The tasks are allocated specific time based on their complexity and length.

Several problems are likely to be experienced along the way. However, if a problem is experienced such as in setting milestones, I plan on consulting my professor and supervisor for advice and guidance. In addition, I plan to rely on building good relationship with others to ensure that any possible challenge is countered without fail. Also, conducting thorough research is critical in overcoming the challenges which cannot be avoided. Hence, as a researcher I am prepared to deal with any rising issues during the process of developing the dissertation hence ensuring that the objective of the research are achieved and that the outcomes are reliable and credible.

 

 

 

 

 

 

 

 

 

 

 

 

Reference List

Alharahsheh, H. and Pius, A., 2020. A Review of key paradigms: positivism VS interpretivism. Global Academic Journal of Humanities and Social Sciences, 2(3), pp.39-43.

Andreou, P.C., Louca, C. and Panayides, P.M., 2016. The impact of vertical integration on inventory turnover and operating performance. International Journal of Logistics Research and Applications, 19(3), pp.218-238.

Ataseven, C. and Nair, A., 2017. Assessment of supply chain integration and performance relationships: A meta-analytic investigation of the literature. International journal of production economics, 185, pp.252-265.

Belotto, M.J., 2018. Data analysis methods for qualitative research: Managing the challenges of coding, interrater reliability, and thematic analysis. The Qualitative Report, 23(11), pp.2622-2633.

Bonilla, S.H., Silva, H.R., Terra da Silva, M., Franco Gonçalves, R. and Sacomano, J.B., 2018. Industry 4.0 and sustainability implications: A scenario-based analysis of the impacts and challenges. Sustainability, 10(10), p.3740.

Heeringa, J., Mutti, A., Furukawa, M.F., Lechner, A., Maurer, K.A. and Rich, E., 2020. Horizontal and Vertical Integration of Health Care Providers: A Framework for Understanding Various Provider Organizational Structures. International journal of integrated care, 20(1).

Helfat, C.E. and Campo-Rembado, M.A., 2016. Integrative capabilities, vertical integration, and innovation over successive technology lifecycles. Organization Science, 27(2), pp.249-264.

Joyce, A. and Paquin, R.L., 2016. The triple layered business model canvas: A tool to design more sustainable business models. Journal of cleaner production, 135, pp.1474-1486.

Kaiser, F. and Obermaier, R., 2020. Vertical (Dis‑) Integration and Firm Performance: A Management Paradigm Revisited. Schmalenbach Business Review, 72(1), pp.1-37.

Ponomarenko, T. and Sergeev, I., 2016. Quantitative methods for assessing levels of vertical integration as a basis for determining the economic and organizational sustainability of an industrial corporation. Indian Journal of Science and Technology, 9(20), pp.94482-94482.

Siva, V., Gremyr, I. and Halldórsson, Á., 2018. Organising sustainability competencies through quality management: Integration or specialisation. Sustainability, 10(5), p.1326.

Sroufe, R., 2017. Integration and organizational change towards sustainability. Journal of Cleaner Production, 162, pp.315-329.

Sutduean, J., Singsa, A., Sriyakul, T. and Jermsittiparsert, K., 2019. Supply Chain Integration, Enterprise Resource Planning, and Organizational Performance: The Enterprise Resource Planning Implementation Approach. Journal of Computational and Theoretical Nanoscience, 16(7), pp.2975-2981.

Wan, X. and Sanders, N.R., 2017. The negative impact of product variety: Forecast bias, inventory levels, and the role of vertical integration. International Journal of Production Economics, 186, pp.123-131.