It is insufficient to consider the significance of business integration only from a technical standpoint in the current digital environment. It’s easy to lose sight of the purposes that today’s systems, software applications, and business processes are meant to serve, which are typically to provide customers with better products and services and to foster business growth.
Today’s business process integration software focuses on much more than just linking various computer systems or applications. Creating methods for your digital ecosystem’s participants to interact naturally and support the outcomes that are significant to your organization constitutes true business integration. There has never been a better reason to concentrate on a business integration strategy that embraces that sentiment and connects, enables, and optimizes your larger ecosystem because, as we were taught in school, the whole is greater than the sum of the parts.
The number of integrations that an enterprise must manage can quickly spiral out of control. This causes an environment that is incredibly complex, which can impede operations and aggravate IT managers. A platform for ecosystem integration makes connectivity workflows and data flows less complicated. You have time to concentrate on the crucial tasks, like enhancing your company’s bottom line, because the difficult work has been done for you.
Enterprises can view any type of data’s entire life cycle thanks to end-to-end data visibility. You can track, monitor, and manage data across EDI systems, cloud services, and SaaS applications using a centralized integration platform. Additionally, it gives business and technical users real-time visibility, enabling persona-based insight and intelligence into your crucial data flows. You will have access to all the data you require across your entire digital ecosystem, and if you don’t, advanced reporting and alert notifications will be sent to you.
We are all aware of how inconvenient workarounds and custom code in our outdated technologies can be. Because of their ability to automate processes and manage business operations, centralized integration platforms are able to lower error rates, processing times, and potential chargebacks. Employees no longer have to spend their time on laborious and time-consuming tasks like data entry because end-to-end workflows are made possible by the built-in data movement and data transformation capabilities.
Say goodbye to the headaches caused by the expensive legacy systems and one-off applications that your teams are currently managing, and welcome to a single platform that makes managing your EDI, application, and data integration workflows a breeze. By combining solutions, you can reduce maintenance expenses and increase operational effectiveness, allowing you to direct funds and resources toward your core business services.
In addition to being more expensive, an unintegrated IT environment also makes it more challenging to manage all security requirements. It is very laborious to manage the risk and security requirements of each system and application separately. It is easier to protect your data and the data of your customers when using an ecosystem integration platform, which enables organizations to use secure protocols and encryption techniques and layer in additional security tools in a more manageable way.
Horizontal and Vertical Integration (Business Growth Strategy)
Five Types of integration for businesses
Depending on where the purchasing company is in the supply chain, there are five typical types of business integration:
1. Horizontal integration
When a company buys another business that conducts related business at a similar supply chain level, it engages in horizontal integration. The acquiring company’s goal is to grow its market share. The most typical type of business integration between two companies in the same sector and level of production is known as horizontal integration. For instance, a company that staffs occupational therapists might be acquired by a company that staffs physical therapists.
2. Vertical integration
Vertical integration is the process by which a business acquires another firm in the same sector but at an earlier stage of production. For instance, a game production company might purchase an artificial intelligence company.
3. Forward integration
When a business acquires a business in the same industry but at a later stage of production, this is known as forward integration and is a type of vertical integration. For instance, a podcast streaming service that currently hosts other shows starts producing and streaming its own content after buying a production company.
4. Backward integration
Backward integration is the process by which an organization merges with a supplier of a good or service. Backward integration is also a form of vertical integration. For instance, a furniture retailer might acquire a business that modifies wood to make furniture.
5. Conglomeration
A less frequently used type of integration is a conglomeration. This happens when a company buys out a firm that offers an unrelated good or service. The main objective is diversification, which enables business expansion in new fields. The acquiring company is referred to as the holding company, which is in charge of the goals and policies of the entire group, but each company runs as a separate enterprise. To increase brand recognition, a lumber company, for instance, might purchase a sports team.
What is integration in business?
The process of one company purchasing another and integrating the operations is known as “business integration.” It can be through acquisition, merger or takeover. Integration can occur in a variety of industries, at businesses of all sizes, offering a range of goods and services. A common example of a company that a larger company might buy and integrate to improve their client services is a startup in the technology industry.
Industries where companies can benefit from integration
While integration can benefit both small and large businesses in any industry, those in these sectors are more likely to see more tangible benefits from merging. Here are some sectors where businesses may gain from vertical or horizontal integration:
Potential benefits of integration
There are many potential advantages to integration in business including:
Growth
Integration is a practical and efficient way to increase a company’s size. Growth can help companies provide higher workplace standards for employees. Additionally, it can give businesses more resources to increase their sales territories and enhance their goods.
Product or service improvement
Integrating two companies can lead to a higher-quality overall product. To make their overall software product more secure for customers, for instance, a large technology company might merge with a startup that has new security technology.
Higher profits
Higher profits for the combined companies can result from a company’s acquisition of and integration of its services with those of a competitor. Higher profits for integrated companies can also be a result of growth and product improvement.
Cost savings
The acquisition company’s production costs may be reduced by horizontal integration. For instance, if a midsize sports equipment company buys another company of the same size and industry, the combined company can operate more productively and efficiently.
New market access
Companies may be able to sell in new markets or regions thanks to integration. A women’s clothing company could gain access to a new market segment, for instance, by integrating with a fashion label catering to teens and young adults.
Increased efficiency
In many cases, integration can lead to greater efficiency. This may have an impact on other advantages of integration, such as higher profits, because a company that operates more quickly can close more sales. Greater efficiency, for instance, could result from a large shoe company purchasing a small distribution business that can boost shipping productivity.
Lower competition
A company may experience less market competition if it acquires its rival. A business may have more control over its pricing if there is less competition. Additionally, it presents a chance to increase sales territories and create additional goods or services that can be provided to clients.
More variety
Combining businesses can enable the larger resulting company to provide a greater range of goods or services. For instance, if a hotel chain buys a company that rents out vacation homes, the integration may lead to the company offering guests both hotel rooms and vacation homes.
More market power
When two businesses in a given sector combine to streamline their operations, they can exert more control over their suppliers and distributors. For instance, if two construction companies combine their services, they can strike more advantageous deals with their distributors and suppliers, giving the larger business more resources and boosting profits.
Potential disadvantages of integration
There are also potential disadvantages to integrating companies, including:
Reduction in quality
A monopoly occurs when one business is the sole provider of a good or service. Lack of competition may make a company less motivated to keep up the quality of its goods. It can also lead to low production. By abiding by monopoly laws and regulations and ensuring that there will still be competition even after a merger, a business can avoid this integration disadvantage.
Lower returns
Sometimes a company buys another with the hope that the integration will be financially beneficial, but the integration doesn’t turn out to be as successful as the buying company had hoped. An organization can avoid an integration that lowers valuation by thoroughly investigating and vetting a company it intends to acquire. This can also guarantee that a business is making an acquisition at a fair price.
Less flexibility
Because a company’s corporate structure can become more complex as it grows, the larger company that results from integration may be more difficult to manage. Companies thinking about integrating can prepare for how it will manage the increased number of employees to avoid this loss of flexibility.
FAQ
Why is integration important in business?
Business integration aims to use IT to open up new business opportunities. To improve product transportation or other supply chain activities, for instance, a business might use internet of things devices and artificial intelligence.
What are the 4 types of integration?
The advantages of business integration By automating and accelerating processes that businesses previously performed manually, business integration significantly reduces the likelihood of employee error. Because of the significant increase in overall efficiency brought about by those solutions, operating costs are decreased.
What are the four types of business integration?
- Backward vertical integration.
- Conglomerate integration.
- Forward vertical integration.
- Horizontal integration.
