On Tuesday, we discussed corporate-level strategies such as horizontal and vertical integration. Horizontal integration is acquiring or merging with industry competitors, while vertical integration is expanding operations backward into industries that produce inputs for a company or forward into industries that distribute a company’s products. Other corporate-level strategies include strategic alliances, which are short term contracts that replace vertical integration, and strategic outsourcing, which is letting some value creation activities within business be performed by an independent entity.
If Hasbro were to pursue a strategy of horizontal integration, it would consider acquiring or merging with other toy-maker competitors such as Mattel. A couple months ago, I reported on how Hasbro had partnered with digital game-maker Zynga, the company known for creating popular Facebook games such as FarmVille and Words with Friends, to create physical board-game versions of these games. This is an example of the company’s corporate-level strategy and is a cross between horizontal integration and a strategic alliance. I haven’t heard too much about whether Hasbro has ever pursued a strategy of vertical integration, or expanded into strategic outsourcing, but I imagine they probably have, at least to a small extent. As a toymaker, they might find it beneficial and even cost-efficient in some cases to be able to control operations for their inputs and distribution of their output to retail stores.