1. MANAGE OR BUY
S U M I T R O D U T TA
EPGDBM-04

2. OVERVIEW
 SCOPE OF AN ORGANIZATION
 BACKWARD INTEGRATION
 BENEFITS & DRAWBACKS
 TOYOTA

3. SCOPE OF AN ORGANIZATION
 Breadth of an organization’s production line & range of activities
it performs.
 In 1899 none of the American car makers made their own
components.
 As business grew companies had to extend their scope of
activities backward to the manufacture of components.
 Ford went onto buy vast plantation on the Amazon jungle to
produce rubber tires(Vertical Integration).

4. BACKWARD INTEGRATION
 As car market developed ,value addition increased and so did
manufacturing cost.
 Auto-makers struggled to keep up with demand and , at the same
time cut additional costs.
 GM’s asked its major supplier, Fisher Body, to build a plant
adjacent to a new GM assembly
.
 Hold-up problem
 GM brought fisher outright.

5. BACKWARD INTEGRATION
 BENEFITS
 Better coordination-lowered costs
 Ownership guaranteed a source of critical raw materials
 DRAWBACKS
● Dampen motivation

6. TOYOTA
 EMPOWERMENT
 Empowering its suppliers.
 Freeing workers to take corrective action
 Cross functional participation
 JUST IN TIME
 TOTAL QUALITY MANAGEMENT

7. THANK YOU