Three main explanations for vertical integration

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QuaDron competes in the market for military and commercial drones. The company manufactures its own high-resolution cameras, which are smaller and more powerful than those of any other competitor. The QuaDron cameras are equipped with a new, proprietary battery manufactured on-site. The new battery combines the existing lithium ions with solar power technology and lasts 150% longer than any other competitor's battery. When developing the proprietary battery, QuaDron decided to manufacturer the battery in-house out of fear of reverse engineering from the company it outsourced the battery manufacturing to, a scenario that was especially problematic considering an expected significant increase in demand. Additionally, QuaDron sells its products and services through its own direct sales force to ensure that its representatives highlight the longer battery life of QuaDron's units.

1. Discuss shortly IN THEORY the three main explanations for vertical integration (Leverage Capabilities, Manage Opportunism, Exploit Flexibility). Which of the three is most consistent with QuaDron's decision to manufacture the battery in-house and why?

2. Discuss shortly the different types of innovation. What type of innovation is the development of the new battery?

3. Assume that QuaDron were to expand into selling its drones through company-owned retail stores. What kind of integration would it be?

4. What do you think is the most appropriate organizational structure for QuaDron, considering the changes in strategy? If QuaDron’s CEO decided to use budgets as a management control but wanted to make sure that the managers did not become too focused on the short term, what should she/he do (use an open process in developing budgets or determine budgets for her managers and allow them to focus only on meeting the budgets, use quantitative and/or qualitative evaluations of performance, …)?

Reference no: EM132264696

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