If you are an startup entrepreneur, you might think this article is not for you. This is one mistake Steve Jobs didn’t do when he had Pixar. It helped understanding how corporate strategies work, even if when it started Pixar was not at all an impressive company. Steve Jobs understood a thing or two about horizontal and vertical integration and this is why later on Disney, the giant, bought Pixar, the successful.
This is a short story about corporate strategy, horizontal and vertical integration, related or unrelated diversification forward and backward integration and an attempt to answer to the question that puzzles a lot of us: is it a business better as part of a corporate? Is competing on different product markets like Disney and Virgin or competing on one product market but along multiple points of the supply chain, like Apple and Amazon, a strategic choice or a set of coincidences?
One thing is for sure to gain: the economy of scope and the resulting capacity to use products and services in different forms and capacities to attract more business. Which, of course gets us to a debate that also attracted the attention of the famous Nobel Committee: should companies develop mechanisms to act strategically or just let the market handle everything? Sometimes, there are also diseconomies of scope worth to be mentioned, because they are extremely harmful.