The integrator model as a way to enrich one's offer

Mis à jour : mars 29

OUR ANALYSIS

Principles: The integrator business model consists of selling an offer by exploiting a network of actors whose individual offers become the components of the latter. There are several types of integration; for example, a company could own all the operations from production to sales, this is called vertical integration. Horizontal integration, however, is when someone aims to create a monopoly in an industry, purchasing some or all of its competitors. More recently, integrators purchase complementary and supplementary business to add value to their product or platform. This third variation is called a conglomerate company.

  • Advantages & Challenges: The integrator can benefit from increased economies of scope and scale. This drives operating costs down, while efficiency goes up -- leading to exponential growth. Additionally, the added value obtained from purchasing complementary businesses means that the very successful companies can offer a more complete offer or service in a way that competitors cannot. Low prices and increased availability can drive remaining competition out of business. The specific implementation of this business model can widely vary according to the industry or company. In other words, not everyone has to play the same game -- at least initially. On the downside, the integration process can be very complex and may take a lot of time. In addition, the integrated companies can be reluctant to the changes executed for efficient integration. In this case, complementary actions or negotiations are needed.

  • Evolution & Maturity: Historically, integration did not have a cooperative connotation. Businesses that were integrated maintained little to no autonomy as the new parent company marched on towards monopoly. Think for example of Hollywood, the vertically integrated giant during the ’40s and '50s, or John D Rockefeller’s Standard Oil 50 years before. These examples show the power and magnitude that comes from such integration. Digitalization has changed this, however, and today integrated companies often come from outside the integrator’s industry, and exist as a partner with more autonomy.

  • Key figures: According to Forbes, all of the top ten most profitable companies in 2019 were conglomerates. The most notable conglomerate company is Amazon, which integrates companies and products from just about any industry. In 2020, the e-commerce giant’s revenues added up to around $386 billion.

  • Products & Services: Almost any industry or business can participate in and benefit from some type of integration. Vertical integration is the most well adapted to all kinds of businesses, as it optimizes the value chain. The story is very much the same for horizontal and conglomerate companies; from tech to cars, gas and oil, and home goods, they all are able to easily integrate. It should be noted that in the case of conglomerates, even though the industries might differ, they generally complement or supplement each other.

On IntelligenceMaker, our competitive intelligence platform, you can get more information on this business model and learn about inspiring players that already deployed it:


Contact us to get the complete analysis: info@inspiringtrend.com