There are two schools of thought about vertical integration business model. The first one believes that there is a big chance to develop the industry production in order to take advantage of economy of scale or scope. The vertical strategy is interesting to be flexible and market efficient because you can manage immediately the industry situation. Then, you can use the solved problem, so you may be faster than in other way.
The second one, thinks that in terms of “weight” of structure you could be slow and have more transfer pricing. Therefore it is more difficult to communicate through the hierarchy level of company because of its size.
First of all, the vertical integration strategy should be based on continue important investment to be advanced and innovated. This, in order to challenge against market leader competitors and to have a good level of customer satisfaction. In this case, Hanwa’s case is an interesting business success because it uses the know-how advantage. In addiction it invests in Develop&Research so it offers high quality products.
The Suntech case of business lecture, is the most representative example of overweight of structure and “overdependency” on market factors. If you were too slow to change similarly to market movement, you would lose part of your brand reputation and your value proposition. Market’s movements are very difficult to predict. So you must have the right balance of diversification about your holding portfolio activity and between the specific strategic business unit and the dependence of the market. In fact, when the price of solar market went down Suntech lost value and the company’s decline started.
In brief, you have to control the relation between company’s size and economy of scale or scope using.
In conclusion, we should use a balance program of investment between company strategy and level of management. The best way to have success in this situation is to adopt the adhocracy model. Toffler was the first who talked about adhocracy, in the 1970, and Robert H. Waterman, Jr. defined adhocracy as “any form of organization that cuts across normal bureaucratic lines to capture opportunities, solve problems, and get results”. This strategic structure permits to have great information sharing through hierarchy level and immediately intervention by core management.
The adhocracy is: “Particolare forma di organizzazione aziendale, caratterizzata dalla ripartizione del personale in piccoli gruppi superefficienti e ultraaddestrati, a ognuno dei quali vengono affidate mansioni specifiche molto qualificate. Ne risulta un’efficienza complessiva molto elevata che riposa proprio sulla ripartizione del lavoro e sulla specializzazione dei gruppi che operano all’interno dell’azienda medesima. È un criterio adottato soprattutto dalle imprese che si occupano di progettazione, innovazione e ricerca.”
The adhocracy model is one of the most efficient working organization. In fact it’s used in particular for scientific project by big companies, like NASA and Oil company, or Google too.
Therefore, you can take more advantages in terms of economy scale or scope, than in other cases because you have highly skilled professional team in the field.
Hence, I think that you should solve the problem about communication costs increasing, using of specific software. For example, http://www.dialog.it/, offers software to manage, control every level of your company.
Nevertheless, the Pv companies should be attractive to new investor through more investment, so you may have a bigger and bigger industrial ecosystem.
Although the adhocracy model needs highly qualified professional team to be adopted, it should be crucial to have success.
Hence, I’d like to report the Ferdinando Azzariti’s definition of adhocracy: “Adhocrazia assume dunque un doppio significato: da un lato seguire l’evolversi dei cambiamenti (in tempi di caos) e dall’altro sviluppare una forte progettualità, un senso della direzione, una strategia a cui tendere, non solo con più flessibilità o velocità, ma con strutture più idonee alla competizione del terzo millennio”.
GIOVANNI MARIA LEPORI