Forward Integration–a Strategic Trend in Abrasives Industry

The internationally authoritative market research corporation—Transparent Market Research recently released a report on abrasives industry, stating that the value chain system has a tendency towards Forward Integration. With the rapid development of the Internet, online marketing has become a prevailing trend for traditional abrasives companies, who are seeking to expand distribution channels and upgrading marketing strategies to build their international brand. 

First we shall have a rough idea of Forward Integration, which is relative to Backward Integration. Both of them belong to Vertical Integration. As is seen in the following chart:



Vertical Integration includes Forward Integration and Backward Integration. Simply put, Forward Integration is a strategic form by which companies enlarge its business scope forward to end-consumer market, combining production and marketing.

Backward Integration refers to the strategic form of companies enlarging its business form to materials supply, i.e, combining production and raw materials.

A typical value chain system is Vertical Integration, under which forms the complete value transmission process. The corporate strategy planner may dig dipper their industry value.

The value chain of the abrasives market encompasses attributes such as raw materials used for the production of abrasives, various types of abrasives and abrasive tools, distribution channels, applications of abrasives and end-user industries that directly or indirectly consume abrasives.


Value Chain System

Distribution channels in the abrasives market comprise retailers, wholesalers, direct selling, supply agreements and online portals. The report recommend trade platforms, such as iAbrasive engaging in online trading of various types of abrasive materials and abrasive tools, can be made full use of.

There is a high degree of forward integration in the abrasives market. Major multinational companies such as 3M, TYROLIT Schleifmittelwerke Swarovski K.G. and Robert Bosch GmbH are present across the major part of the value chain. Suppliers, producers and end-user industries in the abrasives market enter into supply agreements to ensure a guaranteed supply of raw materials and finished goods. In December 2013, Almatis GmbH acquired an alumina refinery in Louisiana, the U.S., from Ormet Corporation for the guaranteed supply of feedstock for the production of alumina products.

In conclusion, developing e-commerce via specialized online platform to enlarge business distribution channels serves as an important abrasives strategy.

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