The Mech Touch novel Chapter 5504

Chapter 5504 Vertical Integration

Most mech designers never became good enough to challenge the market leadership of SKL Mech Industries.

It was sheer folly for them to even think about competing directly against this monster of a mech company!

Smaller players simply did not have the skills to compete against the large amount of excellent mech designers employed by SKL.

Even if there were individual mech designers who excelled so much that their products could actually achieve parity with the corresponding sickle mechs, their own mech businesses were simply too small and inadequate to match the industrial prowess of a giant mech enterprise.

"SKL's business model centers around two crucial advantages." Alexa explained the greater details of this market leader to Ves. "Due to its dominance in the industry and the market, it has always attracted a large number of excellent mech designers. The company maintains a policy of recruiting external mech designers from practically any state or background as long as they are good enough to design mechs according to its standards. SKL is never short on applicants, as many mech designers who worked for the company all received excellent treatment for their services."

Although working for SKL did not hold a great attraction to Ves who already owned his own successful mech company, the same did not apply to those who did not have a business empire on their hands.

There were many mech designers who worked for governments, other mech companies and research institutions for the majority of their careers.

Once their obligations to their old employers came to an end, these newly freed Seniors and Masters usually wanted to dip their toes into the commercial mech market, but did not want to build their own mech companies and everything related to them from scratch.

So long as they were good enough, there was a chance that they could get accepted by SKL, which granted them access to one of the best and most expansive business networks and industrial chains in human space!

SKL could take care of every problem, from marketing to sourcing rare materials. Mech designers only had to do their core job well and leave all of the other tedious work to other highly competent professionals.

"The other major advantage that SKL is counting upon to maintain its dominance in every mech market and mech industry is its high vertical integration. SKL sits at the heart of an industrial network that encompasses many different subsidiaries. They encompass mining companies, material processing companies, logistical companies, research institutions, development companies and even after-market service centers. In short, SKL utilizes its own in-house goods and services as much as possible, allowing it to control the entire supply chain from start to finish."

Ves looked impressed. "From what I have learned about business, most attempts at vertical integration fail. When companies spread their focus over too many different business activities, they tend to lose focus and allow a lot of inefficiencies to fester. The lack of external competition makes it so that a lot of links in the chain lose their competitiveness over time."

"That is true, sir, but SKL has managed to avoid that outcome. It relies on a combination of strict management as well as internal competition to keep its subsidiaries sharp. The company regularly does business with third-party companies in order to make direct comparisons."

The ability for SKL to build a large and vertically integrated supply chain on such an enormous scale reflected its strength as a company!

The Larkinson Clan and the Living Mech Corporation were incapable of doing the same.

The Larkinsons lacked the capital, the connections, the expertise and the motivation to do everything themselves.

The clan had no inherent advantage in essential links such as harvesting raw materials and shipping large amounts of goods across human space.

Trying to enter these industries was a bad idea. It did not matter if the Larkinsons took existing companies or set up new subsidiaries from scratch.

Without enough people in charge who excelled in these sectors, it would be difficult to make these subsidiaries as good and efficient as those run by established competitors!

Ves tilted his head in thought. "SKL's vertical integration is unmatched. The closest thing we have that can compete against this powerful force are the Open Consortiums, but that is not a fair comparison at all. Our supply chain is still made up of a lot of external companies that each demand their own share of the profits."

The Open Consortium had grown a lot since he initially founded it to make sure that the LMC's manufacturing complexes could always keep its production lines fed.

Just like many other daughter organizations of the Larkinson Clan, the Open Consortium established many different branches on many planets that hosted a large number of industries.

It usually cooperated closely with the local branches of the LMC on the same planets. Due to the reliability of contracts added to the Open Book.

The various Open Consortiums established on other planets did not need to acquire their own Open Books.

The only relic of its kind in existence was still in the hands of Chairwoman Calsie Doornbos.

In order to enable the activities of the other Open Consortiums, the holder of the Open Book was able to remove pages from it that still carried its power.

Verify captcha to read the contentVerify