Vertical integration is a business strategy where a company takes control of multiple stages of the production and distribution process of its products. For example, Apple is vertically integrated, designing its hardware and software and selling products directly to consumers through its own retail stor...
Types of Vertical Integration There are three forms this strategy takes: backward integration, forward integration, and balanced integration. Each one involves a firm branching out within its supply chain and taking control of a part of it to gain more control of manufacturing, distributing, and/...
Balanced integration is a vertical integration strategy that controls a supply chain’s upstream and downstream operations. It allows a company to have more control over the entire value chain of its products, from the production of raw materials, assembly, and distribution to sales. A company can...
Andrew Carnegie (1835-1919), a Scottish American industrialist who led the expansion of the American steel industry in the late 19th century, became involved in more than one stage of the supply chain. His example encouraged others to use the vertical integration strategy to promote efficiency and...
However it’s done, the idea is to gain more control over supply chain processes by bringing more of them in-house. Vertical integration requires sizable up-front financial outlays. But, in the right circumstances, the strategy can serve to streamline a company’s journey from raw materials to...
Alternatively, McDonald’s (NYSE: MCD) is known for its very dispersed supply chain due to its franchising business model. Instead of pursuing a vertical integration strategy, it uses a robust communication system between its managers and external suppliers. Part of this system is a crowdsourcing...
QuickMBA / Strategy / Vertical Integration Vertical Integration The degree to which a firm owns its upstream suppliers and its downstream buyers is referred to as vertical integration. Because it can have a significant impact on a business unit's position in its industry with respect to cost, ...
Vertical integration is a business strategy in which a company controls multiple stages of its production process and supply chain, minimizing or eliminating the need for outside entities. By merging various stages of the production processes and supply chain into its own operations, a company can ...
Definition:Vertical integration is a business strategy that allows a firm to control two interlinked stages of the value chain. It typically consists a sequence of alterations that are applied during the value chain until one or moreraw materialsare converted into afinished product. In other words...
Horizontal integration, on the other hand, involves the acquisition of a competitor or related business. A company may do this to eliminate a rival, diversify its core business, expand into new markets, or increase its overall sales. While a vertical integration strategy stretches a company along...