Vertical Diversification

Vertical diversification is a business strategy where a company expands its operations along its supply chain. This means it either moves upstream by acquiring suppliers or downstream by acquiring distributors or retailers. For example, a car manufacturer might buy a parts supplier to control costs and quality (upstream) or purchase car dealerships to sell its vehicles directly (downstream). The goal is to enhance efficiency, reduce risks, and increase market control, ultimately leading to improved profitability and competitiveness within the industry.