Vertical Integration
Vertical integration is a strategy where a company acquires or merges with other businesses that are part of its supply chain. This means a company can control more stages of production, from raw materials to final products, enhancing efficiency and reducing costs. For example, a car manufacturer might acquire a parts supplier or a dealership. This helps ensure a steady supply of components, improves product quality, and increases profits by capturing a larger share of the market. Overall, vertical integration aims to strengthen a company's position and competitiveness within its industry.
Additional Insights
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Vertical integration is a business strategy where a company expands its operations by acquiring or merging with other businesses that are part of its supply chain. This can involve taking over suppliers (backward integration) or distributors/retailers (forward integration). The goal is to gain more control over the production process, reduce costs, improve efficiency, and increase market power. For example, a car manufacturer that owns both the parts suppliers and the dealerships is vertically integrated, allowing it to streamline operations and enhance profitability.