14 Facts About Vertical integration

In microeconomics, management, and international political economy, vertical integration is an arrangement in which the supply chain of a company is integrated and owned by that company.

Vertical integration has described management styles that bring large portions of the supply chain not only under a common ownership but into one corporation.

Vertical integration is often closely associated with vertical expansion which, in economics, is the growth of a business enterprise through the acquisition of companies that produce the intermediate goods needed by the business or help market and distribute its product.

However, it is still debated over if vertical integration expected efficiencies can lead to competitive harm to the market.

Vertical integration is the degree to which a firm owns its upstream suppliers and its downstream buyers.

Disintermediation is a form of vertical integration when purchasing departments take over the former role of wholesalers to source products.

Problems that can stem from vertical integration can include large capital investments needed to set up and buy factories and maintain efficient profits.

The Birds Eye company used vertical integration to create a larger organization structure with more levels of command.

Vertical integration controlled not only the mills where the steel was made, but the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships that transported the iron ore and the railroads that transported the coal to the factory, the coke ovens where the coal was coked, etc.

Vertical integration focused heavily on developing talent internally from the bottom up, rather than importing it from other companies.

Issue of vertical integration has been the main focus of policy makers because of the possibility of anti-competitive behaviors affiliated with market influence.

Vertical integration finds that in many cases of agricultural vertical integration, the integrator denies the farmer the right of entrepreneurship.

The other deviation from the vertical integration model were local distribution companies in some towns and regions.

In economic theory, vertical integration has been studied in the literature on incomplete contracts that was developed by Oliver Hart and his coauthors.