Vertical Integration

Vertical integration is a business strategy where a company expands by acquiring or merging with suppliers, distributors, or retailers that are at different points on the same production chain.

For instance, a company may choose to own its own suppliers, or it may purchase a retailer to gain more control over its products. By controlling more of the production chain, a company can reduce costs and increase its competitiveness.

One example of vertical integration is Apple, who owns both its own suppliers and its own retail stores. By owning both, Apple is able to control the production process as well as the distribution and sale of its products.

Vertical Integration = Controlling More of the Production Chain + Lower Costs + Increased Competitiveness