How Does Vertical Integration Works?
Picture this: a food manufacturer and a chain of supermarkets decided to merge into one. This event is referred as vertical integration. This means merging together two business that happens to have different stages of production. This type of coming together can lead to forward integration which means merging for the development of production process. The opposite of this one is horizontal integration. This refers to the merging together of businesses which have the same stage of production. Examples for these are the partnership of two food manufacturers or two clothing companies. Then, there is also a backward integration wherein merging happens further back in the production process. An example for this is a food manufacturer collaborating with a farm. The most interesting merging is called conglomerate integration, which takes place between two completely different kinds of business. In 1990’s, McKinsey & Company, a global management consulting firm, wrote that: historically firms
