Benefits of Vertical Integration

Vertical Integration (With Real World Examples) | From A Business Professor
Vertical Integration (With Real World Examples) | From A Business Professor

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Benefits of Vertical Integration

University: De Montfort University

Module: Global Strategic Management (CORP 3501)

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Benefits of Vertical Integration

Companies pursue vertical integration for the obvious advantages it

offers — namely having greater control over the supply chain and the

ability to offer lower prices while increasing market control. But there

are plenty of other benefits to vertical integration (whether forward or

backward).!

Regardless of what the product actually is, most vertically integrated

companies have a leg up on the competition, because they can often

offer lower-cost or higher-quality products to consumers.!

Independence From Suppliers

One of the principle advantages of vertical integration (whether

forward or backward) no longer being dependent on!suppliers — and

the costs and unpredictability that may come with them. This helps

the company or firm increase efficiency by streamlining the process

of obtaining supplies for!its product, manufacturing it and selling it. In

this manner, companies that vertically integrate often are more time

efficient — with shorter turnaround times.!

Additionally, since the companies are now independent of external

suppliers, they may be immune to supply disruptions — such as labor

strikes or bad management of a supplier. This can help the process

go more smoothly and eliminate the possibility of a supply hiccup.!

Cost Control

With vertical integration, the ability for manufacturers or retailers to

control prices is a huge asset to conglomerates, who would ordinarily

have to set some prices to match up with their supply chain. But

when companies vertically integrate, they are able to control costs

more closely, and often are able to offer lower prices (which

translates to increased consumer demand and therefore an

increased bottom line). Additionally, companies further downstream in

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