Vertical Integration

Vertical integration is the degree to which a business owns or controls parts of the supply chain, also known as the value chain. Vertical integration can be classified by the direction of integration, the degree of integration, and the nature of integration or type of control used. Business may use vertical integration for various strategic purposes, including increasing efficiency, cost reduction, increasing quality, product or service customization, and/or ensuring traceability. Each form of vertical integration has benefits and costs that must be considered [Page 1444]in context, as well as associated management and public policy issues. Historically, business has vertically integrated to control access to physical resources. Today, some of the best examples of vertical integration are in the oil industry; companies such as Shell or ...