Vertical Integration

This chapter discusses vertical integration in detail. While horizontal integration refers to combinations between competitors, vertical deals involve companies that have a buy-sell or upstream-downstream relationship. While they may not be as common as horizontal deals, there are still countless examples of vertical integration merger and acquisitions (M&A). The benefits of vertical integration vary depending on the industry. One of the benefits of being vertically integrated is that it can lower some of the risks a company faces in the marketplace. The chapter discusses how vertical integration becomes a path to global growth and it also discusses vertical integration as a natural outgrowth of a business. Companies that are vertically integrated need to regularly reevaluate their structure and examine the returns that come from the different parts of the vertical chain. When one major company in an industry becomes vertically integrated, its competitors may think it has gained competitive advantages over them and they may pursue their own vertical integration strategy. Sometimes, these responses are nothing more than knee-jerk reactions and not the product of a well-thought-out strategy.