Strategy
Vertical integration
Owning more stages of your own supply chain.
Last reviewedWhat does Vertical integration mean?
It can secure supply and capture margin, but it adds capital, risk and complexity.
Example
Vertical integration means a company takes over stages before it (backward, toward suppliers) or after it (forward, toward customers) in its value chain, for example a carmaker buying a battery supplier.
Where does it come up in case interview prep?
- Value chains and profit poolsLesson in How industries work: the toolkit
- How restaurants and food service make moneyLesson in Restaurants and food service
- How luxury and fashion make moneyLesson in Luxury and fashion
- How the chip, electronics, and data center value chain worksLesson in Semiconductors, electronics, and data centers
- How oil and gas works: from the well to the fuel pumpLesson in Oil and gas
- Mining players, trends 2024 to 2026, and how to crack the casesLesson in Mining and metals
- Agriculture players, food security, trends 2024 to 2026, and how to crack the casesLesson in Agriculture and food production
- How data centres, cloud and AI compute workLesson in Data centres, cloud and AI compute
Related terms
- Horizontal integrationCombining with firms at the same stage, often competitors.
- Value chainThe activities a firm performs to create and deliver value.
- Economies of scaleCost per unit falls as volume rises.
- Economies of scopeCost falls when related products share resources.
- Barriers to entryWhat makes it hard for new competitors to enter a market.
- Switching costsThe cost or effort for a customer to change supplier.
- Network effectsA product becomes more valuable as more people use it.
- Competitive advantageWhat lets a firm earn more than its rivals over time.