Vertical integration意思

"Vertical integration" is a business term that refers to the expansion of a company's control over the supply chain. This can involve acquiring or merging with suppliers at the start of the supply chain, such as raw material providers, or with distributors and retailers at the end of the supply chain.

Vertical integration can take two main forms: forward integration and backward integration.

1. Forward integration: This involves a company expanding its operations to include distribution and retailing. For example, a car manufacturer might decide to open its own chain of car dealerships.

2. Backward integration: This involves a company expanding its operations to include the production of materials and components that it previously bought from suppliers. For example, a furniture manufacturer might decide to start growing its own timber.

Vertical integration can give companies several advantages, such as greater control over the supply chain, reduced costs, and the ability to respond more quickly to changes in the market. However, it can also involve significant risks and costs, and it can lead to a company becoming too focused on its own operations and losing touch with the wider market.