Vertical Integration
Definition
Vertical integration refers to the consolidation of multiple stages of production and distribution within a single company. In other words, it is when a company controls various aspects of its supply chain, from production to distribution.
Analogy
Think of vertical integration like having all the ingredients and tools necessary to bake a cake in your own kitchen instead of relying on different stores for each ingredient or task. By controlling the entire process, you can ensure quality, maximize efficiency, and minimize costs.
Related terms
Supply Chain: The sequence of activities involved in the production and distribution of a particular product.
Economies of Scale: The cost advantages that companies gain by increasing their scale of production.
Monopoly: A situation where a single company dominates the market by controlling all or most of the supply.
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