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Vertical Integration (With Real World Examples) | From A Business Professor

Vertical integration#Industry Value Chain#Backward Integration and Forward Integration#Strategic Management#Backward Integration#Forward Integration#business school#real world examples#corporate strategy
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💫 Short Summary

Vertical integration is a strategic approach for companies to streamline operations by taking ownership of various stages of the production process. Advantages include reliability, power over competitors, flexibility, and potentially lower prices. However, challenges such as high costs, management difficulties, loss of focus, and reduced flexibility exist. Examples from companies like Apple and McDonald's showcase successful implementations. Overall, companies considering vertical integration must carefully weigh the pros and cons to make informed decisions.

✨ Highlights
📊 Transcript
Overview of Vertical Integration in Business Operations.
The industry value chain includes activities like raw material sourcing, manufacturing, and marketing from conception to distribution.
Two main types of vertical integrations are backward integration and forward integration.
Backward integration involves bringing product ownership earlier in the value chain.
Successful examples of backward integration strategies are demonstrated through case studies of Amazon and IKEA.
Benefits of Vertical Integration in Business Operations
Vertical integration allows a company to control different stages of the supply chain for improved efficiency.
Examples of vertical integration include Apple opening retail stores and McDonald's acquiring a tech company.
Advantages of vertical integration include reliability with suppliers, power over competitors, flexibility in market adaptation, and potentially lower prices for consumers.
By owning various parts of the supply chain, companies can align business activities, reduce costs, and enhance customer satisfaction.
Summary of Vertical Integration Strategy
Advantages of vertical integration include streamlining operations, reliability, power over suppliers, flexibility, and lower prices.
Limitations of vertical integration include high costs, management difficulties, loss of focus, and reduced flexibility.
Backward and forward integrations are the two types of vertical integration strategies.
Challenges of vertical integration include the need for different skill sets, difficulty finding a competent CEO, potential loss of focus, and time-consuming production transitions.