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Study Notes

Vertical Integration

AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 22 Mar 2021

Vertical integration involves acquiring a business in the same industry but at a different stage of the supply chain.

There are two main kinds of vertical integration:

Forward vertical integration: this an integration of a business that is closer to final consumers e.g. a manufacturer buying a retailer

Backward vertical integration: here the aquisition is operates earlier in the supply chain e.g. a manufacturer buying a raw material or component supplier

Examples of Vertical Integration

Film distributors owning cinemas + digital streaming platforms

Brewers owning/operating pubs (forward vertical) or buying hop farms (backward vertical)

Record labels and radio / online music stations

Drinks manufacturers such as Coca Cola integrating with bottling plants

Pig processing business buying a pig farm

Technology companies growing vertically through hardware, software and services

Recent Case Studies of Vertical Integration

Nov 2015: Apple buys Star Wars motion-capture company Faceshift

Nov 2015: Ikea Buys Romanian, Baltic Forests to Control Its Raw Materials

Oct 2015: Dell makes $67bn bet on EMC in tech history's largest acquisition. US computer giant Dell agrees to buy data storage company EMC

Sept 2015: (Wholesaler) Booker given green light for takeover deal worth £40m of Budgens and Londis grocery chains

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