Question

Explain in detail the concept of vertical integration and how firms use this in organizations

Answer 1

Answer

✓ vertical integration: it is a strategic arrangement of an organisation, that manages and control it's supply chain activities. Vertical integration helps the firm to cut the costs and to increase the value of the business by taking total control over its manufacturing, distribution and retail activities.

Firms use vertical integration by owning it's manufacturing processes, distribution centre and supply chain arrangements, as well as the retailing of their variety of products, on its own brand name. The firm and its management is responsible for delivering the needful products and services, under their brands, and must have capabilities to handle each and every area/functions of the whole supply chain. The best example for vertical integration is 'Target' company. It has its own manufacturing units, and handles the retailing of their products, along with its distribution networks.

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