Vertical integration

• Vertical integration is the coming together of firms in the same industry but at different stages of the production process
• Vertical integration can be backwards or forwards
• An example of backwards vertical integration would be a manufacturer integrating with the supplier of its raw materials
• An example of forward vertical integration would be when a business integrates forward such as a manufacturer integrating with a retailer that sells its finished products
• Vertical integration results in a position to control supplies or sales of the product and reduces costs
• Vertical integration also builds barriers to entry for new competition