vertical integration
merger of companies that have a similar range of activity in marketing and production in order to gain more control in that range
Vertical integration
In
microeconomics and managing management, the term vertical integration describes a style of
ownership and control. The degree to which a firm owns its upstream suppliers and its downstream buyers determines how vertically integrated it is. Vertically integrated companies are united through a
hierarchy and share a common owner. Usually each member of the hierarchy produces a different
product or service, and the products combine to satisfy a common
need. It is contrasted with
horizontal integration. Vertical integration is one method of avoiding the
hold-up problem. A
monopoly produced through vertical integration is called a
vertical monopoly, although it might be more appropriate to speak of this as some form of
cartel.
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vertical integration
Noun
1. absorption into a single firm of several firms involved in all aspects of a product's manufacture from raw materials to distribution
(synonym) vertical combination
(hypernym) consolidation, integration
Vertical Integration
Vertical integration
The integrating of successive stages of the production and marketing functions under the ownership or control of a single management organization. For example, much of the broiler industry is highly vertically integrated in that processing companies own or control the activities from production and hatching of eggs, through the growth and feeding of the chickens, to slaughter, processing, and wholesale marketing.
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