Vertical integration is a business strategy in which a company expands its operations beyond its core domain by acquiring or merging with businesses located upstream or downstream in its value chain.
This entails integrating production, distribution, or sales activities that were previously managed by separate entities. The goal of vertical integration is to enhance the company’s control and efficiency across the entire process, reduce costs, improve coordination, and gain a competitive advantage.
For instance, a manufacturing company might acquire a raw material supplier or a distribution company to oversee the end-to-end supply chain. Vertical integration can also enable better quality control, reduced production lead times, and greater strategic flexibility.