Vertical Integration

Vertical integration is a corporate-level strategy that involves a company entering

new industries to increase its long- run profitability. As a corporate- level strategy,

vertical integration gives companies a choice about which industries in the raw-

materials- to- consumer chain they should compete in to maximize their long-run

profitability.

When a company pursues a strategy of vertical integration, it expands its

operations either backward into industries that produce inputs for its core products

(backward vertical integration) or forward into industries that use, distribute, or sell its

products (forward vertical integration).

Alternatively, it may acquire or merge with a company that is already in the

industry.