[Management]

Assignment #3 (Part - B)

Introduction

Vertical integration is a concept of organization and corporate control. Vertical integration refers to the degree of control that a given company has on their inputs or on the distribution or use of the products and services they produce. Vertical integration is said to be full when the company has full control over their inputs or on the distribution or use of the products and services they produce. Vertical integration can therefore be understood with the progression of the company in its value chain. Companies are vertically integrated together through a hierarchy and share a common owner. Typically, each member of the hierarchy produces a different product and combined product which meets the needs of their customers. Vertical integration may take two types:

Upstream vertical integration: when the monitoring progression occurs towards the rear of the production chain , i.e. towards the sector which produces inputs used by the enterprise 

Downstream vertical integration: when the control is given progression towards the front of the production chain, i.e. towards the sector which controls the distribution or processing of products and services produced by the company.

There are several advantages that could be gained from adopting a strategy of vertical integration, including:

Greater control over the quality, timeliness of delivery and cadence, etc. Production factors

Greater control over the distribution of goods and services produced and the services after sales associates

Increased bargaining power over suppliers or customers depending on the integration process is upstream or downstream

Benefits associated with economies of scale and cost savings by providing inputs or outputs of the distribution

Vertical integration requires the company to control the final product and all of its components. In the technology sector, Apple leads for 35 years the vertical model, which combines software and hardware integrated. The iPhone and i-Pad, for example, have software and hardware designed by Apple, who also ...