In: Economics
Define Vertical Integration Strategies (Forward, Backward & Horizontal Integration)
Vertical integration is a strategy used by the firm to gain control over other competitors in the market to increase the power of the firm. Some forms of vertical integration strategy are as follows:
a. Forward Integration: Forward integration happens when a seller gains control of the direct distribution of the selling of the product. For example, a wholesaler of a product selling directly to the customers rather than retailers of the product.
b. Backward Integration: This type of integration happens when a company starts producing an important raw material on its own or purchase some segments of its supply chain. For example, when a car company merges or acquires with the suppliers of iron and steel.
The other form of integration is Horizontal Integration. When a company merges or acquires its competitors it is known as Horizontal Integration. for example, merger of Idea Cellular and Vodafone Limited.