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Vertical Integration

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Andrew Carnegie, owner of the Carnegie Steel Company, used vertical integration, a system of related businesses in which a parent company owns its suppliers, to increase his businesses efficiency levels. Carnegie bought out the companies and suppliers that carried the raw materials and services he required for his business. He was able to control everything he needed, and make agreements with other companies to buy his steel. Using this method, he saved money and increased his profits.

The Walt Disney World Corporation also uses vertical integration, just as Carnegie had done.

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Walt Disney plans, produces, advertises, and distributes all their own products. These products are sold in stores all owned by Disney. What also adds to the use of vertical integration within this corporation would be the purchase of ABC. Through this acquisition, it was a way for Walt Disney to propagate some of its programs on its own.

Vertical integration affects society by creating less competition, it makes businesses’ profits increase and allows them to save money.

There are many positive reasons for vertical integration, such as improving supply chain coordination and reduce transportation costs, but with that always comes the negatives. Due to the lack of supplier competition, there are potentially higher costs, and there is a lower opportunity to increase product variation.

Cite this Vertical Integration

Vertical Integration. (2016, Jul 18). Retrieved from https://graduateway.com/vertical-integration/

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