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Vertical Integration

Also Known As Vertical Consolidation
Corporate Structure and Sourcing Models

Vertical integration is a corporate strategy in which a company brings multiple stages of its own supply chain, from raw materials to distribution, under single ownership rather than relying on external suppliers or buyers. It is used to secure input supplies, control quality and capture margin that would otherwise go to outside vendors. The Ford River Rouge complex of the 1920s, which began making much of its own steel rather than buying it from suppliers, is a classic historical example. This description is adapted from Wikipedia contributors under CC BY-SA 4.0; changes were made. https://creativecommons.org/licenses/by-sa/4.0/

Facts
Partially Attested
Origin Year
1920 1
Marks the Ford River Rouge Complex, the source's own cited example of a company vertically integrating raw-material and component production into one operation. Vertical integration as a general strategy is far older and already practiced by Andrew Carnegie and John D. Rockefeller in the 1870s-1890s (both linked to this entity by associated-with edges); this year marks a commonly cited early industrial-era example, not a claim that the strategy itself began then.
Core Mechanism
A firm owns its upstream suppliers, its downstream buyers, or both, so that it internalizes transactions that would otherwise cross a market interface between separate companies. 1
Connections

Associated With

Aliko Dangotes Dangote Group controls its cement and refining businesses from raw materials through to finished product, a vertical integration strategy.

Source Aliko Dangote (Wikipedia)

Carnegie Steel controlled its own raw materials, transport and mills end to end, a textbook case of vertical integration.

Source Wikipedia, Andrew Carnegie
Automotive Industry, Industries

Ford, already linked to this industry, built the River Rouge complex to make its own steel rather than buy it from outside suppliers, the source article's own automotive example of vertical integration.

Source Wikipedia, Vertical Integration

Carnegie Steel controlled not only the mills where steel was manufactured but the mines where coal and iron ore were extracted, the textbook example of vertical integration.

Source Wikipedia, Vertical Integration

Elon Musks Tesla brings battery and parts manufacturing in house rather than relying on outside suppliers, a widely noted vertical integration strategy.

Source Wikipedia, Elon Musk

Vertical integration was the main business approach of Ford and other 1920s car companies, minimizing costs by integrating the production of cars and car parts.

Source Wikipedia, Vertical Integration

The two strategies are defined as an explicit contrast pair by the source article itself: same production stage, expanded in scale, versus different production stages, brought under one roof.

Source Wikipedia, Horizontal Integration
Petroleum Industry, Industries

Standard Oil, already linked to this industry, is the source article's own textbook case of vertical integration in petroleum: its 1890 near-monopoly on refining came from owning production through distribution rather than merely refining oil bought from others.

Source Wikipedia, Vertical Integration

Standard Oil is the article's own historical example of the strategy: by 1890 it controlled 88 percent of refined oil flows in the United States.

Source Wikipedia, Vertical Integration
Steel Industry, Industries

Carnegie Steel, already linked to this industry, is the source article's own named example of vertical integration in steel, controlling both the mills that made the steel and the mines that supplied its ore and coal.

Source Wikipedia, Vertical Integration
Source Wikipedia, Steve Jobs
Sources
1. Wikipedia, Vertical Integration
Wikipedia
  • Historical Context section
    the Ford River Rouge complex began making much of its own steel rather than buying it from suppliers
  • Lead section
    Vertical integration, also referred to as vertical consolidation, is an arrangement in which the supply chain of a company is integrated and owned by that company.
  • Standard Oil section
    In 1890, Standard Oil controlled 88 percent of the refined oil flows in the United States.
  • Steel and oil section, Carnegie Steel
    Carnegie Steel is an example of America's initial approach to vertical integration, with the business controlling not only the mills where steel was manufactured, but mines where coal and iron ore was extracted.
  • Definition section
    an arrangement in which the supply chain of a company is integrated and owned by that company
  • Associated With: Ford Motor Company, Automotive section, 1920s Ford
    It was the main business approach of Ford and other car companies in the 1920s, who sought to use curated designs by Ford engineers, while minimizing costs by integrating the production of cars and car parts.
View the Source
Wikipedia, Horizontal Integration
WikipediaAssociated With: Horizontal Integration, Lead section
Quote, Associated With: Horizontal Integration, Lead section
It stands in explicit contrast to vertical integration, which instead spans different stages of production, and can raise antitrust concerns about monopoly pricing.
View the Source
Wikipedia, Andrew Carnegie
WikipediaAssociated With: Andrew CarnegieView the Source
Wikipedia, Elon Musk
WikipediaAssociated With: Elon MuskView the Source
Aliko Dangote (Wikipedia)
WikipediaAssociated With: Aliko DangoteView the Source
Wikipedia, Steve Jobs
WikipediaAssociated With: Steve JobsView the Source
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