verticle integration

Vertical Integration

Under what conditions would vertical management be an appropriate model and why

Globalization has greatly contributed to the increasing competition between firms . Business organizations have no choice but to look for ways to gain competitive advantage . Globalization has also forced many firms to maintain supply chains in strategic geographical locations with raw materials produced in one part of the world and processing them into a finished product in another location . This is a challenge posed by globalization that makes the issue of effective supply chain management all the

more important (Cox 1999

Vertical integration is a type of management control wherein companies are united under a hierarchy with one business owner . Each of the companies united by vertical integration produces a different product or service . The products are then combined to meet one common need Vertical integration is a model that attempts to see the series of business functions and processes as one business unit . From the end users to the suppliers of raw materials , systems are established to make the entire supply chain optimal (Sawyer 1985 . The supply chain initiatives of the company rely on the investments in warehousing and transport facilities and information technology , geographical distribution of outlets as well as the product categories that are being used and the scale of the operations . If all the operations of the supply chain are owned by one company , the business goals can easily be attained . A successful vertical integration has three main elements Communication , trust and the...