9: Vertical integration

• What is vertical integration?
• The definition
• Examples of vertical integration
• Potential opportunities to consider
• Partial vertical integration
• Examples of partial vertical integration
• Advantages of vertically integrating
• Achieve economies of scale
• Create new profit centers
• Expand geographically
• Maintain quality control
• Protecting proprietary processes or recipes
• Risks in vertical integration
• Established distribution channels may be adversely affected
• Unprofitable outcome
• Obsolescence due to new technologies
• Higher cost due to lower volume
• Unforeseen labor issues
• Lack of continued focus on the original business
• If acquisition is a commodity, not having lowest costs
• Unsatisfactory return on capital
• Evaluating the potential of vertical integration
• Look to examples of success in your own industry
• Look for examples of failures in your business
• Look for possibilities both "up" the chain and "down" the chain
• Give weights to the advantages and the risks
• Evaluate alternative strategies to vertical integration
• Test it first
• Top ten do's and don'ts
• Session Quiz