There are several reasons why business leaders began the practice of vertical integration:
1. Cost and Efficiency: By vertically integrating, companies were able to control and optimize various stages of production. This allowed for greater coordination, reduced transaction costs, and streamlined operations, ultimately leading to cost savings and increased efficiency.
2. Secure Supply Chain: Vertical integration enabled companies to have greater control over their supply chain. By owning or acquiring suppliers or distribution channels, companies could ensure a reliable and uninterrupted flow of materials and resources, reducing dependency on external parties and minimizing risks.
3. Market Control: Vertical integration provided companies with greater control over the entire product cycle, from production to distribution. This allowed them to dictate prices, control quality, and respond quickly to market demands. By dominating multiple stages of the value chain, companies could gain a competitive advantage and enhance their market position.
4. Synergies and Innovation: Integrating different stages of production could lead to synergies and improved innovation. Companies could leverage shared knowledge, technologies, and resources across various business functions, fostering collaboration and driving advancements. This enabled them to develop new products, improve existing ones, and stay ahead in the market.
5. Horizontal Expansion: Vertical integration facilitated horizontal expansion by allowing businesses to diversify their operations. By integrating with companies operating in different sectors, they could enter new markets and broaden their product offerings, ultimately increasing their market share and revenue.
Overall, the practice of vertical integration offered companies strategic advantages, ranging from cost savings and efficiency gains to market control and increased competitiveness, enabling them to grow and thrive in the business landscape.
why did business leaders begin the practice of vertical integration
big companies could grow by merging with other companies or acquiring them
factory workers could start in low positions and work their way up to manangment
large corporations could control the cycle of a product form creation to sale
small companies could grow so that the could compete with the larger companies
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