Scribd
Upload
173 views2 pages

Vertical Integration Examples in Business

Amazon vertically integrates across 3 stages of the supply chain by sourcing products, marketing and selling them on its website, and distributing them. Carnegie Steel owned miners extracting raw materials and refineries, controlling nearly the entire supply chain for steel production. Ikea has increasingly vertically integrated by purchasing forests for wood supply and controlling wood production, manufacturing through its subsidiary Ikea Industry, and retail distribution.

Uploaded by

Sunshine C Gante
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
173 views2 pages

Vertical Integration Examples in Business

Amazon vertically integrates across 3 stages of the supply chain by sourcing products, marketing and selling them on its website, and distributing them. Carnegie Steel owned miners extracting raw materials and refineries, controlling nearly the entire supply chain for steel production. Ikea has increasingly vertically integrated by purchasing forests for wood supply and controlling wood production, manufacturing through its subsidiary Ikea Industry, and retail distribution.

Uploaded by

Sunshine C Gante
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Examples of Vertical Integration

Amazon

Amazon has vertically integrated much of its business. Not only does it act as a marketplace for buyers
and sellers – but it also offers its own products and services, as well as its own distribution channel. So in
effect, it has 3 stages in the supply chain. It sources the products, markets and sells them on its website,
and then distributes them.

Carnegie Steel

Carnegie was a massive steel manufacturer in the late 19th century. It vertically integrated by acquiring
companies before itself in the supply chain. The process of making steel requires raw material extraction
– iron ore and coal. It then requires those materials to be refined before it is then sent to Carnegie Steel
to manufacture into the final goods.

Carnegie Steel owned both the miners that extract the raw materials, as well as the refineries – thereby
owning virtually the whole supply chain.

Ikea

Ikea is known as a flat-pack retailer that sells mostly wooden furniture, but also other fixtures and
fittings. It is the last in the supply chain as it directly sells to the final consumer.

In 2015, Ikea made a huge step in ensuring complete vertical integration by purchasing a Romanian
forest. The company added to this by purchasing forestland in Alabama in 2018 – aligning the companies
aim to create a sustainable supply chain.

Not only does it now control much of the raw material production, but it also controls the
manufacturing process through its subsidiary – Swedwood, which was renamed in 2013 to Ikea Industry.
So it controls the production of the wood, the manufacturing process, and the final distribution through
its retail units.

Netflix

Netflix is known as a provider for streaming services – the end of the supply chain where there is direct
interaction with the consumer. It provides a platform for produces of films, TV, and other content.
However, the company was reliant on third-parties to provide new content that its subscribers would
like. At the same time, it had to pay a premium – particularly for big shows.

In 2013, Netflix decided to vertically integrate and enter the production business. So in turn, it not only
produced shows and films but also provides the distribution network through its streaming services. This
strategy has become vital as it has helped differentiate it from competitors and control the type of
shows that are made available.
Zara

Zara is a Spanish clothing and accessory company that has over one thousand stores worldwide. Not
only does it own its own retail stores and distribution, but the vast majority of its clothes are sourced
inhouse. Zara is vertically integrated with both the manufacturers and designs of its goods.

Whilst other stores rely on independent designers and manufacturers, they are left at their mercy. By
contrast, Zara is able to adapt to new trends much quicker than its competitors. It has also led to
improved efficiency in stock management – something that is crucially important in fashion design.

You might also like