Question
Vertical stages of production, also known as vertical integration, refer to the process where a company expands its business operations into different steps on the same production path. This means a company performs more than one stage in the supply chain that can range from sourcing raw materials, manufacturing, to distribution of the product.
For example, a company like Apple Inc. is a great example of vertical integration. They design their own software, produce their own hardware, and sell their products in their own retail stores.
Another example is Starbucks, which buys and roasts its own coffee beans, operates its own stores, and also sells its own branded products in grocery stores.
This strategy allows companies to reduce costs, improve efficiency, and gain more control over their supply chain. However, it also requires significant investment and can increase business risks.
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Though "where" connotes geography, the question of where to play to deliver on a winning aspiration includes five categories: 1) geography; 2) product type; 3) consumer segment; 4) distribution channel; and 5) vertical stage of production. To employ a sound strategy means to gather extensive information in each of these areas and to make a conscious choice along each parameter.
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