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ahmed zerrouki
teacher, Algeria
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Who can share and explain an example of vertical integration? Thanks... (...) Read more? Sign up for free
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Hisham Albuolayan
Analyst, Saudi Arabia
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Example of Vertical Integration
We need to identify the value-chain of our business, then identify the applicable vertical/horizontal integration.
An example is a company that produces and sells Polypropylene products. They need the Propylene as an input. They can buy it, but this will incur extra costs like the profit margin of the producer, transportation cost, customs (if exported), etc. Also the suppliers will have power on them.
Due to the above, it could consider to build its own production line for the Propylene to supply itself and in the same time it can sell any excessive quantities to third parties and perhaps make a little profit too.
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Luis de la Puente
CEO, Peru
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Vertical Integration example
Another example of vertical integration for the fishing industry:
As a fish processing plant, it is a plus if you integrate the fishermen into your company as strategic partners and permanent providers (backward integration). That is the only way to assure your plant gets a stable, permanent supply of fish for production process.
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