The advantages and disadvantages of vertical integration

Julie Brownlee, Fsp Invest, 24 Nov. 2015

Tags: vertical integration, what is vertical integration, types of vertical integration, mergers, company mergers,

In the world of stocks and shares, there is a fair number of mergers and acquisitions.

One way for this to happen is through vertical integration.

So what exactly is vertical integration? And what are the pros and cons for you as an investor?

Read on to find out more…

What is vertical integration?

Vertical integration is when two companies which are at different stages of production merge to form a larger company. In other words, a company caters to more or all parts of its supply chain.

There are different types of vertical integration.

Upstream or backward integration is when a merger takes place to bring a company back closer to the initial source of its product.

Downstream or forward integration is when a merger take place to take a company closer to its final customer.

An example of vertical integration

Vertical integration works well in the oil industry…

Take a global oil giant like BP. The company began taking crude oil out of the ground. Over the years it became vertically integrated as it bought refineries, petrol stations and chemical companies.

This is an example of downstream or forward integration.

The pros and cons of vertical integration

The main benefit of vertical integration is it can give a company more control over costs in its business. It may achieve this by centralising specific departments.

The main disadvantage of vertical integration is it can leave a company with many assets that aren’t contributing a lot to the bottom line.

This can lead to companies having to take steps to sell off underperforming assets.

So there you have it. The advantages and disadvantages of vertical integration.

*********** Best seller *************

Let me show you how to become a minimum wage millionaire and live the life you deserve!

Stocks, bonds or fixed deposits that you need to hold for years for a small return will not do the trick. What you need now is...

  • Something that can help you make extra money quickly, almost instantly
  • Something that you could even have your spouse do while you stick to your regular job
  • Something easy enough that even retired people can use to generate a little extra income on the side

Now you can… Profit from my home business plans without any risk!


Related QA

willz asked:
Good day I see the share price of Hulamin has dropped continuously since November 2017. Apparently it is a very good buy. Why does the price keep on [read more]
Published at 10 Feb. 2018 in: Shares & Stock Ideas Share price 1 Answer
BrianD asked:
Can you please advise me what is all required to get set-up for CFD trading? – as per the adverts from Timon? I note the quarterly fee, but what [read more]
Published at 13 Dec. 2017 in: Shares & Stock Ideas Cfd 1 Answer
DRTANYA asked:
I received shares form NETCARE in 2006 and forgot about it and now I am not sure if it is still available or valid anymore - who can I mail or [read more]
Published at 04 Dec. 2017 in: Shares & Stock Ideas 1 Answer
While I have been following Francois suggestions on the Red ?Hot Penny Shares since February this year, I am still not certain how long I am meant to [read more]
Published at 29 Aug. 2017 in: Shares & Stock Ideas Buy Sell Hold 2 answers
nmaranele asked:
Good day, What would be the right amount to invest as a minimum for equities to see tangible results? [read more]
Published at 18 Aug. 2017 in: Shares & Stock Ideas Minimum invetsment 1 Answer

Related articles:




Youtube Twitter Facebook

Connect with us:    

  • Accelerated Investor