Upline Vertical Integration

Posted in Marketing and Strategy Terms, Total Reads: 929
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Definition: Upline Vertical Integration

Vertical integration is of two types:-  

Upline vertical integration or backward integration and downline vertical integration or forward integration.


When a company moves backward on its own production path it is called Upline vertical integration. It is a form of vertical integration in which a company purchases or acquires its suppliers.  Such a move is usually initiated to reduce dependency on suppliers and become more independent in the process of production.

 

Example

A television manufacturer might acquire a picture tube manufacturer. This would help the television manufacturer to acquire control over one of its main components i.e. picture tubes.

 

Advantages:-

  • It saves a company from being dependent on suppliers. Any problem with the supplier might adversely affect the company in question. But if upline vertical integration is done, the company does not have to bother about supplier problems.
  • A company might be in a better position to maintain the quality of its products.


Disadvantage:-

  • Sometimes, it is more effective for a company to rely on the expertise and economies of scale of other suppliers than to have backward integration.

 

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