Vertical integration helps companies and businesses to have control over their supply chain. We will discuss the vertical integration examples of companies across different sectors, the impact of this business strategy on these businesses, and whether the application of each of the examples of vertical integration was successful or not.
Vertical integration can be defined as a business strategy that involves a company taking over some aspect of its supply chain instead of just being focused on production alone. This helps the companies to bypass the middlemen (suppliers and contractors). There are various reasons why a company may decide to apply this business strategy. As we discuss each of these examples of vertical integration, we will say why each company decided to use each type of vertical integration.
Vertical Integration Examples of Companies
- Tesla Vertical Integration Example
- The Vertical Integration Strategy of Walmart
- Apple’s Example of Vertical Integration
- Zara’s Vertical Integration Strategy
- Google’s Example of Vertical Integration
- Amazon Vertical Integration Example
- Vertical Integration Example of Netflix
- Coca-Cola’s Example of Vertical Integration
- Live Nation and Ticketmaster Inc. Vertical Integration Example after their merger.
We will discuss some of these vertical integration examples below and see how the companies were able to execute their strategies.
The Vertical Integration Strategy of Walmart
Walmart is a very good example of vertical integration that was successfully applied. With more than 5,100 retail units and 550,000 associates worldwide, the retail giant has complete control over its supply chain. Walmart’s vertical integration example involves acquiring an extensive network of distribution centers and transportation fleets; this allows it to control the transportation and distribution of its products. This retail giant has even gone as far as creating its own branded products in-house which cuts out the middleman entirely. This is an example of a forward vertical integration.
This vertical integration example has helped Walmart to offer low prices on the products it sells while maintaining high-profit margins. It also helps the company to be consistent without disrupting the distribution of its products.
Apple’s Example of Vertical Integration
Apple is one of the most well-known companies in the world, famous for its technology products such as iPhones, iPads, and Macbooks; Apple controls some aspects of its product development process through its vertical integration strategy.
An example of vertical integration by Apple is developing its own operating system instead of having to rely on another company for an operating system. Other vertical integration examples by Apple are designing hardware components such as the high-resolution screen and assembling them into finished products. This allows the company to maintain tight quality control measures and ensure that each component works as desired.
The aim of Apple is to increase the quality of its product which leads to more customer satisfaction and trust in the brand. Other companies often outsource some components used in making their tech products and may use operating systems produced by a different company. For example, the Android operating system owned by Google is being used by many phone manufacturers. Should any of the phone manufacturers decide to make their own operating system instead of relying on Android, such a company is applying an example of vertical integration.
Vertical Integration Example of Netflix
Netflix is another vertical integration example of a company that started as a DVD rental company. It later diversified into streaming movies and films online; this is its major service. Over time, the company in a bit to increase its profit margin started creating its own movies and shows instead of paying for licenses for all movies from producers. Some of the shows and movies produced by Netflix include The Get Down, Stranger Things, Grace & Frankie, etc.
Whether Netflix’s example of vertical integration was successful or not, will be difficult to say because the company earns from subscriptions. How will it determine if an increase or decrease in subscribers was a result of a specific movie? Since many movies are advertised and streamed at the same time, we cannot say with certainty whether Netflix’s vertical integration strategy was successful or not.
Amazon’s Vertical Integration Examples
Amazon is an e-commerce giant that has applied some vertical integration examples in its business. The company started as an online retailer, selling books and expanding into diverse other product categories over time. However, Amazon’s success can be attributed to its expansion beyond just selling products to creating and manufacturing some products itself.
One example of Amazon’s vertical integration is the introduction of its own line of electronic devices such as Kindle e-readers and Fire tablets. This allowed the company to reduce its reliance on third-party manufacturers.
Another vertical integration example by Amazon is Amazon Web Services (AWS) which offers cloud computing services to businesses worldwide while also using it for its own web platform. AWS generates additional revenue for Amazon from external clients.
Through the acquisition of Whole Foods Market in 2017, Amazon was able to expand its physical presence by owning grocery stores across America. Owning these grocery stores not only provides another sales channel for existing products like Prime Now delivery service but also allows them access to customer data for targeted marketing purposes.
Amazon’s strategic use of vertical integration has allowed them not only to expand their line of business but also to increase efficiency and maintain control over every aspect of their business operations.
Vertical Integration Examples carried out by Nestlé
Nestlé as a food and beverage company has several vertical integration examples that have been successfully implemented; this has made the company popular and efficient.
One of Nestlé’s biggest strengths is its backward vertical integration strategy; it starts from the farms to the factory. The company owns farms, factories, and distribution centers to ensure it has complete control over every aspect of production. This enables it to maintain consistent quality across all product lines while also preventing any disruption that may arise if it were to use contractors or suppliers to supply them (for example, cocoa for making their beverages). This example of vertical integration provides Nestlé with greater efficiency and improves its profitability.
Coca-Cola’s Example of Vertical Integration
Coca-Cola is a great example of a company that has successfully implemented vertical integration. The company has been vertically integrating its business for more than 100 years and has proven to be a successful strategy. In fact, Coca-Cola had tried contracting their bottling and distribution process to other companies but found out there was no flexibility from the end of the contracted companies to the changing market demands. This made the Coca-Cola company buy back these bottling and distribution companies in order to improve its flexibility to any market demands and also control the distributions more efficiently.
Coca Cola’s vertical integration strategy has helped it to maintain a competitive edge within the market while optimizing efficiency across its entire value chain.
Live Nation and TicketMaster Inc. Merger
Live Nation and Ticketmaster Inc. formed a merger that enabled the two to work as a single company. This created an excellent example of a vertically integrated business where a single company manages the artists, owns the venues, produces shows, and sells tickets to these shows.
Video showing Real Life Examples of Vertical Integration
Table showing the Vertical Integration Examples of Different Companies
|Company Name||Product||Type of Vertical Integration|
|Tesla||Electric vehicles||Forward Vertical Integration Example|
|Apple||Consumer electronics||Backward Vertical Integration|
|Amazon||E-commerce platform||Forward and Backward Integration Examples|
|ExxonMobil||Petroleum products||Backward and Forward Vertical Integration Examples|
|Ford Motor Company||Automobiles||Forward Vertical Integration|
|Nestlé||Food and beverages||Backward Vertical Integration|
|Netflix||Online streaming service||Vertical Integration|
|Boeing||Aircraft manufacturing||Forward Vertical Integration|
|Samsung||Consumer electronics||Backward and Forward Vertical Integration Examples|
|Tyson Foods||Processed meat products||Vertical Integration|
Related:Last Updated on July 29, 2023 by Nansel Nanzip Bongdap