Legal Definitions - vertical integration

Vertical integration is the process of a company owning or controlling different stages of the production process for a product or service. This can include owning facilities that produce raw materials or parts, as well as owning distribution channels or retail outlets.

• A car manufacturer that owns a steel mill to produce the metal for its cars is an example of backward integration.
• A technology company that owns its own retail stores to sell its products is an example of forward integration.
• A fast food chain that owns its own farms to produce the ingredients for its menu items is an example of complete vertical integration.

These examples illustrate how a company can control different aspects of the production process to increase efficiency, reduce costs, and improve quality control.