business integration process model example

Ikea is known as a flat-pack retailer that sells mostly wooden furniture, but also other fixtures and fittings. It then requires those materials to be refined before it is then sent to Carnegie Steel to manufacture into the final goods.Ĭarnegie Steel owned both the miners that extract the raw materials, as well as the refineries – thereby owning virtually the whole supply chain. The process of making steel requires raw material extraction – iron ore and coal. It vertically integrated by acquiring companies before itself in the supply chain. Carnegie SteelĬarnegie was a massive steel manufacturer in the late 19th century. It sources the products, markets and sells them on its website, and then distributes them.

So in effect, it has 3 stages in the supply chain. Not only does it act as a marketplace for buyers and sellers – but it also offers its own products and services, as well as its own distribution channel. Vertical Integration Examples AmazonĪmazon has vertically integrated much of its business. In turn, consumers may see lower prices in a competitive market place. As a result, the manufacturer can pay exactly the marginal cost – rather than profiting the processor. Mondelez) purchases a cocoa bean processor that is buying its beans from. Vertical integration occurs when the chocolate manufacturer (e.g. Two of which are the processing of the cocoa beans, and another to manufacture the final chocolate bar.

For instance, chocolate manufacturing has many stages of the supply chain. This can effectively allow it to offer lower prices to the final consumer. Vertical integration allows the company to control the distribution or supply of its goods – allowing it greater control and efficiencies along the supply chain.Īt the same time, the combined company benefits from the profits of both companies.There are three types of vertical integration – backward, forward, and balanced.Vertical integration is where two companies at different stages of the supply change join together to form one company.

Business integration process model example