Vertical Combination:

Author Topic: Vertical Combination:  (Read 233 times)

Offline Shah Alam Kabir Pramanik

  • Hero Member
  • *****
  • Posts: 542
  • Test
    • View Profile
Vertical Combination:
« on: April 03, 2017, 04:38:33 PM »
Vertical Combination:
It is also known as sequence or industry or process integration. It arises as a result of integration of those business enterprises which are engaged in different stage of production of a product. In other words, it implies combination under single control of enterprises in different stages of manufacturing the product. The aim of vertical integration is to gain self-sufficiency as regards raw materials and distribution of finished products. Two or more business units engaged in successive stages of production, or producing articles leading to the same final product, may combine together and mange all stages of production and the distribution of the final product. For example, in cotton textile industry, there may be a combination of units engaged in successive stages of cloth manufacturing. Such as spinning, weaving, bleaching and finishing of cloth. Vertical combination may result from backward or forward integration. Manufacturers at successive stages in production may integrate backward up to the sources of raw materials or they may expand through forward integration to retail selling of the finished product. Thus, the basic objective of vertical combination is either to secure an assured supply of raw materials and other requirements or to create steady market for the products manufactured. The former objective is fulfilled by backward integration and the latter is realized by forward integration.