Vertical Integration: Backward Integration
Vertical Integration Vertical Integration deals with the degree to which a firm owns its upstream suppliers and its downstream buyers. When a firm becomes vertically integrated it means that it has incorporated all the aspects of the supply chain including manufacturing, distribution, warehousing, and even retailing. Specifically there are two types of vertical integration, backwards and forward integration. Backward or upstream integration is when a firm takes command of a function that its suppliers previously managed. For example if Dell were to buy Intel this would be an example of backward integration, because Dell uses the Intel processors in their computers. Forward integration on the other hand is just the opposite; it is when a