BUS 010 Lecture Notes - Lecture 16: Moe Williams, Vertical Integration, Switching Barriers
Document Summary
The extent of vertical integration is indicated by the ratio of a firm"s value added to its sales. Defining vertical integration revenue: the more a firm makes rather than buys, the lower are its costs of bought-in goods and services relative to its final sales revenue. Backward integration: firm acquires ownership and control over the production of its own inputs. Forward integration: firm acquires ownership and control over activities previously undertaken by its customers. Vertical integration was considered generally beneficial in the past: currently firms are concentrating more on outsourcing to focus on their core. The benefits & costs of vertical integration competencies . Vertical integration of software devices and content is viewed as a critical advantage in the face of rapid technological change in a number of high-tech industries. Positives of vertical integration: produce cost savings, facilitate transaction-specific investments.
