Vertical integration
In microeconomics and strategic management, vertical integration is a theory describing a style of ownership and control. Vertically integrated companies are united through a hierarchy and share a common owner. Usually each member of the hierarchy produces a different product, and the products combine to satisfy a common need.
Three types
There are three varieties of this : backward vertical integration, forward vertical integration, and balanced vertical integration.
An example - The music industry
Some in the music recording industry believe vertical integration is the best way to survive in the modern, post napster environment. The idea would be to vertically integrate the record label with the radio station of its genre in local markets. This would allow the label to more cheaply produce music (because many of the elements which make the production expensive are due to unnecessarily high standards of production required by the radio stations, and the system of payola). It should also ensure that the record company better understands the wants of the radio listeners. The hope would be that anything the record label would play on their radio station, provided the listening habits and distribution system of music has not changed, would very likely be a hit.
See also
