Vertical integration
Vertical integration is when two businesses at different stages of production join to form one bigger company.
Vertical integration is when two businesses at different stages of production join to form one bigger company. Anything that moves a company towards the the start of the production process is upstream' or backward' integration. Anything that moves it closer to the final customer is downstream' or forward' integration.
In the oil industry, the likes of BP and Shell started off upstream looking for and extracting oil. They then moved downstream by buying refineries (to turn the oil into products) and petrol stations to sell finished products to customers.
Vertical integration can give a company more control over costs and quality. But when business is slow it can leave them with lots of assets that aren't paying their way.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
HMRC savings tax crackdown: More workers to pay tax directly from their wages
Banks and building societies will be required to obtain National Insurance numbers from savers to make it easier for HMRC to tax those who breach their personal savings allowance
-
It’s time to start backing the UK stock market
The UK stock market has been languishing for decades. But the tide is turning and smart investors should buy in now