VERTICAL STRATEGY

Strategy vertical: vertically integrated companies are united through a hierarchy and share a common owner. Generally, members of this hierarchy develop different tasks that combine to satisfy a common need.This common need comes from economies of scale in each company, and synergies within the corporation. This resulted in a search for higher profits and therefore generate higher added value based on the primary sector to the final cosumidor. Example: the oil companies: one company can bring under its control tasks as diverse as exploration, drilling, production, transportation, refining, marketing, distribution and retail trade of products processed. In the field of agribusiness are also very frequent cases of vertical integration.A sugar company, for example, can be owned by a company that has its own sugar cane plantations, their mills or sugar mills, rum and other beverages and spirits, their trademarks and their own transport. There are three varieties of vertical integration: backward vertical integration, forward and offset. In backward vertical integration, the company creates subsidiaries that produce some of the materials used in the manufacture of its products. For example, an automobile company may own a tire company, a glass and metal. The control of these subsidiaries is justified to create a stable supply of materials and ensure consistent quality in the final product. In the vertical integration forward, the company establishes subsidiaries that distribute or sell products for both consumers and for their own consumption. As an example, would a movie studio who owned a chain of theaters. Offset in vertical integration, the company establishes subsidiaries that supply materials while distributing the products manufactured.