Are … these modern forms of vertical integration good strategies? Yes, if two special conditions are met. The first is a “market failure” that is hurting your business; the most common are supply risk, demand risk, and profit gouging. The second is that you have the power or capabilities to fix and even exploit that market failure. Without market failure, vertical integration is just plain ole diversification. And without the power or capabilities to exploit a market failure, it’s a very risky strategy.
In the end, vertical integration is a strategy driven by lack of trust that upstream and downstream players will come through for your business, and not overcharge you. If that lack of trust is well founded, there’s a failure in the market. And if you have the market power or essential capabilities to enter your suppliers’ or customers’ business, vertical integration makes sense for your strategy. But those are two very big ifs.
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