The practice of owning or controlling the source of raw materials and components is known as vertical integration. This strategy involves a company taking on the ownership or management of its supply chain to improve efficiency, reduce costs, and ensure a steady supply of the materials needed for production. By vertically integrating, companies can gain more control over their operations, limit reliance on external suppliers, and mitigate risks associated with supply chain disruptions. This approach can lead to increased profitability and a competitive advantage in the market.
In contrast, horizontal integration focuses on acquiring or merging with other companies at the same stage of production, aiming to increase market share. Market control entails having the power to influence prices and supply in a particular market, which is distinct from the concept of controlling raw material sources. Supply chain management encompasses a broader range of activities that involve managing the flow of goods, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to consumer, rather than just focusing on ownership or control of raw materials.