vertical integration

vertical integration
The combination in one firm of two or more stages of production normally operated by separate firms. Vertical integration may involve forward integration, for example an oil company running filling stations; or backward integration, for example an army running its own ordnance factories. Vertical integration may be beneficial for firms if it assists in co-ordination over the quality and reliability of intermediate goods which one independent firm would have sold to the other. On the other hand it may inhibit entry to and competition in an industry.