Vertical integration is a business strategy that involves expanding one’s operations into different areas of the supply chain. While it has its advantages, such as enhanced control and being able to keep up with rising demands, it also has its drawbacks — namely, greater risk exposure.
Vertically integrated companies have to handle all parts of the production process, from procurement and production to distribution and marketing. This requires a huge amount of capital and resources in order to be successful. Additionally, any issues or discrepancies between the various stages of production can be especially damaging. If a company isn’t able to stay ahead of these issues quickly and efficiently, it could end up losing out on potential profits. Furthermore, if a particular part of the production process fails entirely, the entire enterprise may suffer negative consequences.