Technologies, competencies, etc., in the chain of production processes of goods or service (direction to suppliers of raw materials - back; direction to consumers - forward). Vertically integrated holdings are controlled by the general owner. Usually each holding company produces a different product or service to meet common needs.

For example, in modern agriculture in most cases there is such a chain: product collection, its processing, sorting, packaging, storage, transportation and, finally, the sale of the product to the final consumer. A firm controlling all or several links of a similar chain will be vertically integrated. Vertical integration is the opposite of horizontal integration. The monopoly created by vertical integration is called a vertical monopoly.

Three types

Vertical integration forward

The company carries out vertical integration forward, if it seeks to gain control over the companies that produce goods or services that are closer to the end point of the product implementation or service to the consumer (or even subsequent service or repair).

Balanced vertical integration

The company carries out balanced vertical integration if it seeks to gain control over all companies that provide the entire production chain from the extraction and / or production of raw materials to the point of direct realization to the consumer. In developed markets, there are effective market mechanisms that make such a type of vertical integration redundant: there are market mechanisms for control over the adjustments. However, on the monopolistic or oligopolistic markets of the company often strive to build a full vertically integrated holding.

Notes

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Watch what is "vertical integration" in other dictionaries:

- (Vertical Integration) Association in one firm of two or more stages of production, usually located in the management of individual firms. Vertical integration may include forward integration, completing the technological process (for example, ... ... Economic Dictionary

Production and organizational association of enterprises related to the general participation in the production, sale, consumption of a single final product. Vertical integration covers suppliers of materials, manufacturers of nodes and parts, ... ... Financial vocabulary

See Integration Vertical Dictionary Business Terms. Academician. 2001 ... Business Terms Dictionary

vertical integration - An agreement in which the same company owns all the various aspects of the production, sales and supply of a product or service. In the electric power industry, this refers to the historically common agreement when the utility ... ... ... Technical translator directory

Vertical integration - Vertical Integration Specialization of the company on a number of consecutive stages of product production. Vertical integration can be regressive (see Backward Integration) or progressive (see Forward Integration). Within the entire industry ... ... Dictionary-Directory for Economics

vertical integration - Stačioji Integracija Statusas T Sritis Radiolektronika Atitikmenys: ANGL. Vertical Integration Vok. Vertikalintegration, F Rus. Vertical integration, F PRANC. Intégration Verticale, F ... Radiolektronikos Terminų žodynas.

Combining into a single technological process of all or basic links of production and appeal, from growing with. x. Products prior to the sale of finished products under the control of one center of industrial, banking or trading monopoly. ... ... Great Soviet Encyclopedia

Production and organizational association, merger, cooperation, interaction of enterprises related to the general participation in the production, sale, consumption of a single final product: suppliers of materials, manufacturers of nodes and parts, ... ... Encyclopedic Dictionary of Economics and Law

Vertical integration - Inter-sectoral cooperation and combining enterprises and produced. branches of nar. Xa, providing optim. The passage of the car mass in a single tehnol. The process from one phase of production to another. On the target function, 2 subsystems of V. ... ... Agricultural encyclopedic dictionary

Vertical integration - associations of a group of enterprises carrying out consistent stages of the production of finished products and who are the property of one company ... Dictionary of Economic Terms and Foreign Words

Books

• Vertical integration and vertical restrictions in industry, A. Ya. Butrkin. In the monograph, the theoretical and practical problems of one of the forms of the economic organization - vertical integration and vertical limitations are considered. Theoretical aspects ...

Essence of vertical integration. Motifs and stimuli vertical integration.

Forms and degree of vertical integration. The result of the functioning of vertically integrated firms. The problem of double marginal surcharge. Models of vertical integration.

1. The essence of vertical integration.

Vertical integration is the process of incorporation in the structure of companies that are associated with a single technological chain associated with it, or the merger of the stages of the production of a single technological chain and establishing controlling one company over them. At the same time, the production stage is understood as a process, as a result of which added value added to the initial cost of the product, and the product itself moves along a chain to the final consumer.

The main difference in the definitions of vertical integration by scientists is the degree of control of one firm over another, which arises as a result of the integration of various stages of the value chain.

2.1. Motifs of vertical integration.

There are a number of motives for creating vertical integration.

First, the vertical integration reduces the transaction costs.

Secondly, the stimulus for the combination of firms into a vertically integrated company can be the desire of enterprises to reduce the pressure of state regulation, for example, to reduce tax revenues.

The third motive to vertical integration may be the use of an effective price discrimination system. Assigning different prices for different buyers of goods, manufacturers of intermediate products are able to expand sales volumes and raise profits.

The fourth motive of vertical integration can be the diversification of production. The diversification of the company's release makes it possible to reduce the overall risk of economic management, which is particularly important in the conditions of expansion of activities.

The fifth motive of vertical integration can be the desire to reduce losses from the monopoly power.

Finally, the sixth motive of the association of firms to vertical integration can be the desire of firms to increase profits due to the solution of the problem of "double surcharge" or "double marzhnalization". Consider this problem in more detail. The problem of "double surcharge" occurs when the intermediate market and the market of final products are the markets of imperfect competition.

2.2. Incentives.

There are two main types of incentives - external and internal. External requires the requirements for the special characteristics of the structure of a sectoral market to real or potential participants, as well as the actions of firms functioning on it.

External incentives affecting the choice of one or another type of integration, in turn, can be divided into two categories - strategic and non-strategic. The latter are determined by industry characteristics, directly independent of the activities of firms. Strategic incentives are characteristics of the market structure and develop as a result of the functioning of the companies themselves.

The defining non-strategic characteristics of the market are: Scale effect; The current concentration of sellers and buyers; Capacity and saturation, Elasticity of demand; foreign competition; development of infrastructure; transaction costs; administrative barriers; General economic conjuncture.

The most important strategic characteristics of the market include: agreed actions of firms; price and other types of discrimination; Differentiation of products; nature and level of integration; the actions of firms to limit the entry into the market; The presence of potential competitors.

Internal incentives include all the real or potential advantages that receive a firm as a result of a particular type of integration. Internal benefits of integration may be the result of the effective interaction of the participants of the Group and to be expressed, among other things, in favorable for the company's structural changes in the market.

Vertical integration- Production and organizational association, merger, cooperation, interaction of enterprises related to the general participation in the production, sale, consumption of a single final product: suppliers of materials, manufacturers of nodes and parts, finite product collectors, sellers and consumers of the final product.

Vertical integration denotes that part of the value added, which is made in the framework of joint ownership. The price of the goods sold will surely include the costs of materials, components and systems. The high procurement price of these investments means a low level of integration. If the main share of the total value of sales is created within one organization, the level of integration will be high. The concept of horizontal integration in Pasha time is used much less and refers to the use of a wide range of products in order to maximize customer satisfaction.

Vertical integration is the process of replacing market transactions with intracorporate transactions, which leads to a planned economy in which suppliers enjoy a monopoly position, and consumers simply do not have another choice. Vertical integration, as well as diversification, was very popular in the management of commercial organizations, but the peak of this popularity passed several decades ago. As a classic example, you can bring Singer, an American company for the production of sewing machines, which at some point integrated all its operations from primary sources of raw materials (forests and iron mines) to ready-made sewing machines.

Vertical integration in the company is closely related to outsourcing and analysis "to produce or buy" and affects such philosophical questions as "Did Ronald Couze Nobel Prize in 1992?" Or "where does the company begins and ends and why?".

Experience shows that a low level of competition leads to a high level of integration, that is, diversification. Those countries of the world where competition was low, experienced a strong influence of the planned economy to be competitive in the modern world with its globalization. This led to a thorough revision of the entire business chain, as a result, considering the possibilities of outsourcing. As a result, traditional cost chains were broken and new companies were created. At the same time, the performance of old companies decreased. Production of components and supply of auxiliary systems in the telecommunications industry were given to PA spookice specialized companies, the main activity of which was the production of electronics.

Most sectors are now already in the phase of reducing integration, when they independently produce less finite products and buy more components from third-party suppliers.

Theoretically, all functions can be performed by individual companies. We can allocate a computer department, a factory, sales company and other parts of the managerial apparatus. The decision on vertical integration, in fact, implies the choice between to produce goods and / or provide services on their own, and to buy them from anyone else.

We gradually revealed disadvantages of advanced vertical integration. The high level of vertical integration became the problem and object of struggle for Mikhail Gorbachev in the Soviet Union. "Approximately the same problem arises from all traditional airlines. The largest European companies have always been relatively free from the voltage of the competitive struggle, and, accordingly, it has been characterized by a high level of vertical integration. In a competitive fight with newcomers, such as Ryanair or Easy.jet, old companies faced with difficulties associated not only with their cost structures, but also with advanced vertical integration. These companies themselves were engaged in the maintenance of engines, cleaned their aircraft, led their own terrestrial provision services and loading and unloading works, etc., which, of course, led to the conclusion of a number of intermediary transactions.

For centralized organizations, an excessive belief is characterized in its own abilities, which is expressed in the desire to do everything on their own. For organizations, more prone to entrepreneurship, on the contrary, is characterized by another trend: they make a more efficient chain by purchasing them the necessary goods and services from other companies. Below are negative features of advanced vertical integration:

• 1. It eliminates market forces, and together with them the ability to correct extra operations.
• 2. It makes attractive granting subsidies, which distorts the picture of the competition and distorts the meaning of the company's existence.
• 3. It creates a deceptive feeling of strength that does not correspond to the realities of the free market.
• 4. It creates interdependence that can lead to the collapse of any of the functions involved, if one of them turns out to be in a difficult situation.
• 5. It is organized by the closed market (guaranteed sales channels) lulls the company's vigilance and creates a false sense of security.
• 6. A false sense of security is dulling the desire and ability of the organization to participate in a competitive struggle.

The basis of many examples of vertical integration is erroneous representations and self-deception. The most common of delusions is faith in the possibility of excluding competition in a separate area of \u200b\u200bthe production chain using its control. Some of the illusions prevailing vertical integration in the world are listed below:

Illusion 1: A strong market position at one stage of production can be transformed into a strong position on another.

This assumption often led to incorrect investment solutions in the activities of the Cooperative of Swedish consumers * and other conglomerates, which were subsequently exposed to the above deficiencies.

Illusion 2: Commercial operations that do not exceed one firms exclude the participation of trade agents, simplify the management process and thus make transactions cheaper.

This is nothing more than the classic credo of all the adept plan for the planned economy, which consider centralized controls the only right way, and the free market is worthy of anathema.

Illusion 3: We can resurrect a strategically weak unit, bought out the unit following it in the production chain, or a unit, preceding it.

This is possible in rare cases. The logic of each industry should be assessed by its own indicators. This rule applies here with the exception of diversification situations in order to distribute risks.

Illusion 4: The knowledge of the industry can be used in order to achieve a competitive advantage at the stages of both previous and subsequent operations.

It is worth considering potential advantages in more detail and make sure that this logic does not enter a mislead.

There are many examples of a stunning increase in the level of profitability achieved by the destruction of vertically integrated structures. Perhaps it is for this reason that commercial organizations are generally moving towards a smaller level of integration. Manufacturers of cars with their own supply channels do not supply their cars to export markets at a less low price than those that enjoy the services of independent supplies companies. They also make their own gearboxes are not cheaper than enterprises specializing in the production of gearboxes.

One of the reasons why vertical integration was so popular in a technocratic era should be considered obvious savings on the scale, which was tangible and measured, in contrast to the benefits of small scale, such as the spirit of entrepreneurship and the energy of competition, which is impossible to express the numbers.

In certain specific situations, vertical integration has a positive side, especially when monitoring key resources allows to achieve competitive advantages.

Some are listed below:

• - higher level coordination of operations with better control capabilities
• - closer contact with end users thanks to vertical integration
• - Creating a stable relationship
• - Access to technical know-how, meaningful for this industry
• - Confidence in the supply of the necessary goods and services.

The integration of the tourist company Vingrevsor to the hotel business by creating country villages at the tourist resorts is an example of growth from the sale of vouchers before placing the post of vacation, a step that was regarded as a likely strategic advantage.

SAS also invested in the hotel, and Ike with its integration back from the sale of furniture to its development and production planning was balanced by integration forward leaving the latest production stage (furniture assembly) to consumers themselves.

The basis of vertical integration is often due to narrowing or excessive pride, so it is worth carefully considering its own internal motives.

Tired of the kitchen? Want to change something? Order kitchens to order According to individual orders.

This strategy means that the company is expanding in the areas of activity related to the promotion of goods to the market, its implementation to the final buyer (direct vertical integration) and related to the flow of raw materials or services (reverse).

Direct vertical integration protects buyers or distribution network and guarantees the purchase of products. Reverse vertical integration is aimed at consolidating suppliers supplying products at lower prices than competitors. Vertical integration also has a number of advantages and disadvantages, some of them are shown below.

Benefits:

There are new opportunities for savings that can be implemented. It includes the best coordination and management, reduction of costs for loading and unloading and transportation, the best use of areas, capacities, easier collection of information about the market, reducing negotiations with suppliers, less expenses for transactions and benefits from stable connections.

Vertical integration should guarantee the organization of delivery in a tighter time and, on the contrary, selling its products during periods of low demand.

It can provide the company more space for participation in differentiation strategies. This is because it controls most of the value chain, which can give more differentiation opportunities.

This path allows you to withstand the significant market power of suppliers and buyers.

Vertical integration can allow the company to increase the overall profit on investments, if the proposed option assumes the return greater than the alternative price of the company's capital.

Vertical integration may have technological advantages due to the fact that the acquirement organization will receive a better understanding of technology, which can be fundamental to the success of activities and competitive advantage.

Disadvantages:

In vertical integration, a tendency towards an increase in the proportion of constant costs is laid. This is due to the fact that the company should cover the constant costs associated with feedback or direct integration. The consequence of such an increased operational dependence is that the risk of an enterprise will be higher.

Vertical integration can lead to less flexibility in making decisions due to changes in the external environment. This arises because the competitive advantage of the company is associated with the competitiveness of suppliers or buyers included in the integration process.

It can also create significant obstacles to the exit, as it increases the degree of attachment of the company's assets. They will be much more difficult to sell in the event of a decline.

There is a need to maintain the initial and final stages of the main

The activities of modern companies proceeds in conditions of a rapidly changing competitive environment, which is due to the processes of globalization, liberalization of markets, as well as technological progress. The company's success in such a situation largely depends on the effectiveness of interaction with other companies at various stages of creating and promoting the final product or service to the end user, in other words, from the effectiveness of vertical integration.

The main purpose of this article is to consider the concept of vertical integration, a comprehensive analysis of theoretical approaches to the explanation of this phenomenon, which did not pay significant attention in the literature earlier, as well as the creation of the theoretical base for explaining the processes of vertical integration in the automotive industry. The main source of information in writing the article was the works of R. Cowus, O. Williamson. Ademanak. R. Harriegen, J. Stigler, V. Abernasi, K. Erroow, R. Blair, R. Basel, devoted to the consideration of the issues of vertical integration, as well as a number of articles in scientific journals.

The object of study in this article is the economic theories that are used to explain the vertical integration of the company. At the same time, the object of analysis, the arguments given to the protection of vertical integration, contribution to the theoretical substantiation of vertical integration, as well as their limitations are considered.

Vertical integration is the process of incorporation in the structure of companies that are associated with a single technological chain associated with it, or the merger of the stages of the production of a single technological chain and establishing controlling one company over them. At the same time, the production stage is understood as a process, as a result of which added value added to the initial cost of the product, and the product itself moves along a chain to the final consumer.

The main difference in the definitions of vertical integration by scientists is the degree of control of one firm over another, which arises as a result of the integration of various stages of the value chain.

Thus, Professor of the Massachusetts Institute of Technology M. Ademan believes that the firm is vertically integrated when the goods and services are moving from one unit to another, which could be sold on the market without further recycling. This definition reflects the opinion of the majority of scientists that the vertical integration implies one hundred percent control of the firm over several production stages. Such a definition excludes the flexibility of the company when choosing the degree of vertical integration, as well as the possibility of implementing quasi-integration strategies.

Professor Harvard University K. R. Harrygen gives a wider definition of vertical integration as a method for increasing the value added when creating a product or service and promotion to the final consumer. Such a point of view involves the diversity of the forms and the degree of control of the relationship between different stages of production, including their disintegration. The last phenomenon is observed in many industries, for example in the automotive industry.

Depending on the direction of vertical integration, allocate:

• - integration "forward", or direct integration, involving the integration of one of the stages of the value chain with subsequent stages of production and sales. An example of such integration may be the integration of the stages of assembling cars and their distribution;
• - Integration "Back", or reverse integration at which one of the stages of the value-added chain with previous stages of the technological process occurs. For example, a car assembly firm is vertically integrated with supplier of component materials for assembly.

Depending on the degree of integration, consider:

• - complete integration;
• - Quasi-integration requiring fewer investments and allowing companies to remain freer.

Quasi-integration can exist in the form:

• - long-term contracts;
• - joint ventures and strategic alliances. With this form of the company, they combine certain resources to achieve a general result, while remaining independent in solving other issues;
• - licenses for the right to use technologies. In this case, we are talking about vertical integration, in which one of the integrable stages is the development of technologies and R & D. Full vertical integration can be replaced by a license agreement, if the developed technology is difficult to copy and additional assets are not required to sell such technologies, for example marketing specialists;
• - ownership of assets. The company has ownership rights to certain assets at various stages of the technological chain, while the management of such assets carry out external contractors. For example, car manufacturers own specialized tools, snap, templates, forms for stamping and casting, without which the production of components is impossible. They conclude contracts with contractors for the production of such components, remaining the owners of the means of production, thus preventing the possibility of violation of contractors from contractors and guaranteeing supplies;
• - franchising. The franchisor is the owner of intangible assets (for example, brand), controls prices, product quality, level of service, while minimizing financial and managerial resources.

At the moment, there is no common theory of vertical integration in economic science and the explanation of its existence occurs using various theories and approaches.

For a long time in neoclassical direction of economic theory Taking into account one of the assumptions about the existence of competitive markets, through which effective placement of resources occurs, the only justified case of vertical integration was the existence of a continuous technological relationship of various production stages. It is assumed that to achieve the effectiveness of consecutive processes that coincide over time and space, as, for example, with the production of steel, common property is necessary. In accordance with this approach, vertical integration in the automotive industry as discrete production does not make sense.

This approach is unjustified, since, as soon as various scientists have proven, the market is not an ideal resource allocation mechanism, in addition, in the history of the automotive industry there are many examples of successful vertical integration.

Vertical integration is when the company controls more than one phase of supply chain. This is a process that enterprises are used to convert raw materials into the product and bring it to the consumer. There are four phases supply chain: goods, production, distribution and retail trade.

Vertical integration is when the company controls more than one phase of supply chain. This is a process that enterprises are used to convert raw materials into the product and bring it to the consumer. There are four phases supply chain: goods, production, distribution and retail trade. The company is vertically integrated when he controls two or more of these stages.

There are two types of vertical integration.

Forward integration - this is when the company at the beginning of the supply chain controls the steps further. Examples include iron production companies that own "descending" activities such as metallurgical plants. Inverse integration is when the business at the end of the supply chain operates "upstream". For example, when the distributor of films, such as NetFlix, also produces content.

An example of vertical integration is a store, for example Target, which has its own shop brands. He owns production, controls the distribution and is a retailers. Since he cuts out an intermediary, he can offer a product similar to a product with a corporate name, in a much lower price.

Manufacturers can also integrate vertically. Many shoe and sewing companies have a flagship store that sells a wider range of products than you can get from a regular seller. Many also have stores that sell the goods last season with a discount.

Five advantages

Any of the five advantages of vertical integration gives the company a competitive advantage over non-integrated companies. Consumers are more likely to choose their products or services. Or the cost below, quality is better, or the product adapts directly to them.

The first advantage is that the company should not rely on suppliers.

They have less chances to face violations from those who do not work. They can avoid frequent strikes and labor disputes from companies in socialist countries.

Secondly, companies use vertical integration when its suppliers have large market power and can dictate conditions. This is important if one of the suppliers is a monopolist. If the company can bypass these suppliers, it will bring many advantages. It can reduce the internal costs and improve the delivery of the necessary items. It is less likely that it will not have critical elements.

Thirdly, the vertical integration gives the company savings due to scale. It is then that the size of the business allows you to reduce costs. For example, it can reduce the cost per unit by buying in bulk. Another way is to make the production process more efficient. Vertically integrated companies eliminate overhead due to management consolidation.

Fourth, a retailer with vertical integration knows what is well for sale. It can "knock down" the most popular branded products. It was then that it copies the ingredients or production process. It creates similar, but branded, marketing messages and packaging. This can only make powerful retailers. This is because brand manufacturers cannot claim copyright infringement.

They do not want to risk losing the distribution through the retailers.

The fifth advantage is the most obvious to consumers. These are low prices. The company with vertical integration can reduce costs. He can transmit these savings to the consumer as lower prices. Examples include Best Buy, Walmart and most national grocery store brands.

Four disadvantages

The biggest disadvantage of vertical integration is the expense. Companies must invest a lot of capital to create or buy factories. Then they must support the work of the plant to maintain efficiency and profits.

This reduces flexibility. Vertically integrated companies cannot follow consumer trends that disseminate them from their factories. They also cannot change the factory in countries with a lower exchange rate.

The third problem is the loss of focus.

For example, a successful retail business requires another set of skills than a profitable factory. It's hard to find CEO, which is good for both.

It is also unlikely that any company will have a culture that supports both retail stores and factories. Successful retailer attracts marketing and sales. This culture does not meet the needs of the factory. The collision of cultures can lead to misunderstandings, conflicts and lost performance. Unintegrated company can even use cultural diversity in the workplace to compete with vertically integrated.

Classic examples of vertical integration that covers all economic ties in one market segment, are interros and lukoil companies (see Fig. 30.1). With a horizontal scheme, the holding combines homogeneous production (see Fig. 30.2). It offers the market wide product line and already in this area dictates its rules. The classic example of such holdings are Concerns Bolshevik, Red October, Yukos company.

The most striking Russian example of vertical integration is the oil complex, in the process of the restructuring of which it was decided to form vertically integrated oil companies covering all the stages of oil production and processing and sales of petroleum products - from geological exploration to the sale of gasoline on benzocolones. To date, formed 16

Examples of vertical integration can be

All the companies mentioned closely took up their production by making major capital investments into labor and technology, as well as thoroughly worked out the most important strategic decisions in relation to the infrastructure, including, for example, vertical integration and specialization of production. In this chapter, we will discuss the process of developing production strategies and the role they play in increasing competitiveness.

An example of Japanese refineries. These companies did not participate in the activities of oil-producing firms, so their financial position largely depended on the prices of crude oil, changes in exchange rates, the demand of petroleum proposions. Only those Japanese oil companies that are branches of foreign oil production leaders demonstrated relative stability due to the high degree of vertical integration.

Give examples of vertical and horizontal integration.

We illustrate the above for example. Suppose that direct vertical integration is selected as a development strategy and within the framework of this strategy it is supposed to purchase retailers. In order to include new stores in the company's management system, a number of programs should be developed.

We present several characteristic examples of vertical Japanese industrial integration.

Here they say that in Russia the excess processing capacity. But it was so before. Today there is no excess, because we set up the power under the need that had the state of these 10 years 160-170 million tons per year. So far there was no economic growth, everything was fine. But with an economic rise, when the consumption of gasoline, electricity, diesel fuel and other products increase dramatically, we face a lack of primarily bright petroleum products. We are all increasing the depth of processing, but it takes time. Lack of capacity. Here, for example, the NORSI plant. It is not included in the structure of any vink and does not use his potential. In Angarsk, the plant was practically stood. And there is also a number of similar enterprises for which no one is responsible and which therefore is also idle. And to top it all - an increase in export duties. Today we have increased downloads and Norsi, and the Moscow Oil Refinery. Vertical integration is necessary for what the close relationship between oil production, its processing and implementation. In Komi there was a problem - the Ukhta plant did not function. Today it is loaded on that power that allows you to work effectively. Also with Perm, Volgograd, Ryazan plants. The inclusion of individual refineries in Wink is the real path to solving the pressing problems of oil refining.

Diversification involves the activities of the company in the markets of various goods that are not close to substitutes, in contrast to vertical integration, which involves the release of one product. An example of diversified production can serve as a refrigerator manufacturing company that issues one-

The firm may benefit from vertical integration through investment in other market-oriented or supply. However, recently there were more examples of investments focused on the supply of raw materials from other countries than the opposite. This is due to the growing dependence of developing countries from raw materials and the lack of funds from these countries for substantial investments abroad.

Germany was the only European state, where by the end of the XIX century. The enterprises management system is upgraded. On the eve of 1900, a significant number of large companies diversified their activities and conducted vertical integration. Focusing on the American model, many of them took the organization's strategy of numerous divisions. On the eve of the First World War, such an organization, for example, possessed the company "Siemens" 10.

Examples of vertical integration 5.3.1. Toto Motor Company

We mentioned that when using vertical integration, especially quasi-integration, adaptation to technological changes can accelerate, because the leading company gets the ability to plan changes and manage them. Good examples of this are given Seico and Totea. On the other hand, if investment invested in certain technologies, vertical integration can be a factor in conservation. Not-

Diagonal integration is integration with a firm at a different level of the vertical production cycle and producing paple products. An example of diagonal integration may be acquired by the automotive firm of the plant for the production of engines for motorcycles and motor boats.

Long-term contracts differ in the article and the density density of the developing economic separations. The lowest stage is a long-term contract, in which the full independence of the parties is preserved. The next step is long-term contracts with vertical restrictions. An example is the franchise system, widely used in retail vehicles, gasoline, other goods. Let's say the automotive company provides the right to sell its corporate products in a specific area to a special dealer. Although the dealer does not lose the status of an independent company, he at the same time is forced to observe a number of restrictions established by the supplier and obey its control. As a result, this is not complete, and a partial vertical integration is formed by a quasi-recorder.