Skip to main content

What is Vertical Combination ? Example of vertical combination.

Vertical combination implies combination under single control of firm engaged in different process of manufacturing a given product. Vertical combinations are the result of integration of process applied in the manufacture of a product. In the words of Kimball and Kimball Integration means an effort to acquire as far as desired, control of all process in manufacturing and distributing a line of commodities from the raw material to the customers. In case of vertical combination the relationship amongst the combining units is that the output of one unit is used as inputs by another combing unit. According to prof. Robinson, vertical combination as the combination of firms in successive stages of the same industry. Vertical combination is also known as Industry Integration and combination, which takes place in an industry where a product passed through a number of processes. The combining units are not competing but are inter dependent on each other for supplying raw material for processing. Each unit of enterprise contributes a finished product, which becomes the raw material for the next process until the finished product is completed. When the finished product is ready for the market he would entrust the work of selling it to a distributing house. After integration, all the successive processes, from the raw material stage to marketing are in the hands of one organizations. Integration may start for the manufacturer who desires control of supplies and markets, it may start with the merchandiser who wishes better control of the products that he is selling, it may emenate from the producer of raw materials who desires an out let for them, or it may appear as a recognition of the mutuality of the interest on the part of all concerned. Because of this fact the vertical combination is also known as sequence or process combination. This type of combination is suitable for those industries where the product process involves a number of processes or stages.

Kinds of vertical combination : There are mainly two kinds of vertical combination. Such as -
(i) Forward vertical combination, where an entrepreneur or business unit tries to control the succeeding activities of combining units. Example : Combination between cloth making and ready made garment.

(ii) Backward vertical combination where an entrepreneur tries to control the producing activities in an industry. Example: cloth making unit combines with the unit of producing cotton and spinning cotton.

Example of vertical combination: Textile is an example of vertical combination, where performance of consecutive process such as carding spining and weaving are carried out by one organization. In this form, all stages from the basic or extractive industry to the finished article or even to marketing are united. These stages are sometimes described as extractive(raw-materials), analytical (fabrication of parts) assembling (putting the part together to make the finished article) and marketing. This example is shown by the following diagram. 
                                 
                                                                                                                                    





Comments

Popular posts from this blog

Why is Scandinavia so expensive ?

Hi I am Deepjit Karmakar, founder of thecommercialinfo.com and today here in this article I am gonna tell you why Scandinavia is so expensive. Across scandinavia, the average price of everything from a knitted  pay roll neck pastries from the local bakery are some of the highest in the world. Scandinavia is a region in Northern Europe that was a historical e made up of three kingdoms: Norway, Sweden and Denmark. They are United by their Viking heritage but also their shared reputation as one of the most expensive regions to live and visit. Whether it's buying a car or a TV. Consumers in Scandinavia pay some of the highest prices in the world. Even buying groceries is costly with all three countries' food and drink prices above the European average. All three countries also have a standard  VAT rate of 25%. Amongst all the European Nations, only Hungary has a higher rate. Heading to the bar is also pretty pricey. In Norway, having a beer or glass of wine will cost in ×2.5 times

Why is Singapore so rich and developed

 Hii! I am Deepjit Karmakar and today here in this article i am gonna tell you that why Singapore is so rich and developed. So, without wasting time let's get started. Singapore: Singapore is a tiny country, so tiny you can drive accross the island in just one hour. Despite its size and lack of natural resources, Singapore's 5.6 million people enjoy one of the highest average incomes in the world, ahead of countries like Germany, France and Japan. So, how did this little island get so rich?  Xiaomi 11 Lite NE 5G (Diamond Dazzle 6GB RAM 128 GB Storage) | Slimmest (6.81mm) & Lightest (158g) 5G Smartphone Explained:  Singapore doesn't have resources like coal or oil but it does have something which countries can't buy, location. The island sits in the middle of an important trade route connecting Asia to Europe. That's the key reason why the British decided, back in 1819, to set up a colony in Singapore. Location isn't everything though. There are several count

Japanese Management Approach

  Fossil Chronograph White Dial Men's Watch-CH2882 Amazon's Choice for "fossil watches for men" 16% off Japan has emerged as a world leader in industrial development. Today japan has great commercuial success. The japanese 'economic miracle' has attracted the attention from east and west. In this respect, many countries are turning to the japanese style of management. Although the entire japanese style of management may not be applicable to all nations due to social and cultural differences, certain characteristics features may find wide applicability. The roots of unique practices and style of Japanese management are as follows- (a) Groupism : Groups are the primary social unit throughout japan. Without getting the consensus of his group, the leader of a group can't do anything. In japan, self is seen as part of a group. (b) Confucianism : It is a descipline of life-style. It emphasizes the importance of loyalty to a boss, obedience to a senior person, th