Tech entrepreneur Agam Berry recently took time out of his busy work schedule to share some of his insights about small businesses and vertical integration. It is a topic that he is very familiar with, so getting insight from him should be helpful for many different types of people. He has about a decade of experience in this field, and it is something he is very passionate about. Here are his answers to some common questions.
What is Vertical Integration?
Vertical integration is talked about quite a bit in the business world, but not everyone is completely sure on what it is. Vertical integration is when a company has control over more than one stage of the supply chain. The supply chain is the process businesses use to turn the material they have into a product and ultimately sell it to the consumer.
In the business world, there are different phases in the supply chain, and each one plays a specific role. Commodities, manufacturing, distribution and retail are all important, and once a company controls two or more of these stages, they have found a way to vertically integrate.
Perhaps the easiest example is any company like Target, Walgreens, Walmart and more that sell their own line of store branded items. They own the manufacturing, they distribute the products, and they are the retailer. That helps them keep cost down. That Is the reason why their store brands will almost always be lower than the name brand competitor that is right next to the product on the store shelves.
How Companies Can Become Vertically Integrated?
There are a number of ways for a company to vertically integrate, so there isn’t one set answer. The more important thing is the when and why. If existing suppliers or buyers have too much power, a company can pursue vertical integration. If a company can absorb a bit of a short-term loss (higher costs when vertical integration occurs), they can usually end up better in the long run.
Research is a big key. Just make sure all possible research is done beforehand, because this is a big step and a lot of times, there is no looking back. The last thing any company wants to do is look like they are bit over their head with work and therefore, unprofessional. It can be a huge detriment to any business.
Can Small Businesses Vertically integrate?
Most of the time you only seem to hear about big companies with millions and billions of dollars using vertical integration to their advantage. If works well on a smaller scale too. The major difference is that the small staff of workers at a small business will have to likely do multiple things throughout the day. It can be a stressful time in the beginning, but vertical integration totally works in the small business world. In fact, I recommend it in a lot of cases.
Saving money is huge in small business integration. That is what usually gets people intrigued initially. Just know the workload could instantly double, and everyone needs to be on board. In a small business, just one slacker during a critical change like this could bring down a lot of things at once.
Have more questions about vertical integration for Agam Berry? Find him on:
- Facebook: https://www.facebook.com/Agam-Berry-1396311880450380/
- Twitter: https://twitter.com/agamberry62
- Or visit his official website at: Agam-Berry.com
