Forward Integration Definition with Real Industry Examples (2024)

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Forward Integration Definition with Real Industry Examples? ›

This type of vertical integration is conducted by a company advancing along the supply chain. A good example of forward integration would be a farmer who directly sells his crops at a local grocery store rather than to a distribution center that controls the placement of foodstuffs to various supermarkets.

The grocery store buys coffee from a vendor and resells it to its shoppers. The owner of the grocery store wants to pursue forward vertical integration. To take control of the grocery store's production and increase its profits, the owner makes a plan for the grocery store to start producing its own specialty coffee.

Forward integration example

A case in point is Disney - a producer of movies and associated branded toys and consumer goods (its 'raw materials'), who introduced Disney+ to distribute the movies, and a global chain of Disney retail outlets to sell its branded toys and consumer goods.

Forward vertical integration involves acquiring a business further up (forward) in the supply chain – e.g. a vehicle manufacturer buys a car retail business. Another example might be Amazon or Netflix deciding to buy a chain of movie theatres (cinemas).

To give one example of the multiple forward integrations in Amazon's business, the company has built its delivery fleet directly controlling delivery to end users instead of relying on third-party services, making a move forward in the supply chain.

What Is An Example Of A Forward Integration Brand? Apple exemplifies forward integration by designing, manufacturing, and selling its products in its stores, enhancing control over distribution and customer experience.

Forward integration

For example, IKEA – a DIY furniture company – needs wood to manufacture furniture. IKEA decided to acquire a wood supplier, which is an example of backward or “downstream” integration. Generally, backward integration aims to seek control over supply or manufacturing of a product.

Netflix Inc., which started out as a DVD rental company supplying TV and film content, used backward integration to expand its business model by creating original content.

Forward Vertical Integration. A forward vertical integration strategy involves a firm moving further down the value chain to enter a buyer's business. Disney has pursued forward vertical integration by operating more than three hundred retail stores that sell merchandise based on Disney's characters and movies.

The vertical merger between Walt Disney and Pixar

And when it comes to the merger of Walt Disney and Pixar it was a vertical merger because Pixar has specialization in animation. Disney's focus is on creating animated movies. Both companies were in the same field and were operating at different stages of production.

Is Nike forward or backward integration? ›

All of Nike's products use the same resources and distribution channels. Nike uses vertical integration during the supply chain process when handling with producers, retailers, and providers (Soni, Phalguni). This is also an example of forward integration allowing Nike to increase their power over the suppliers.

Forward integration: If Intel acquires Dell, it is a forward integration because it is an acquisition of manufacturer by a supplier. If Dell acquires a distributor of computers such as BestBuy it will be a forward integration too since it is an acquisition of a distributor by a manufacturer.

A good example of forward integration would be a farmer who directly sells his crops at a local grocery store rather than to a distribution center that controls the placement of foodstuffs to various supermarkets.

Is Ikea backward integration? Ikea practices backward integration by owning forests and manufacturing facilities to control its raw material supply and production.

In summation, Nike's vertical integration strategy ensures consistency in product quality, capitalizing on up-and-coming market trends (and changes in consumer preferences or behavioral patterns), and maintains control over its brand image — which all contribute toward improved operating efficiency, more customer ...

For example, in economics, integration is used to compute the consumer surplus, in biology integration can be used to determine population, and in environmental science, integration is used to analyse environmental phenomena like pollution dispersion.

The European Single Market, the North American Free Trade Agreement (NAFTA), and the Association of Southeast Asian Nations (ASEAN) are notable examples of integrated markets in macroeconomics. These markets facilitate free trade and movement of goods, services, capital and people across national borders.

b) Forward Integration: This happens when a company acquires or controls distribution channels or retailers. It enables the company to have control over its sales and distribution process, ensuring a direct connection with customers. For example, a clothing manufacturer opening its retail stores.