Vertical integration has transformed the manufacturer into a supplier to large timber products resellers, offering the firm a greater potential to provide integrated solutions and, therefore, become a strategic partner to its customers. Findings: The study found that the most important factors driving the manufacturer's vertical integration of distribution were the demands of large retail chains and the manufacturer's decisions to focus on developing its positioning strategy in the supply chain. Data were collected primarily through open-ended, face-to-face interviews. Design/methodology/approach: This study adopted an exploratory case study approach to examine a Swedish-based timber manufacturer that vertically integrated a distribution centre in the UK, which made it a direct supplier to DIY retailers and builders' merchants. However, the current popularity of vertical integration seems inspired by something more than altering industry structure and minimising cost, which are the traditionally accepted explanations for vertical integration This paper aims to explore the driving forces for vertical integration, particularly downstream integration of distribution, and the consequences of vertical integration in a manufacturer-distributor-reseller chain. Numerous explanations have been created for vertical integration, and transaction cost economics (TCE) provides a theoretical basis to help understand the process.
As a corporate strategy and a supply chain governance strategy, vertical integration relates to organisational economics and strategic supply chain management. Purpose: Strategic concentration is a key issue for manufacturing companies when designing a supply chain.
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