Vertical Integration Is Making a Comeback at U.S. Companies
Nineteenth-century business innovators like Andrew Carnegie bought up suppliers and controlled all stages of production. Twentieth-century CEOs slimmed down. Then came Covid.
Supply chain woes? Not for Andrew Carnegie.
Source: Kean Collection/Getty ImagesAs a corporate strategy, vertical integration is seriously old school. It requires a firm to take direct control of stages of the production process formerly handled by independent companies. A product of the Gilded Age, vertical integration fell out of favor as firms focused on their core business and outsourced everything else.
But big business is rethinking that approach and channeling the ghosts of long-gone vertically integrated enterprises. Cutting-edge firms such as Amazon.com Inc. and Tesla Inc. openly pursue a strategy of vertical integration. In recent weeks, more traditional enterprises such as General Motors Co and Ikea of Sweden AB have followed suit.