What does forward vertical integration involve?

Forward vertical integration involves a company taking control of a later sector in the supply chain, which typically means gaining ownership or control over an entity that is closer to the customer. This business strategy allows the company to exert greater influence and capture more of the market share by controlling distribution, retail, or service points that interact directly with the consumer.

For instance, if a manufacturer decides to open its own retail stores to sell its products, it is engaging in forward vertical integration. This not only can enhance customer relationships but also allows the business to manage pricing and branding more effectively.

The alternatives do not meet the specific definition of forward vertical integration. Merging with a competitor relates to horizontal integration, acquiring a supplier represents backward vertical integration, and entering an unrelated market indicates diversification rather than integration within the supply chain. Each of these options addresses different strategic business moves, demonstrating the unique nature of forward vertical integration.