Shank, Spiegel and Escher (n.d) describes the value chain framework as a method for breaking down the chain -- from basic raw materials to end-use customers -- into strategically relevant activities in order to understand the behavior of costs and the sources of differentiation.
Vertical integration can aim at full integration (participating in all stages of the industry value chain) or partial integration (building positions in selected stages of the industry's total value chain). "A firm can purchase vertical integration by starting its own operations in other stages in the industry's activity chain or by acquiring a company already performing the activities it wants to bring in-house "(Thompson, Strickland & Gamble, 2005, p. 150).
According to Thompson et al., (2005), vertical integration does not really benefit the industry financially or strategically unless it produces enough cost savings to validate the extra investment, adds materially to a company's technological and competitive strengths, or really shows the company's product offerings. (p. 150).
The solution provides a detailed explanation of the industry value chain in terms of competitive advantage and positions. Includes a description of pros and cons.
[527 words with references]