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Vertical Integration Essay


Submitted By samfsr
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Carnegie not only controlled the mills where he manufactured the steel, but he also owned the iron mines where they extracted iron ore, coal mines that supplied the factories coal, the trains and boats that transported the coal and iron ore, and the ovens that coal was coked in (Online Highways). The company also tried to focus on using internal talent from the floor up, rather than buying it from other companies. Because he did not have to pay any middle men, Carnegie could aggressively cost his steel and still make a profit (Online Highways). With his lower prices, Carnegie began to slowly become a monopoly due to being the cheapest option in steel.

American Apparel is an example of a modern day company that uses vertical integration. They start by knitting and dying fabrics, and continue all the way to public stores. Due to the lack of middlemen, they are able to cut production costs, and because they are entirely in the United States, they are able to cut shipping costs by not using foreign vendors (American Apparel. This supplies American’s with jobs rather than outsourcing to another country (American Apparel). People like the idea of supporting their country rather than a foreign one, so people tend to buy American-products (Economist), giving American Apparel an advantage over other companies.

Vertical integration gives society more competitive prices, meaning the consumer saves money as well as the companies. Vertical integration creates more jobs, leading to more people being paid so more money is spent, helping everyone. The only disadvantage of vertical integration is how competitive the pricing is. If a local business has to compete with a big one that is vertically integrated, the small business will have to charge more due to more expenses in the middlemen (Economist). However, some people would rather buy things from a small merchant than a

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