What is the process of joining with a business in the next stage of production called?

The process of joining with a business in the next stage of production is known as forward vertical integration. This occurs when a company expands its operations by acquiring or merging with another company that is further along the supply chain, typically closer to the end consumer. For example, a manufacturer might purchase a retailer to gain direct control over the distribution and sales of its products.

This strategic move helps businesses strengthen their position in the market, enhance their control over the supply chain, and potentially improve profits by capturing additional value that would otherwise go to intermediaries. Forward vertical integration can also create efficiencies and reduce costs associated with distribution.

In contrast, backward vertical integration involves acquiring businesses that operate earlier in the supply chain, such as suppliers. Integration is a general term that encompasses both types of vertical integration as well as mergers and acquisitions in other contexts, while horizontal integration refers to the merger with or acquisition of a competitor at the same stage of the production process.