Vertical Integration
When a company expands its business into areas that are at different points of the same production path.
Example:
A car company that expands into tire manufacturing would be an example of vertical integration. A company such as this is often referred to as vertically integrated.
Horizontal Integration
When a company expands its business into different products that are similar to current lines.
Example:
A hot dog vendor expanding into selling hamburgers would be an an example of horizontal integration. Compare this to vertical integration.
Backward Integration
A form of vertical integration that involves the purchase of suppliers in order to reduce dependency.
A good example would be if a bakery business bought a wheat farm in order to reduce the risk associated with the dependency on flour.
Forward Integration
A business strategy that involves a form of vertical integration whereby activities are expanded to include control of the direct distribution of its products.
A good example of forward integration is when a farmer sells his/her crops at the local market rather than to a distribution center.
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