Business generates some fantastic jargon, and I have made a promise to myself to avoid it at all costs. Occasionally it will be necessary to break the rule. Many years ago someone coined the phrase ‘vertical integration’. For the uninitiated ‘vertical integration’ relates to the idea that businesses can be more efficient (or make more money) if they own more and more of the processes between raw materials and the final product being delivered to the customer. In formal business-speak, this is ‘vertical integration within the supply chain’.

Large brewers are a good example of this phenomenon in action. First of all they take hops, barley, sugar and water, boil them up and produce a miraculous liquid called beer. Having done this they have a wide range of opportunities for vertically integrating their business to a point much closer to final customers enjoying a pint in the pub. The most obvious and successful way of achieving this involves owning the pub as well. That way they can ensure that all beer sold in the pub is their own (or products supplied by official partners), and they get to take the retail profit in addition to the wholesale profit. Large brewers developed such enthusiasm for this activity that eventually the Department of Trade and Industry had to intervene and tell them to stop. Some organizations were forced to sell hundreds of public houses because they had negatively affected all of the competition in certain regions. Vertical integration may be good for business but it is not always in the best interest of consumers.

If you own a successful pub there is a reasonable prospect that a brewery would be interested in buying it. Then they will vertically integrate their beer into your cellar. But it is not only brewers. Perhaps you have a small Who will buy your business? 15 local double-glazing business. The company that supplies your extruded PVC may well be interested in taking over your business. It can then join the brewers in their enjoyment of wholesale and retail profits. Does vertical integration make sense in your business sector? It depends, but a little logical thought should suggest a clear answer. If you own a newspaper shop it is unlikely that Mirror Group Newspapers will want to buy you out. Why? Isn’t the scenario similar to that of the brewers? Similar yes, but the difference lies with product exclusivity. If Mirror Group buys your shop and just sells its own newspapers, everyone who