I came to the realization that I couldn’t think of an example of when vertical integration isn’t just an older name for enshittification. Apple owning an app store, Amazon being a marketplace and seller, etc. What examples of vertical integration aren’t bad? Are there any?
I’d argue that Amazon is good for the consumer. It’s bad for vendors, bad for employees, and bad for the environment.
Most people love Steam, to the point they got a free game on Epic Store nad they still buy it on Steam later
Most Costco-specific products, sold under their Kirkland brand, are pretty good. They’re always a good value and they’re sometimes are among the best in class separate from cost.
I think Apple’s products improved when they started designing their own silicon chips for phones, then tablets, then laptops and desktops. I have beef with their operating systems but there’s no question that they’re better able to squeeze battery life out of their hardware because of that tight control.
In the restaurant world, there are plenty of examples of a restaurant having a better product because they make something in house: sauces, breads, butchery, pickling, desserts, etc. There are counterexamples, too, but sometimes that kind of vertical integration can result in a better end product.
A lot of chain restaurants/franchises own and operate a fairly deep food distribution system. It ends up being good for consumers as having large and knowledgeable ingredient buyers generally helps maintain high food quality standards.
Part of the problem with Chipotle’s issues with food borne illness came about because they lost access to McDonald’s supply chain.
I would argue that Amazon selling and also handling significant parts of the logistics is beneficial to the customer.
Shipping companies did not do a good job, that’s why Amazon vertically integrated parts of it.
Netflix having its own fiber and datacenters is another example where it was likely beneficial.
These companies do other things that suck, but I’m not sure I would blame the vertical integration on much of it.
In situations where your product is dependent on a problematic supply chain it can make sense for a company while also being beneficial to consumers. Imagine you need 100 widgets a month to build your product but the market is only capable of providing 10. It might make sense to start making 90 widgets a month to supply your own unmet demand. Especially if there’s also a widget cartel trying to squeeze your margins so producing the widgets yourself lets you cut them out of your supply chain. That could be the difference between your survival and failure.
It’s interesting you mention Apple because their products benefit tremendously from vertical integration in ways that directly benefit the consumer.
We can argue all day about price, but as far as features, the interconnectedness of Apple stuff is way better than anyone else. The ability to seamlessly jump from your laptop to your phone to your TV and smart speaker and have it all routed to your account means that you only have to manage that one account.
Again, there are more consumer-friendly ways of doing this and Apple isn’t a saint, but there are recognizable benefits that come along with it.
That’s not really vertical integration, though. That’s more horizontal than anything.
Vertical integration would be, for example, Tyson chicken owning the company that makes the feed for the company they also own that raises the chickens that go to their own processing plants.
It’s a supply chain structure, not a product offering ecosystem.
Their horizontal integration is made more seamless by the vertical integration.
On an Apple laptop, they’re the OEM of the hardware product itself, while also being the manufacturer of the CPU and GPU and the operating system. For most other laptops that’s 3 or 4 distinct companies.
Not disagreeing with the benefits, but my gripe with Apple is that they lock out everyone else from even competing with them, which is anticompetitive and ultimately anti-consumer. All of those cool features only with with THEIR phone, THEIR laptop, THEIR smart speaker, THEIR earphones, THEIR smartwatch, THEIR cloud storage, THEIR keyboard, THEIR mouse, THEIR location-tracking tag, THEIR VR headset, THEIR TV box… If you replace any one of those things with a competitor’s product – which might have been better than Apple’s – then you’re locked out of many great features for no good reason.
You’re not wrong, hence my mention about them being no saint. But you can’t argue the fact the with all of the open standards available, none of them work nearly as well as Apple’s implementations. I say this using both Mac and Linux interchangeably on a daily basis. They each have their strengths and weaknesses. When I need a space for creative work, I use my Mac. When I need a space for gaming or experimental software or programming, I use Linux. When I’m feeling masochistic, I save a VM of Windows Me for late nights when the roommate’s not around.
Yes. Vertical integration means a lot more than what you described. In a nutshell it can be described as “A big upfront cost that is cheaper in the long run.” The basic example would go something like this: you make beef jerky. You buy the beef, you rent a kitchen, make the jerky, pay a company for packaging, pay a company to ship it to stores, etc. Then you save up and buy a facility to make the jerky. Then you save up and buy a packaging machine. Then you save up and buy some shipping trucks. Then you save up and buy a farm to raise cattle, etc. That’s vertical integration.
Mondragon
A socialist economy
