Forward integration

Forward integration is vertical integration through combining a core business with its buyers.

The advantages of forward integration include excluding competing suppliers, greater ability to reach end customers and better access to information about end customers.

By buying (or building) a sales channel a company can exclude its competitors products from that channel. This can often create a near monopoly in a local area or a market segment: more than that is likely to draw the attention of regulators.

A common problem with vertical integration is that, as a business is usually unable to buy all the channels it sells to, it can bring a business into competition with its customers (apart from those it has bought!). This can then lead to a loss of business to customers who do not to deal with a competitor: this may be, depending on the the industry, because of the risk of relying on a competitor, or reluctance to promote a competitors brands, or reluctance to help a competitor build network effects.

Most effects of forward integration are much the same as those of backward integration, and are covered in vertical integration.

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