From manufacturer to supplier: Driving forces and consequences
(English)Manuscript (preprint) (Other academic)
Purpose Historically, vertical integration is a corporate strategy of interest to the field of strategic management and organizational economics. There is no lack of explanations for vertical integration, among which, transactional cost economics (TCE) provides a theoretical basis for vertical integration. However, the current popularity of vertical integration marks a departure from traditional motivations based on altering industry structure and minimizing cost. Besides, most of the existing studies regarding vertical integration have been conducted at the micro-analytic level but analysis at the supply chain level is sparse, which might be more relevant and significant in today’s business environment. The purpose of this paper is exploring the driving forces for vertical integration, particularly downstream integration of distribution and the consequences in a chain of manufacturer-distributor-retailer.
Design/methodology/approach This study takes an exploratory case study research approach. The case chosen was a Swedish-based timber manufacturer that vertically integrated a distribution centre in the UK, thereby becoming a direct supplier to DIY retailers and builders’ merchants. Data was primarily collected through face-to-face interviews that used an open-ended format.
Findings Research findings include that large retail chains’ demands and manufacturer’s reposition strategy, regarding business focus and position in supply chain, are the most important factors driving the manufacturer’s vertical integration of distribution. Vertical integration has transformed the manufacturer into a supplier to large timber product sellers and offered the supplier with greater potential to provide integrated solutions, in turn, become a strategic partner to its customers.
Originality/value This empirical study examines a building material distribution channel, a subject not often studied in extant literature. The study results add empirical evidence to explanations and impacts of vertical integration, especially the integration of customer interface. This study also provides an empirical inquiry of the transformation from product to offering focusing on the retailing context.
Supply chain integration, Vertical integration, Distribution channel, DIY retailers, Builders’ merchants
Other Mechanical Engineering
IdentifiersURN: urn:nbn:se:liu:diva-64360OAI: oai:DiVA.org:liu-64360DiVA: diva2:389734