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Vertical integration in supply chains: driving forces and consequences for a manufacturers downstream integration
Linköping University, Department of Management and Engineering, Industrial Marketing and Industrial Economics. Linköping University, The Institute of Technology.
Linköping University, Department of Management and Engineering, Industrial Marketing and Industrial Economics. Linköping University, The Institute of Technology. (Marketing & Logistics)
2012 (English)In: Supply chain management, ISSN 1359-8546, E-ISSN 1758-6852, Vol. 17, no 2, 187-201 p.Article in journal (Refereed) Published
Abstract [en]

Purpose - Strategic concentration is a key issue for manufacturing companies when designing a supply chain. As a corporate strategy and a supply chain governance strategy, vertical integration relates to organisational economics and strategic supply chain management. Numerous explanations have been created for vertical integration, and transaction cost economics (TCE) provides a theoretical basis to help understand the process. However, the current popularity of vertical integration seems inspired by something more than altering industry structure and minimising cost which are the traditionally accepted explanations for vertical integration This paper aims to explore the driving forces for vertical integration, particularly downstream integration of distribution, and the consequences of vertical integration in a manufacturer-distributor-reseller chain. less thanbrgreater than less thanbrgreater thanDesign/methodology/approach - This study adopted an exploratory case study approach to examine a Swedish-based timber manufacturer that vertically integrated a distribution centre in the UK, which made it a direct supplier to DIY retailers and builders merchants. Data were collected primarily through open-ended, face-to-face interviews. less thanbrgreater than less thanbrgreater thanFindings - The study found that the most important factors driving the manufacturers vertical integration of distribution were the demands of large retail chains and the manufacturers decisions to focus on developing its positioning strategy in the supply chain. Vertical integration has transformed the manufacturer into a supplier to large timber products resellers, offering the firm a greater potential to provide integrated solutions and, therefore, become a strategic partner to its customers. less thanbrgreater than less thanbrgreater thanOriginality/value - This empirical study examined a building material distribution channel, a subject that has rarely been studied. Study results add empirical evidence to explanations and impacts of vertical integration, especially the integration of customer interface.

Place, publisher, year, edition, pages
Emerald , 2012. Vol. 17, no 2, 187-201 p.
Keyword [en]
Vertical integration, Supply chain integration, Downstream integration, Building materials, Retailing, Merchanting, Vertical marketing, Sweden
National Category
Engineering and Technology
URN: urn:nbn:se:liu:diva-77344DOI: 10.1108/13598541211212915ISI: 000303091900006OAI: diva2:526309
Available from: 2012-05-11 Created: 2012-05-11 Last updated: 2013-02-08
In thesis
1. The Role of Suppliers and Resellers: Cases of Timber Product Distribution Channels
Open this publication in new window or tab >>The Role of Suppliers and Resellers: Cases of Timber Product Distribution Channels
2013 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This dissertation aims to explain the impacts of distribution channel developments on the roles of timber product distribution channel actors. The role of channel actors in this dissertation is defined as the structured behaviour pattern that combines activities and resources in distribution channels. Three phenomena and their impacts on channel actors’ roles are addressed: (1) shifts in manufacturers’ supply chain position, (2) the changing nature of manufacturing companies’ offerings, and (3) concentrated markets with enhanced resellers. The research builds on case studies focusing on timber product distribution channels. The dissertation consists of an extended summary, six papers, and a grand case description.

This dissertation has produced several findings. First, reseller developments have driven changes in the retailer supply chain structure and have placed pressure on manufacturers. Manufacturers’ downstream vertical integration and their move to a total offering approach can be seen as countervailing effects on reseller developments. These effects have result in a new type of role: the integration role, while the significance of the service role has increased. Second, resellers have gained a central position in distribution channels, not only because they are in good position to exploit the clones to customers, but also because their business has extended from being suppliers’ distribution partners to customers’ supply hub.

Theoretically, this research contributes to the field of distribution channels by proposing definitions of roles and the roles of channel actors that allows for a better understanding of the dynamics of distribution channels. This research also proposes a distributionsupply view of vertical systems that highlights the roles played by resellers in defining offerings to customers, shaping supply chain structures, and developing and launching new products.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2013. 275 p.
Linköping Studies in Science and Technology. Dissertations, ISSN 0345-7524 ; 1502
Distribution channels, roles, role changes, downstream vertical integration, offerings, timber products
National Category
Economics and Business
urn:nbn:se:liu:diva-88483 (URN)978-91-7519-687-9 (ISBN)
Public defence
2013-03-01, Planck, Fysikhuset, Campus Valla, Linköpings universitet, Linköping, 10:00 (English)
Available from: 2013-02-08 Created: 2013-02-08 Last updated: 2013-02-08Bibliographically approved

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