Post 10 - EOTO #2

     My Group’s presentation was focused on policies that are very grey area on whether or not they are doing more good than bad or more bad than good. My specific policy that I researched was vertical integration. Vertical Integration happens when a company takes over multiple parts of the suply chain of a product. There is forward integration; When a company own a middle part of production and extends their reach forward or towards the finishing of the product, And there is backwards integration; when a company owns a middle part of production and extends their reach backwards in production in the direction of the raw goods. 

It works sort of like this:

Backward integration:

Forward Integration:

    While the above diagram is an oversimplification of how vertical integration works, you can see the general idea of it. Vertical integration is definitely a grey area policy. While it is not technically a monopoly and thus isnt prohibited by anti-trust regulation, it still has monopoly type power. A company that has vertically integrated has more control over the means of production, quality control, time constraints and cost of production and sales. Hypothetically this should be a good thing - companies would then be able to find the perfect balance of quality and cost and ideally sell products for what they are worth in able to save consumer wallets as well as making a steady profit, however, living in a country built on capitalism, enough is never enough. It is very easy to abuse that sort of power.

Take Apple for example. Apple is a great example of a company that has been vertically integrated. Apple has control over the production of parts of the parts, control of assembly, and control of in-store sales. They build their products with their own parts and are the exclusive distributor of them. Because of this, Apple gets to maximize their income and minimize cost according to their quality control. Generally speaking, Apple does a really good job at managing all the factors that go into being a vertically integrated company without abusing that power, but they have been caught in a few instances manipulating product quality and increasing costs for future profit. Presently they are in the middle of a lawsuit nicknames “batterygate” as the result of such abuse. Apple was caught slowing down older iPhones by putting low quality batteries in them in order to get people to spend more money on the newer iPhones. Because they have control of the means of production and are the only distributers of Apple products, there was no one looking to question the quality of the phones in the supply chain. They were selling lower quality iPhones for the same price of the fully functioning ones and making a ridiculous amount of profit on it and are just now in the past few years is being called to address this issue. Vertical Integration can be good or bad depending on the circumstances and the intentions behind it. In a less capitalist based country, vertical integration could be a good thing as long as the interest of the consumer stays the main focus of the integration and not the total maximization of company profit.

    Overall I enjoyed the research and presentation process of this EOTO project. I learned a lot about the inner workings of business and the dangers of total control without checks and balances - kinda like the government.