Vertical Integration pertains to the business structure of a company or firm with multiple companies. There is usually an anchor or corporate parent-company over the various products or intangibles produced by the additional businesses. It is pertinent to understand that not all of these businesses would fall under the category of subsidiaries, which sometimes implies that the business is not as important as the head company. In fact, a vertically integrated company in the traditional sense would execute manufacturing, supply, and production in various stages within the business itself; in turn, the parent company holds more control over the supply chain altogether. Such companies not only develop their products but also sell them to consumers.

There are two types of vertical integration that a company can choose from. The first is forward, and the second is backward. In forward integration, the company expands its ownership and control in the supply chain. For instance, the company cuts out a distribution center and directly sells to the consumer. In backward integration, the company is involved in supplying their own materials to produce their final product.