Vertical disintegration

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In business, vertical disintegration is understood as the outsourcing of upstream and downstream production stages of a product to legally independent companies with their own management. The counterpart of vertical disintegration is vertical integration .

Reasons for vertical disintegration

  • Spreading the business risk across several companies
  • specialization
  • Flexibility
  • Different scope of production
  • Faster response options to changing demand thanks to smaller units

Examples

While before the Second World War the entire production stages of film productions in Hollywood were covered by a few large companies, after the Second World War a large number of small companies specialized in sub-areas emerged.