Vertical disintegration
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.