Vertical integration is when you control the entire product, in consumer electronics Apple is the gold standard; they make the software, hardware, and processors then integrate them into iPhones and macBooks. Tesla is a good example in the automotive space, their goal with the mega-factories is "raw materials in, cars out" and they work to build as many of the parts themselves as possible.
Alternately Microsoft just makes a good enough OS that runs on good enough hardware from commodity vendors, so you get good enough computers. Most auto makers buy good enough components from 2nd and 3rd tier suppliers and integrate them into good enough cars.
That is a great explanation of what vertical integration is. I am not sure I see why it is inherently bad.
I guess a large vertically integrated option could make it hard for alternatives to compete. That is more of a monopoly problem than a vertical integration issue though.
I do agree with interoperability requirements though. I see nothing wrong with Apple offering a fully vertically integrated product. The issue is when I cannot run my own OS on the hardware, my own apps on their OS, or interact with hardware from other vendors.
But that's exactly the problem. If the company is kind about it, or forced to play nice by effective regulation, there's no issue. But if there's no regulation and the company wants to, it tends towards monopolistic tendencies. And there's nothing that incentivizes a company to play nice forever, in fact they're incentivized to maximize profit. So Vertical Integration is bad without being checked.
Vertical integration is when you control the entire product, in consumer electronics Apple is the gold standard; they make the software, hardware, and processors then integrate them into iPhones and macBooks. Tesla is a good example in the automotive space, their goal with the mega-factories is "raw materials in, cars out" and they work to build as many of the parts themselves as possible.
Alternately Microsoft just makes a good enough OS that runs on good enough hardware from commodity vendors, so you get good enough computers. Most auto makers buy good enough components from 2nd and 3rd tier suppliers and integrate them into good enough cars.
That is a great explanation of what vertical integration is. I am not sure I see why it is inherently bad.
I guess a large vertically integrated option could make it hard for alternatives to compete. That is more of a monopoly problem than a vertical integration issue though.
I do agree with interoperability requirements though. I see nothing wrong with Apple offering a fully vertically integrated product. The issue is when I cannot run my own OS on the hardware, my own apps on their OS, or interact with hardware from other vendors.
But that's exactly the problem. If the company is kind about it, or forced to play nice by effective regulation, there's no issue. But if there's no regulation and the company wants to, it tends towards monopolistic tendencies. And there's nothing that incentivizes a company to play nice forever, in fact they're incentivized to maximize profit. So Vertical Integration is bad without being checked.
Thanks for providing such a great answer!