The Power of Vertical Integration

• Chen tells the stories of the OpenTable restaurant booking system, Starbucks, and Apple as examples of companies that enjoyed success by controlling everything (vertical integration). “We make the whole widget,” Steve Jobs. Chen also shows how Starbucks and Apple had downturns when they tried a more horizontal approach. Google’s open Android system runs on multiple phones that together out sell iPhones, but the iPhone is the number one seller. Microsoft dumped its Windows Mobile and started from scratch to make Windows Phone 7. In the process, their phone department became more vertical even though their overall business strategy is horizontal. Vertical integration goes back to Henry Ford and we can expect to see more of it. The big question is, is a vertically integrated company good for everybody or just the successful company?

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