Vertical integration

Owning more than one step of the value chain, whether backward toward inputs or forward toward the customer.

The case for it is control and captured margin. The case against it is capital and inflexibility: an integrated producer has to run the upstream plant whether or not that is the cheapest source this year, and it carries the fixed costs of both steps through the cycle.

The usual empirical result is that integration works where the adjacent step is a genuine bottleneck and fails where it was merely a supplier.

Ask what problem the integration solves that a contract could not.