Article analysis*

1. review the article and note the findings 2. What is this articles relevance to strategic management? 3. What are the main learning points / take-aways? 4. What is your critique? 5. What are the limitations of the article? 6. What are the areas for future research? 7. What is your conclusion?

Abstract Vertical integration in supply chains: driving forces and consequences for a manufacturer's downstream integration Wei Guan and Jakob Rehme Department of Management and Engineering, Linkping University, Linkping, Sweden Purpose - Strategic concentration is a key issue for manufacturing companies when designing a supply chain. As a corporate strategy and a supply chain governance strategy, vertical integration relates to organisational economics and strategic supply chain management. Numerous explanations have been created for vertical integration, and transaction cost economics (TCE) provides a theoretical basis to help understand the process. However, the current popularity of vertical integration seems inspired by something more than altering industry structure and minimising cost, which are the traditionally accepted explanations for vertical integration This paper aims to explore the driving forces for vertical integration, particularly downstream integration of distribution, and the consequences of vertical integration in a manufacturer-distributor-reseller chain. Design/methodology/approach - This study adopted an exploratory case study approach to examine a Swedish-based timber manufacturer that vertically integrated a distribution centre in the UK, which made it a direct supplier to DIY retailers and builders' merchants. Data were collected primarily through open-ended, face-to-face interviews. Findings -The study found that the most important factors driving the manufacturer's vertical integration of distribution were the demands of large retail chains and the manufacturer's decisions to focus on developing its positioning strategy in the supply chain. Vertical integration has transformed the manufacturer into a supplier to large timber products resellers, offering the firm a greater potential to provide integrated solutions and, therefore, become a strategic partner to its customers. Originality/value - This empirical study examined a building material distribution channel, a subject that has rarely been studied. Study results add empirical evidence to explanations and impacts of vertical integration, especially the integration of customer interface. Keywords Vertical integration, Supply chain integration, Downstream integration, Building materials, Retailing, Merchanting, Vertical marketing, Sweden Paper type Research paper Introduction Supply chain integration is a frequently examined topic in the supply chain management (SCM) literature. In order to grow - and sometimes to survive companies must make wise decisions regarding appropriate governance models for efficient supply chains. This involves considering everything from open spot markets; hybrid forms including collaboration, alliances, and joint ventures; to contracting and full vertical integration (e.g. Hobbs, 1996). Vertical integration has attracted a great deal of research attention from multiple disciplines, and strategic management and organisational economics researchers have made significant contributions toward understanding this concept (Mahoney, 1992). The SCM literature views vertical integration as one extreme of vertical coordination of supply chains (e.g. Hobbs and Young, 2000), or as a precursor to supply chain integration (e.g. Stonebraker and Liao, 2006). The current issue and full text archive of this journal is available at www.emeraldinsight.com/1359-8546.htm Emerald Supply Chain Management: An International Joumal 17/2 (2012) 187-201 Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/13598541211212915] Strategic concentration in supply chains marks a key issue for manufacturing firms. Vertical integration means some companies, such as the Spanish clothier Zara, owning nearly the entire supply chain, from design and production, to distribution and logistics, to stores worldwide. Zara's retail clothing peers, such as Benetton, The Gap, and Hennes & Mauritz, continue to rely on outside production partners through complete or strong outsourcing (Ferdows et al., 2004). Many researchers herald the role of integration as the most important aspect of well-functioning supply chains (e.g. Richey et al., 2009). Simultaneously, the current prevalence of outsourcing has forced many supply chains to become more specialised, making integration across company boundaries even more important. Some theorists even believe outsourcing per se can increase the efficiency of supply chains (Kroes and Ghosh, 2010). Although outsourcing is prevalent in certain industries and segments, it has been argued that different economic and technological circumstances require distinct supply chain governance strategies (Grossman and Helpman, 2002; Rothaermel et al., 2006). In fact, the outsourcing of the buying firm can be seen as the downstream Received: 8 February 2011 Revised: 25 May 2011 10 August 2011 Accepted 6 November 2011. 187