Vertical Integration Strategies by Microsoft (Chapter 10)

 Ch. 10 - Vertical Integration Strategies

This chapter is focused on a firm's ability to engage in multiple stages of a product's or service's value chain.

Interestingly, Microsoft often aims to avoid vertical integration. In the firm's most recent annual report includes a statement about competing with vertically-integrated models:

"Competitors pursuing this model also earn revenue from services integrated with the hardware and software platform, including applications and content sold through their integrated marketplaces. They may also be able to claim security and performance benefits from their vertically integrated offer. We also offer some vertically-integrated hardware and software products and services. To the extent we shift a portion of our business to a vertically integrated model we increase our cost of revenue and reduce our operating margins.

Vertical integration strategies often do not make sense to be pursued by Microsoft. For example, Microsoft Windows operating system is wildly successful by allowing the operating software to be used by other companies such as Dell, HP, Acer, etc.