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Apple, Tesla and other vertically integrated companies will benefit from access to raw materials in scarcity

While politicians lavishly exchange crushing sanctions, ordinary consumers are suffering from shortages of goods, rising prices and delays in product deliveries. Meanwhile, in American post-war history there is an example of a successful exit from the crisis in the market, associated with the vertical integration of business. In the current environment, Tesla, Apple and IKEA can demonstrate resilience to changing market conditions.

Barron ‘s recalls writing in its then paper pages in October 1946 that American consumers were facing a shortage of men’s shirts that lasted several months after the end of World War II. In those conditions, large retail chains like Macy’s and Gimbels were in a better position, because they had access to materials for making shirts, and therefore one of the few who were able to continue selling them in the first post-war months.

Now, according to the source, vertical integration of business is also becoming important for companies’ access to raw materials and components. In this situation, Tesla gains an advantage over many automakers, although even mature American corporations like General Motors or Ford Motor tend to follow its example. And if the latter at the dawn of its history demonstrated the qualities of a vertically integrated business, then after the sixties of the last century, it followed the example of General Motors, moving on to horizontal integration. Both major U.S. automakers are now trying to gain direct access to traction batteries, a critical component used in the production of electric vehicles.

Apple has a long tradition of vertical integration, it loves to develop unique components, and if contractors for a number of reasons cannot organize their mass production, then it itself purchases equipment for them and makes related investments. But even this giant cannot escape the impact of component shortages, which is partly proved by yesterday’s debut of the third-generation iPhone SE, which has risen in price from $399 to $429 against its predecessor.

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source: Barron’s






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