chapter  12
Moving closer to the customers: effects of vertical integration in the Swedish commercial printing industry
Pages 13

Having good relations with customers is important in most areas of business. Through close

customer contact and involvement of customers in the development of new products or

services, it is possible to identify better the needs and expectations of those buying the firm’s

products (Buttle, 2009). Gummesson (2002, p. 67) expresses this as ‘we can talk about

interactive marketing, but also about interactive service development, production and

delivery. The provider and the customer create value together.’ Consequently, having good

customer relations can have a positive impact on a firm’s production costs and revenues

(Buttle, 2009) and be a source of competitive advantage (Langlois, 1992). The classic Five

Forces Framework (Porter, 1979, 1980) illustrates the fundamental forces that should be

considered when determining the level of competition in an industry – existing industry

competition, customers, suppliers, new competitors and competition from substitutes. In this

framework the competition from suppliers and customers is emphasized, even though

suppliers and customers are often not regarded as competitors. However, customers can often

bypass a firm and buy from its supplier and a firm can go directly to the customers’ customer

with their products or services. This can, potentially, create a competitive situation between

suppliers and customers. According to Sawyer (1996, p. 91) vertical integration is a ‘common

route over which the customer-competitor transition takes place’. The concept of vertical

integration has been discussed and researched for a long time and an early definition by

Adelman (1949, p. 27) states that a firm is vertically integrated whenever it ‘transmits from

one of its departments to another a good or service which could, without major adaptation, be

sold in themarket’. Consequently, vertical integration occurswhen a firm integrates activities

in the value chain to produce its own inputs and/or take care of its own outputs (Adelman,

1949, 1955; D’Aveni & Ilinitch, 1992; Harrigan, 1983b; Hirsch, 1950; Jarillo, 1993;

Mahoney, 1992; Perry, 1989; Porter, 1985).