Real net output ratio

The concept of vertical integration (also: vertical integration ) refers to the proportion of the value chain in-house production in the goods production. Under depth is defined as a vertical extension, under production, the production of goods using factors of production.

General

( Or specified in percent) as the quotient shown results for the vertical integration of the following expression:

A production depth of 0% means that the company performs neither a production nor the refinement of products, so be limited solely to the trade.

A production depth of 100 % would mean that the company manufactures without buying components or raw materials in complete independence products, such as when a single company an entire value chain, from ore through several stages up to a camshaft or a saucepan, is shown.

Porsche, for example, has a vertical range of manufacture which is about 15 % of sports cars 911 and Boxster models about 20%, 10% and for the Cayenne the Panamera model published in 2009. A company with a comparatively high manufacturing depth, however, is VW, which has, among other things, an in-house foundry in Hanover with about 1300 employees.

Demarcation to related matters

Depth of services

The performance of depth of a company is the proportion of the management and administrative functions of the company, which completed it yourself.

Vertical Integration

Vertical integration is the summary or combination of technologically distinct processes or functional units, which are downstream in the value chain forward or backward. A paper producer, for example, is vertically integrated by buying a sawmill or a newspaper company.

In contrast to the production depth is limited to the design of vertical integration not only on the production- economic point of view, but also investigation object of organizational theory, economics and strategic management.

The vertical integration describes how high is the percentage of a company itself provided services within the value chain. The higher the degree of vertical integration, the more activities over the company itself; is the vertical integration of degrees lower, lots of activities by partner companies or contractors be performed.

Outsourcing

With outsourcing, business outsourcing tasks to third-party companies is called. The aim of outsourcing is to be inefficient or too expensive to take care of executable tasks by specialized service to our company site. Moreover, one can achieve by outsourcing a relief the firm's activities, so that from now on can all focus on its core competencies. Core competencies are company-specific activities that are not imitable and not substitutable and thus provide a competitive advantage over the competition. Therefore, they should not be outsourced. For outsourcing to offer, however, to support processes that are imitable and substitutable and can be provided cheaper and / or better of the competition, for example by the use of scale and / or specialization. An example of a typical support process represents the management

Make-or -Buy Decision

Under Make- or-buy ( "mob " ) is the decision between in-house production or external procurement.

The decision on the depth of production includes the commitment to the provision of sub-processes, which about the problems concerning the make- or-buy decision can be assigned. The difference between make- or-buy decision and production depth is that in the latter, the study area is limited to the production area, in the former case, the application spectrum is basically open.

One can thus denote the depth of production as the result of an overall production process-related make- or-buy decision. The result of a make- or-buy decision affects not necessarily the depth of production, while a change in the depth of production is always due to a make- or-buy decision.

Share purchase

  • Purchase share of foreign -made, so the related part of the production
  • The term is related to the "mob " and consequently used in vertical integration, for example in figures compass VDMA; generally the trend is increasing, the average in mechanical engineering is 55%

Others

In the German sales tax law until 1967, the tax on each sale of intermediate products was due. This large companies were considerably favored by a large vertical integration. Before: Bought a contractor precursors ( such as a car manufacturer batteries), so he had to pay sales tax on the purchase price. On the whole car (including the battery ) then fell again to sales tax. On the purchased batteries from battery manufacturer acid was paid a total of three times sales tax. The longer the chain of production will, the stronger rose cascade the tax burden. In April 1967, the first two VAT Directives were adopted whereby a general, multi-level, but non- cumulative tax was introduced. This new regulation was unanimously welcomed in public finance and economy, as the cascade effect has now been avoided.

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