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December 4, 2022 

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VERTICAL INTEGRATION: The situation in which a firm participates in more than one successive stage of the production or distribution process. For example a soft drink company that also controls a sugar-producing firm is said to be vertically integrated because the soft drink company does not have to buy sugar from other firms to produce soft drinks. In some cases, two separate firms are vertically integrate because one firm produces a good or service and the other distributes it.

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FACTORY:

The physical capital (building and equipment) at a particular location used for the production of goods and services. A factory, or plant, is usually a relatively large production operation (compared with something smaller, like a shop). While factory and firm are occasionally used synonymously they are not really the same. A given firm might own more than factory and a given factory might be owned by more than one firm.
A factory is essentially the geographic manifestation of large scale production, where the capital, workers, and materials are combined in the production of goods and services.

The term factory is occasionally used synonymously with other terms such as firm or business. However, to be precise, a firm or business is the organization set up to oversee production and a factory is the physical location of the production. The one term that is largely synonymous with factory is plant.

The distinction between the terms firm (or business) and factory (or plant) provides a couple of interesting combinations.

  • A given firm can operate several different factories. Consider The Wacky Willy Company, proud producer of Wacky Willy Stuffed Amigos (those adorable foam-filled tarantulas and scorpions). The Wacky Willy Company actually operates several factories for the production of Stuffed Amigos. They have their main assembly factory on the north edge of Shady Valley, just up the highway from the shopping mall. They also have a fabric-cutting facility in Oak Town, thirty miles south of Shady Valley, a tag-printing factory in nearby Breezy Burg, and a stuffing poofer operation located in upstate Whispering Falls. The Wacky Willy Company is clearly a multi-factory firm. A single firm and four factories.

  • A single factory can be operated by more than one firm. Consider the wireless communications data relay equipment production facility located east of Shady Valley. This facility is used to assemble the assorted computers and communications equipment that enables high speed wireless telephone communication. This particular factory is owned and operated as a joint venture among Shady Valley's four wireless telephone services--OmniCell, Digital Distance, Tucker Trilateral Telephone, and FoneCom. In this case, there is one factory and four firms.

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Recommended Citation:

FACTORY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: December 4, 2022].


Check Out These Related Terms...

     | firm | business | company | enterprise | legal business organizations | ownership liability | business objectives | profit maximization | natural selection | plant | industry |


Or For A Little Background...

     | capital | entrepreneurship | production | production cost | supply |


And For Further Study...

     | business sector | second estate | government enterprises | ownership and control | fixed investment |


Related Websites (Will Open in New Window)...

     | National Association of Manufacturers |


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