Integrating forward into manufacturing may help a raw materials producer
achieve greater product differentiation and escape the price-oriented competition
of a commodity business. Often, in the early phases of vertical product
flow, intermediate goods are "commodities" in the sense that they have essentially
identical technical specifications irrespective of producer (as is the case
with crude oil, poultry; sheet steel, cement, and textile fibers). Competition in
commodity or commodity-like markets is usually fiercely price-competitive,
with shifting supply and demand conditions causing volatile profits. However,
the closer the production stage to the ultimate consumer, the greater the opportunities
for a firm to break out of a commodity-like competitive environment
and differentiate its end-product via design, service, quality features, packaging,
promotion, and so on. Product differentiation often reduces the importance
of price in comparison with other product attributes and allows for
improved profit margins.