The strategic impetus for forward integration has much the same roots.
Undependable sales and distribution channels can give rise to costly inventory
pileups and frequent underutilization of capacity; thereby undermining
the economies of a steady; near-capacity production operation. In
such cases, it is often advantageous for a firm to set up its own wholesaleretail
distribution network in order to gain dependable channels through
which to push its products to end-users. Sometimes even a small percentage
increase in the average rate of capacity utilization can boost manufacturing
margins enough to make forward integration economical. On other occasions,
forward integration into distribution and retailing is cheaper than dealing
with independent distributors and retailers, thus providing a source of cost
advantage.