Vertical integration, choice of the strategic development of the mining companies

Abstract

Vertical integration is one of the options of strategic development for the mining companies. It results from specific needs of a basic company and means the takeover of an outside company involved in one part of the production chain. In the mining industry, the integration may concern mining–processing or mining–processing–metallurgical operations. A decision about the best strategic option should be based on economic premises. This paper proposes a new method of the economic evaluation of strategic activity of mining companies, aimed to improve the management methods, in order to create new structures and to provide the continuous development. Strategy of backward vertical integration towards suppliers, giving new possibilities and allowing for efficient company management, was discussed as one of possible options. Advantages offered by this option are significant since they consist in taking over the majority of production process as well as give the means to control the delivery of the raw materials and products. The method of evaluation the vertical integration profitability presented in the paper may be one of the tools supporting the strategic decisions.