BP is vertically integrated company. In microeconomics and management, the term vertical integration describes a style of growth and management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. Vertical integration has also described management styles that bring large portions of the supply chain not only under a common ownership, but also into one corporation.
Vertical integration is one method of avoiding the hold-up problem. A monopoly produced through vertical integration is called avertical monopoly. BP and national adopt a vertically integrated structure. This means that it is active along the entire supply chain from locating deposits, drilling and extracting crude oil, transporting it around the world, refining it into petroleum products such as petrol/gasoline, to distributing the fuel to company-owned retail stations, for sale to consumers. There are internal and external society-wide gains and losses stemming from vertical integration. They will differ according to the state of technology in the industries involved, roughly corresponding to the stages of the industry lifecycle.
