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Expansion

The pros and cons of vertical integration Add to ...

Small businesses are often advised to do one thing well, but British Columbia farmer Bill Vanderkooi has built a successful organization with several entwined firms.

Here’s a look at the pros and cons of a vertical-integration strategy:

PRO

Companies can benefit by developing a specialty product and selling it through their own retail outlets, according to business professor Lindsay Meredith of Simon Fraser University. Examples include the chocolatier Purdy’s Chocolates of Vancouver, which operates 57 retail outlets in B.C., Alberta and Ontario, and Vancouver yoga wear designer and seller Lululemon Athletica Inc.

CON

Product development and retail are distinct businesses, and doing both takes a lot more work. Many entrepreneurs who try to focus on too many things often “confuse, distract and harm the core business,” business adviser Trevor Throness said.

A THIRD VIEW

Don’t always do it all. Some of the eggs for Mr. Vanderkooi’s dairy brand, Vitala, are produced on his farm, but the majority come from chickens on partner farms. And the eggs are graded, packaged and distributed by another third-party, Golden Valley Foods Ltd., a long-established local firm. Mr. Vanderkooi is looking to replicate that partnership to sell his eggs in the Prairie provinces.

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