Firms are "taper integrated" when they are backward or forward integrated but rely on outsiders for a proportion of their suppliers or distribution. Taper integration represents a useful compromise between desires to control adjacent businesses and needs to retain strategic flexibility.

What is taper integration example?

Examples for tapered integration are (1) Tim Hortons owning some of its retail outlets but also using franchising, (2) Coca-Cola and Pepsi both having integrated bottling subsidiaries while also relying on independent bottlers for production and distribution in some markets, or (3) BMW which uses both in-house market ...

When should vertical integration not be used?

Exhibit 3 plots transaction frequency and asset characteristics on a matrix that suggests appropriate vertical coordination mechanisms. When buyers and sellers seldom need to interact, vertical integration is usually not necessary, whether asset specificity is low or high.