Vertical diversification is a business strategy where a company expands its operations into different stages of production within the same industry. This can involve moving either upstream, by acquiring suppliers, or downstream, by taking control of distribution channels. The goal is to enhance efficiency, reduce costs, and improve product quality. By integrating various stages of the supply chain, companies can gain better control over their resources and processes. For example, a clothing manufacturer might start producing its own fabrics or open retail stores to sell directly to consumers. This approach can lead to increased profitability and a stronger market position.