Vertical FDI is another type of foreign investment. A vertical FDI occurs when an investment is made within a typical supply chain in a company, which may or may not necessarily belong to the same industry. As such, when vertical FDI happens, a business invests in an overseas firm which may supply or sell products. Vertical FDIs are further categorised as backward vertical integrations and forward vertical integrations. For instance, the Swiss Coffee producer Nescafe may invest in coffee plantations in countries such as Brazil, Columbia, Vietnam, etc. Since the investing firm purchases, a supplier in the supply chain, this type of FDI is known as backward vertical integration. Conversely, forward vertical integration is said to occur when a company invests in another foreign company which is ranked higher in the supply chain, for instance, a coffee company in India may wish to invest in a French grocery brand.
