The Real Net Output Ratio (or Vertical Range of Manufacture) is a term commonly used by German economists and infrequently used in wider Europe, and globally. It is used as a measure of vertical integration, though typically limited to a business, rather than across a group of associated companies or a nation. The term was first popularized outside Germany in Hermann Simon's 1996 publication, Hidden champions: lessons from 500 of the world's best unknown companies. In a value chain, the Real Net Output Ratio is the fraction of the internal (company specific) production on the total production value of one company. The total production value of a company consists of internal production plus the sum of externally produced goods and services.
R e a l N e t O u t p u t R a t i o = i n t e r n a l p r o d u c t i o n t o t a l p r o d u c t i o n v a l u e = i n t e r n a l p r o d u c t i o n i n t e r n a l p r o d u c t i o n + e x t e r n a l l y p r o d u c e d g o o d s + e x t e r n a l l y p r o d u c e d s e r v i c e s {\displaystyle \textstyle Real\,Net\,Output\,Ratio={\frac {internal\,production}{total\,production\,value}}={\frac {internal\,production}{internal\,production\,+\,externally\,produced\,goods\,+\,externally\,produced\,services}}}
A Real Net Output Ratio of 0% relates to a company that does not have its own production and therefore only does trading.
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