The figure shows the gross margin across value chain of focal firm. The regression lines are fitted for upstream and downstream connections and reflect value chain morphology. There are four possible shapes- U, Inverted U, Upward, Downward. The focus is primarily on U and Inverted U shapes as they highlight whether the focal firms have the gross margin lower or higher than it's suppliers and customers.

The good examples to understand this is- Flex Ltd. (U), Coca-cola (IU), Nvidia (Transition from U to IU) over time.