QQuestionEconomics
QuestionEconomics
Which of the following is an example of vertical integration?
A. Purchasing competitors
B. Purchasing suppliers
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Answer
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Step 1:I'll solve this problem step by step:
Step 2:: Understanding Vertical Integration
Vertical integration is a business strategy where a company expands its operations to control multiple stages of its production or distribution process. This typically involves acquiring businesses either up or down the supply chain.
Step 3:: Analyzing the Options
Let's examine the two choices: - Option A: Purchasing competitors (Horizontal integration) - Option B: Purchasing suppliers (Vertical integration)
Step 4:: Defining Vertical Integration
Vertical integration occurs when a company acquires or controls businesses that are part of its own supply chain. This can be: - Backward integration: Acquiring suppliers - Forward integration: Acquiring distributors or retailers
Step 5:: Identifying the Correct Answer
Option B (Purchasing suppliers) is a classic example of vertical integration. By purchasing suppliers, a company gains control over the earlier stages of its production process, ensuring a more stable and potentially cost-effective supply chain.
Final Answer
Purchasing suppliers is an example of vertical integration. Key Insights: - Vertical integration helps companies control more stages of production - It can reduce dependency on external suppliers - It can potentially lower costs and improve supply chain efficiency
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