Question

Which of the following best describes vertical integration? A. sell products to a supplier or a distributor B. develop the ability to produce products that complement the original product C. develop the ability to produce the specified good more efficiently than before D. build long-term partnerships with a few suppliers E. produce goods or services previously purchased

Answer 1

Answer: B

Explanation:

A vertical integration is where a company owns another company in the same production line.

For example a company that bakes bread has a farm where wheat is cultivated, a marketing company and retail locations for the sale of the bread.

The advantages of Vertical integration include:

a. It reduces costs.

b. It increases efficiency.

c. It gives the firm greater control of the production process.

A major disadvantage of vertical integration is it requires huge capital outlay.