Chapter 4

What is a primary benefit of Vertical Integration?

• It helps a company reduce costs by controlling various stages of the supply chain

• It allows a company to avoid any financial investment

•  It guarantees higher profits regardless of market conditions.

• It eliminates all risks associated with production and distribution

Which of the following is an example of backward integration?

• A car manufacturer opening a retail store

• A bakery buying a wheat farm to secure its raw materials

• A retailer signing a contract with a third-party delivery company

• A clothing brand franchising its retail outlets

What is a disadvantage of Vertical Integration?

• It can require significant capital investment and increase operational complexity

•  It reduces a company’s ability to innovate

• It leads to complete independence from market fluctuations

• It eliminates the need for strategic planning

Which scenario illustrates Quasi-Vertical Integration?

• A manufacturer partnering with exclusive distributors in specific regions

• A company acquiring its supplier to control raw material costs

• A retailer directly hiring its sales force

•  A producer outsourcing all production to a third party

 In the context of Vertical Integration, what does “forward integration” mean?

• A retailer outsourcing its operations to third-party suppliers

• A supplier reducing costs by negotiating with manufacturers

• A manufacturer taking control of its distribution or retail channels

• A company diversifying its product portfolio to enter new markets

 What is the main advantage that companies gain by operating at scale?

•  Increase production costs.

•  Reduce the average cost per unit of product

•  Reduce product quality

• Reduce the number of customers

 What benefits do third-party suppliers usually bring to customers?

•  Reduce product choices

• Increase product costs

• Provide a diverse product portfolio and competitive prices

• Reduce competition in the market

What benefits does third-party broader market coverage bring to businesses?

• Decrease in sales

• Reduced market share

• Increase sales and market share

• Reduced customer loyalty

Why is it important for manufacturers to have an independent third party?

• Third parties always work against the interests of the manufacturer

• Third parties provide valuable market information that helps manufacturers make better decisions

•  Third parties always increase production costs for the manufacturer

• The third party does not play a significant role in the manufacturer's business operations

What is the role of specific abilities?

• Create sustainable competitive advantage

• Increase business efficiency

• Enhance brand power

• All correct