For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company A. must first be a proficient manufacturer. B. must be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop-off in quality. C. must have excess production capacity so that it has an ample in-house ability to undertake additional production activities.

Question

Chyna

Business

4 May, 19:41

For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company A. must first be a proficient manufacturer. B. must be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop-off in quality. C. must have excess production capacity so that it has an ample in-house ability to undertake additional production activities.

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Aditya Solomon · Answer 1

The correct answer is letter "B": must be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production efficiency with no drop-off in quality.

Explanation:

Vertical integration takes place when other business purchases and manages the supply chain. There are two types of vertical integrations: backward and forward. In backward vertical integration a company, like a producer, owns companies that provide input to the production process of the firm.

The challenge in backward vertical integration relies on handling businesses at the same level as with the suppliers or even better than with them improving the output's efficiency without reducing its quality.