A. take over markets formally controlled by other firms
B. prevent other firms from entering the market
C. reduce advertisement and management cost
D. enjoy economies of large-scale production

Correct Answer:

Option D – enjoy economies of large-scale production

Explanation

Vertical integration is a strategy whereby a company owns or controls its suppliers, distributors, or retail locations to control its value or supply. The following are some of the reasons for vertical integration

  • Reduce transportation costs if common ownership results in closer geographic proximity.
  • Improve supply chain coordination.
  • Provide more opportunities to differentiate by means of increased control over inputs.
  • Capture upstream or downstream profit margins.

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