Firms embark on vertical integration in other to?

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.