TerraLoc competes in the market for global positioning devices and services. The company manufactures its own GPS units, which are smaller than those of any other competitor and include a proprietary battery that lasts 200% longer than any other competitor's battery and that TerraLoc manufacturers on-site. TerraLoc also has developed proprietary software that is much faster and more precise than that of any competitor. When developing the proprietary battery, TerraLoc decided to manufacturer the battery in-house to reduce the possibility that the company it outsourced the battery manufacturing to might reverse engineer the battery and sell a similar product to competitors. This possibility was especially troubling given that the company expected a significant increase in demand due to the improved battery life. Additionally, TerraLoc sells its products and services through its own direct sales force to ensure that its representatives highlight the longer battery life of TerraLoc's units.
-If TerraLoc wanted to expand into selling its GPS units through company-owned retail stores, this would be an example of ________
A) forward vertical integration.
B) backward vertical integration.
C) opportunism.
D) a joint venture.

Question

Quizplus · Accepted Answer

Forward vertical integration involves a company expanding its operations by acquiring or opening new distribution channels, such as retail stores, in order to sell its products directly to consumers. This is the most appropriate option as TerraLoc plans to expand into selling its GPS units through company-owned retail stores. Backward vertical integration involves a company acquiring or owning suppliers of its raw materials or components, which is not relevant to TerraLoc. Opportunism refers to taking advantage of a situation for personal gain, and joint venture involves two or more companies collaborating to form a new entity, neither of which applies to TerraLoc in this scenario.

TerraLoc Competes in the Market for Global Positioning Devices and Services