A company pursuing a strategy of vertical integration may expand its operations:
A) backward into an industry that produces inputs for the company's products.
B) by making specialized investments jointly with its competitor.
C) laterally into an industry that competes with the company's products.
D) by merging with industry competitors.
E) by using its capital resources to purchase another company within the industry.

Question

Quizplus · Accepted Answer

Vertical integration involves expanding operations into industries that are part of the company's supply chain. Therefore, expanding backward into an industry that produces inputs for the company's products is a logical choice for pursuing a strategy of vertical integration. Lateral expansion into a competing industry would be a form of horizontal integration, which is a different strategy. Making specialized investments jointly with a competitor or merging with industry competitors would be strategies of collaboration or consolidation, respectively. Using capital resources to purchase another company within the industry could be a form of either vertical or horizontal integration, depending on the nature of the acquired company's operations.

A Company Pursuing a Strategy of Vertical Integration May Expand