SparklingLeaves is one of the major suppliers of automobile tools to StanMotors, a leading automobile company. Many of the tools are customized to meet the specific needs of StanMotors and hence have little other value. In return, StanMotors has agreed to make SparklingLeaves its sole supplier of automobile equipment for a period of 15 years. This scenario illustrates:
A) horizontal integration.
B) a credible commitment.
C) competitive bidding.
D) vertical integration.
E) parallel sourcing.

Question

Quizplus · Accepted Answer

The scenario illustrates a credible commitment, as SparklingLeaves has made a long-term agreement with StanMotors to be its sole supplier in exchange for customized tools. This provides assurance to StanMotors that it will have a reliable source of high-quality tools, while also securing SparklingLeaves' future business.

SparklingLeaves Is One of the Major Suppliers of Automobile Tools