A firm with a high ratio between value added and sales has brought many of the value-creating activities associated with its business inside its boundaries, consistent with a high level of vertical integration.

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A high ratio between value added and sales indicates that the firm is able to create more value from its inputs than its competitors. This often happens when the firm engages in vertical integration by bringing many of the value-creating activities associated with its business inside its boundaries, thereby controlling the entire value chain. This increases the firm's efficiency, reduces costs, and enables it to differentiate from its competitors.

A Firm with a High Ratio Between Value Added and Sales