If a firm decides to move away from ownership of a vertically integrated production process and begins to purchase supplies or other services from other businesses, this is known as:
A) downstream integration.
B) upstream integration.
C) vertical integration.
D) outsourcing.

Question

Quizplus · Accepted Answer

When a firm stops owning and controlling the entire production process and starts purchasing goods and services from other businesses, it is known as outsourcing. This allows the firm to focus on their core competencies and reduce costs associated with owning and maintaining a vertically integrated production process. Options A and B refer to integration, which is the opposite of outsourcing. Option C refers to the ownership and control of the entire production process, which is not relevant to outsourcing.

If a Firm Decides to Move Away from Ownership of a Vertically