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) forward into an industry that uses, distributes, or sells the company's products.
C) laterally into an industry that competes with the company's products.
D) A and B.
E) A and C.

Question

Quizplus · Accepted Answer

A company pursuing a strategy of vertical integration may choose to expand its operations backward into an industry that produces inputs for the company's products (referred to as backward integration) or forward into an industry that uses, distributes, or sells the company's products (referred to as forward integration). Therefore, the best choice that satisfies both options is D. The company may expand its operations in both directions if it chooses to do so. It is not logical for a company pursuing vertical integration to expand laterally into an industry that competes with its products as this conflicts with the goal of vertical integration, which is to strengthen the company's position in the supply chain by controlling more stages of the production process.

A Company Pursuing a Strategy of Vertical Integration May Expand