Vertical integration is a more expensive strategy to manage than unrelated diversification.

Question

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Vertical integration involves acquiring and controlling more stages of the production process, such as raw materials sourcing, manufacturing, distribution, and retail. This requires significant investments in assets, operations, and management, which can be more costly and risky than diversification into unrelated businesses that may not require as much expertise, infrastructure, or coordination. Moreover, vertical integration may involve more regulatory scrutiny, dependence on external suppliers or customers, and limited flexibility to adapt to changing market conditions or technologies. Therefore, while vertical integration can offer benefits such as increased efficiency, quality, control, and differentiation, it also entails higher costs and complexities than unrelated diversification.

Vertical Integration Is a More Expensive Strategy to Manage Than