Which of the following takes place when firms producing at different stages in the same...
Which of the following takes place when firms producing at different stages in the same industry combine?
- A) conglomeration
- B) vertical integration
- C) horizontal integration
- D) cartel
Correct Answer: B) vertical integration
Explanation
When firms producing at different stages in the same industry combine, it is called vertical integration.Vertical integration refers to a situation where a company acquires or merges with another company that operates at a different stage of the production or distribution process. In this case, firms that were previously separate and operating at different stages, such as manufacturing, distribution, or retail, come together under one ownership.
This integration allows the company to have control over multiple stages of the production process, which can lead to cost savings, increased efficiency, and improved coordination. For example, a company that manufactures cars may decide to vertically integrate by acquiring a tire manufacturing company and a car dealership. By doing so, they can ensure a steady supply of tires for their cars and have direct access to the retail market.
In the given options, vertical integration is the correct answer because it specifically refers to the combination of firms operating at different stages in the same industry. The other options, such as conglomeration, horizontal integration, and cartel, do not accurately describe this particular scenario.
To learn more about vertical integration and other business strategies, please read the relevant sections of the recommended textbooks.