The two most compelling reasons for a company to pursue vertical integration (either forward or backward) are to ___________.

Question

A) expand into foreign markets and/or control more of the industry value chain.
B) broaden the firm's product line and/or avoid the need for outsourcing.
C) enable use of offensive strategies and/or gain a first-mover advantage over rivals in revamping the industry value chain.
D) strengthen the company's competitive position and/or boost its profitability.
E) achieve product differentiation and/or lengthen the company's value chain to include more activities performed in-house and thereby gain greater ability to reduce internal operating costs.

Answer 1

D) strengthen the company's competitive position and/or boost its profitability.
The two best reasons for investing company resources in vertical integration are to strengthen the firm's competitive position and/or to boost its profitability. Vertical integration has no real payoff unless it produces sufficient cost savings to justify the extra investment, adds materially to a company's technological and competitive strengths, and/or helps differentiate the company's product offering.