Vertical Integration along the Industry Value Chain
15 important questions on Vertical Integration along the Industry Value Chain
What is Vertical Integration?
The Degree of Vertical Integration tends to correspond to the Nr of Industry Value Chain stages in which a firm directly participates.
When should firms Vertically Integrate?
(Pursuing an activity internal costs less than buying it on markets)
What is the Industry Value Chain?
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What is Backward Vertical Integration?
When a firm buys another firm at an earlier stage of production.
-- often used to overcome the threat of opportunism and to secure key raw materials
What are the Benefits of Vertical Integration?
- Improved quality
- Facilitating scheduling and planning
- Facilitating investments in specialised assets
- Securing critical supplies and distribution channels
What are Specialized Assets?
What are the 3 Types of Specialized Assets?
2) Physical-asset specificity
3) Human-asset specificity
3 Types of Specialized Assets: Physical-asset specificity
3 Types of Specialized Assets: Human-asset specificity
What are the Risks of Vertical Integration?
- Reduced Quality
- Reduced Flexibility
- Increased potential for legal repercussions (nadelig gevolg)
What is a Vertical Market Failure?
Alternatives to Vertical Integration: What is Taper Integration?
What are the Benefits of Taper Integration?
- Performance comparisons are possible- Enhances flexibility
- Combination of Internal and External knowledge
Alternatives to Vertical Integration: What is Strategic Outsourcing?
What is offshoring / Offshore outsourcing?
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