3.1 - Integration: Vertical Forwards

Question 1

What does vertical forwards integration entail?

Answer 1

Merger with firm in same industry and further ahead in production chain

Question 2

What are the specific advantages of vertical forwards integration?

Answer 2

Guaranteed outlet for produce
Handling + transport costs reduced
Exhibit greater control over sales + prices
Profit maximization by reducing distribution costs

Question 3

What are the specific disadvantages of vertical forwards integration?

Answer 3

Interdependent processes - one disruption may affect entire production system
Efficient management becomes difficult

Question 4

How does vertical forwards integration encourage profit maximisation?

Answer 4

Removal of middlemen
Reduced distribution + handing costs

Question 5

How can vertical forwards integration make management difficult?

Answer 5

Businesses have individual traits + systems
VF allows another firm to exercise control over your business