Th3.1: Forward and Backward Vertical Integration Advantages

Question 1

What are the four advantages of forward and backward vertical integration?

Answer 1

increased potential for profit
less risks
costs low
retail outlets

Question 2

Increased potential for profit

Answer 2

there is increased potential for profit as the firms takes the potential profit from a larger part of the chain of production

Question 3

Less risks

Answer 3

there will be less risks as suppliers do not have to worry about buyers not buying their goods and buyers do not have to worry about suppliers not supplying the good

Question 4

Costs low

Answer 4

with backward integration, businesses can control the quality of suppliers and ensure delivery is reliable - don’t have to worry about being charged high prices for supplies, keeping costs low, increasing competitiveness and sales

Question 5

Retail outlets

Answer 5

forward integration secures retail outlets and can restrict access to these outlets for competitors