Th3.1: Forward and Backward Vertical Integration Advantages Flashcards
What are the four advantages of forward and backward vertical integration?
increased potential for profit
less risks
costs low
retail outlets
Increased potential for profit
there is increased potential for profit as the firms takes the potential profit from a larger part of the chain of production
Less risks
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
Costs low
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
Retail outlets
forward integration secures retail outlets and can restrict access to these outlets for competitors