VERTICAL INTERGRATIONS

Question 1

What is vertical intergration

Answer 1

When an organisation grows through integrating their supply chain.

Question 2

What do most businesses supply chain look like

Answer 2

Raw materials

Manafacture

Retail

Primary sector

Secondary sector

Tertiary sector

Question 3

What is backward vertical integration

Answer 3

Backward vertical integration, is when you buy the companies that supply you with your parts/ raw materials

Question 4

What is forward vertical integration

Answer 4

Forward vertical integrations, is when you buy the companies that deal more with the final consumer, maybe buying the car dealership that sells your cars, or buying the company that services the cars you sell.

Question 5

What are the advantages of vertical intergration

Answer 5

Reduces power of suppliers (Porter’s fiver forces) and increases certainty in terms of pricing and consistency

Suppliers can be tailored to the exact needs of the manufacturers

Can give the organisation power over rivals if suppluers are limited

Allows businesses to benefit from increased added value later in the supply chain

Question 6

What are the disadvatages of vertical intergration

Answer 6

Can be high risk as business is expanding into areas outside its core competence

Fewer econsmies of scale able to be exploited becuase the expansion is into a different industry

Businesses have less choice of suppliers are you become tied to one supplier