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Question 263 - CSCP discussion

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A retailer that imports furniture from several manufactures in low-wage countries wants to reduce variability in quality. The retailer has proposed merging with one of the manufacturers and giving it sole responsibility for one product family. The proposed merger is an example of:

A.
parallel integration.
Answers
A.
parallel integration.
B.
internal integration.
Answers
B.
internal integration.
C.
horizontal integration.
Answers
C.
horizontal integration.
D.
vertical integration.
Answers
D.
vertical integration.
Suggested answer: D

Explanation:

The proposed merger between the retailer and one of its manufacturers, giving the manufacturer sole responsibility for a product family, is an example of vertical integration. Here's why:

Control Over Supply Chain: Vertical integration involves merging with or acquiring firms at different stages of the production process (e.g., a retailer merging with a manufacturer).

Quality Control: By integrating vertically, the retailer gains better control over the production process, helping to ensure consistent product quality.

Supply Chain Efficiency: Vertical integration can streamline operations, reduce costs, and improve coordination between production and retail.

Reduction of Variability: The direct oversight and alignment of production processes can reduce variability in quality and improve overall supply chain performance.

Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.

Harrigan, K. R. (1985). Vertical Integration and Corporate Strategy. Academy of Management Journal.

asked 16/09/2024
Deshawn Sharpe
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