ITPEC IP October 2025 Question 79

A trading company making a major retailer its subsidiary — vertical integration brings a stage before or after the company's own in the same supply chain under its control.

A supply chain runs in stages: procurement and import, wholesale and trading, retail, the consumer. The trading company buys products overseas and sells them on; the retailer is the next stage downstream. Owning the retailer secures a sales channel for the goods it imports, which is forward (downstream) vertical integration.

Answer (b)

Why not others:

• •(a) — outsourcing factory inspection hands an activity to a partner company; it moves work out rather than integrating a stage
• •(c) — a bank acquiring another bank joins two firms at the same stage to gain size, which is horizontal integration
• •(d) — many assemblers using one maker's semiconductors and OS is the spread of a de facto standard; no company takes over another stage

Key rule: Vertical integration joins different stages of one chain (forward toward the customer, backward toward the supplier); horizontal integration joins firms at the same stage for scale or share.

Business Strategy Management · AI-written, may contain errors