Which One of the Following Statements About Backward Vertical Integration

question 38

Multiple Choice

Which one of the following statements about backward vertical integration is false?

• A)What makes backward vertical integration such an attractive strategic option is the opportunity to capture the profit margins of suppliers and thereby increase the company's own profitability.
• B)Backward vertical integration can produce a differentiation-based competitive advantage when a company,by performing activities internally rather than utilizing outside suppliers,ends up with a better-quality product/service offering,improves the caliber of its customer service,or in other ways enhances the performance of its final product.
• C)For backward integration to be a viable and profitable strategy,a company must be able to (1)achieve the same scale economies as outside suppliers and (2)match or beat suppliers' production efficiency with no drop in quality.
• D)The best potential for being able to reduce costs via a backward integration strategy exists in situations where suppliers have outsized profit margins,where the item being supplied is a major cost component,and where the requisite technological skills are easily mastered or can be gained by acquiring a supplier with the desired technological know-how.
• E)Potential advantages of backward integration include sparing a company the uncertainty of being dependent on suppliers for crucial components or support services and lessening a company's vulnerability to powerful suppliers inclined to raise prices at every opportunity.

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