Question

What are the competitive advantages of vertical integration?

Answer 1

Vertical integration is defined as the adding up of business activity of inputs or raw material needed for the firm.

The major advantages are:
1. Greater control over process: It helps to reduce the barrier and dependency on supplier so that a good control can be established over process
2. Improved efficiency: When the process gets improved the efficiency of operation to improves
3. Reduction in cost: The efficiency helps to reduce the cost
4. Increased market share: With the improvement in quality and reduction in cost, market share could be increased

With the increase in control over process, efficiency, cost it helps the firm to gain competitive advantage over the competitors so that greater profits can be realised.