After a company has decided to vertically integrate with another, they will have to seriously consider whether to move upstream or downstream within their value chain. Each direction has its advantages and disadvantages and plays a crucial role in the improved efficiency post-acquisition. Which of the following is an example of forward vertical integration?
A) A local café purchases a small local coffee roaster to source their coffee beans locally.
B) A telecommunications company that manufactures cell phones acquires a marketing company to move the marketing process in-house.
C) A telecommunications company that manufactures cell phones acquires a product design firm to move the product design process in-house.
D) An auto mechanic at a small garage purchases the parts supply store next door to have quicker access to what they need to work efficiently.

Question

Quizplus · Accepted Answer

This question requires familiarity with integration, specifically forward vertical. This type of integration involves a company acquiring another company that exists within the same value chain. Choice B is the only choice listed that accurately depicts a situation where a company is buying another company within the same value chain that is also forward vertical as it is moving downstream. The other choices are forms of integrations but not necessarily forward vertical.

After a Company Has Decided to Vertically Integrate with Another