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 an integration type other than forward vertical?
A) A carrier freight company buys a company that produces cardboard boxes to take advantage of internal transfer pricing.
B) A carrier freight company buys a customer service company to handle customer complaints.
C) A company that specializes in the research and development of new flavor combinations purchases a candy bar factory.
D) A farm that grows cocoa beans purchases a company that can refine the beans into cocoa powder that will be available for resale.

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 A is the only choice listed that accurately depicts a situation where a company is buying another company within the same value chain that is an integration other than forward vertical. The other choices are forms of forward vertical integrations.

After a Company Has Decided to Vertically Integrate with Another