less dependence on suppliers is an advantage of blank
A multiple choice question
B horizontal integration
The Correct Answer and Explanation is :
The correct answer is B: horizontal integration.
Explanation:
Horizontal integration refers to the strategy of acquiring or merging with other companies at the same level of the supply chain. This approach allows a business to expand its market share and reduce competition by consolidating similar businesses. One of the key advantages of horizontal integration is the reduction of dependence on suppliers.
By integrating horizontally, a company can control more aspects of its production and distribution process. For instance, if a company that produces a specific product acquires another company producing a similar product, it can consolidate resources, streamline operations, and improve overall efficiency. This leads to reduced reliance on external suppliers for raw materials, components, or services that are critical to production.
Additionally, horizontal integration can lead to economies of scale, where larger operations can produce goods at a lower cost per unit. This can result from more efficient use of resources, bulk purchasing, and shared administrative costs. The reduced need for external suppliers diminishes the vulnerability associated with supply chain disruptions. For example, if a company is solely reliant on a few suppliers for essential materials, any issues such as price increases, shortages, or quality problems can significantly impact production. However, through horizontal integration, a company can develop its supply capabilities, ensuring a more stable and consistent flow of inputs.
Moreover, controlling a larger portion of the market allows companies to negotiate better terms with remaining suppliers and even internalize some supply functions. This ultimately leads to increased bargaining power, reduced costs, and enhanced operational resilience. In summary, horizontal integration provides a strategic advantage by lessening dependence on suppliers, leading to improved stability and cost efficiency within the business.