Myhomeworkhelp.com makes you aware of pros and cons of vertically integrated firms
In a single word you can say that vertically integrated firms are self-sufficient as they control their own supply chain. They don’t have to depend on other suppliers for raw materials. Such companies enjoy great flexibility. But at the same time, they also have several disadvantages. Myhomeworkhelp.com brings you the vertically integrated firm homework help service to explain you this business process useful, in spite of several limitations.
Definition of vertically integrated firm:
In management and microeconomics, vertical integration is defined as arrangement wherein a company itself possesses its own supply chain. In a vertically integrated firm, different departments of a company, which are the members of the supply chain, produce different products or services to fulfill a common need.
While studying this chapter, students also have to study about horizontal integration. The vertically integrated firm assignment help providers also clearly explain horizontally integrated firm and describe the differences between the two.
What is supply chain?
The supply chain is an important term in economics which is frequently used in microeconomics. A supply chain is a network which comprises of organizations, people, resources, activities, and resources which are responsible for moving products and services from supplier to buyer. Various activities in a supply chain are the transformation of raw, natural resources, and components into finished goods which could be given to an end user.
More on vertically integrated firm:
There are three different ways of controlling its own supply chain. They are backward or upstream vertical integration, forward or downstream vertical integration, and balanced vertical integration which is a combination of both upstream and downstream.
- Backward or upstream vertical integration- It is a situation when a firm controls its subsidiaries which generate some of the inputs required for its production. For instance, an automobile company has subsidiaries which manufacture tire, glass, and metal. In that case, the company can use the products of its own subsidiaries for a smooth supply of inputs, ensuring consistent quality in their finished goods.
- Forward or downstream vertical integration- It is a situation when a firm controls distribution centers and retailers where it sells its products.
There are many renowned companies worldwide who are vertically integrated and controls their own supply chain. Our the vertically integrated firm homework help explain you this management system more clearly citing real-time examples.
Advantages of vertically integrated firms:
- A vertically integrated firm does not have to depend on its suppliers.
- If suppliers enjoy a lot of market power then it is beneficial for a vertically integrated firm.
- It offers economies of scale to the company.
- A vertically integrated company is in a position to sell its product at a low cost.
In spite of several advantages, the system has some limitations as well. Our experts for the vertically integrated firm assignment help say that the system is expensive for a company.Because it has to make huge investments to establish or acquire its subsidiary companies.
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