The method by which a company controls all stages of production to maximize efficiency is called what?

The method by which a company controls all stages of production to maximize efficiency is called what?

• A. Vertical integration
• B. Horizontal integration
• C. Diversification
• D. Franchise

Answer: (A)

Vertical integration is when a company owns and controls multiple stages of the production process, from raw materials to the finished product, with the aim of boosting efficiency. By bringing these steps under one roof, the company lowers transaction costs, reduces reliance on external suppliers, and can coordinate timing, quality, and costs more closely along the entire supply chain. It also often allows capturing more value and improving control over schedules and standards. The other ideas describe different strategies: expanding at the same production level by acquiring competitors; expanding into unrelated businesses; or growing through a brand licensing model that relies on independent operators rather than internal control of production.

Vertical integration is when a company owns and controls multiple stages of the production process, from raw materials to the finished product, with the aim of boosting efficiency. By bringing these steps under one roof, the company lowers transaction costs, reduces reliance on external suppliers, and can coordinate timing, quality, and costs more closely along the entire supply chain. It also often allows capturing more value and improving control over schedules and standards. The other ideas describe different strategies: expanding at the same production level by acquiring competitors; expanding into unrelated businesses; or growing through a brand licensing model that relies on independent operators rather than internal control of production.