Select all that applyUnder which of the following circumstances might backward vertical integration lower costs?Multiple select question.when the item being supplied is a minor but costly component of the final productwhen there are many suppliers competing for market position by keeping prices lowwhen there are few suppliers in the marketwhen the item being supplied is a major component of the final product
Question
Select all that applyUnder which of the following circumstances might backward vertical integration lower costs?Multiple select question.when the item being supplied is a minor but costly component of the final productwhen there are many suppliers competing for market position by keeping prices lowwhen there are few suppliers in the marketwhen the item being supplied is a major component of the final product
Solution
Backward vertical integration might lower costs under the following circumstances:
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When the item being supplied is a minor but costly component of the final product: Backward integration allows a company to gain control over suppliers and therefore can help in reducing the cost of expensive components.
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When there are few suppliers in the market: If there are only a few suppliers in the market, they may have the power to dictate prices. By integrating backwards, a company can control its supply chain and potentially reduce costs.
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When the item being supplied is a major component of the final product: If a major component of the final product is supplied by another company, backward integration can help in reducing the cost of that component by controlling its production process.
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