Question

Which of the following is an example of vertical integration?

purchasing competitors

purchasing suppliers

informally agreeing on prices

buying stock in competing companies

Answer 1

Purchasing suppliers. Vertical integration is when someone buys all aspects of their trade. For example, Gustavus Swift worked in the meat industry. So, he owned the meat factories, but he also bought livestock yards to keep the animals before slaughter and refrigerated rail cars to transport his products. This made his products cheaper for the public.

On the other hand, horizontal integration is when one person buys all companies under their industry. An example of this would be John D. Rockefeller of Standard Oil. He bought all of the smaller oil companies so that he could charge whatever he wanted for his oil.

Answer 2

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