1. Horizontal and Vertical Integration The recent growth in vertical coordination in agriculture is attributed to...
1. Horizontal and Vertical Integration
The recent growth in vertical coordination in agriculture is attributed to several factors (causes) including changes in consumer characteristics, etc.
(a) Differentiate between horizontal and vertical integration.
(b) Name and discuss two other causes of vertical coordination in agriculture.
Homework Answers
Horizontal integration means one organisation acquires the other organisation that is essentially doing the same thing. The benefit of this type of integration is to expand the business and gain monopolistic advantages by reducing competition.
Vertical integration means acquisition of another organisation with one section of supply chain. This assist in reducing the overall cost and improve profitability. For eg a biscuit manufacturing buy the company which manufactures the raw material for biscuits.
Caused for vertical integration in agriculture:-
a) Lower transaction costs
The vertical integration has assisted in reducing the excess transaction costs by organising the supply and systematic allocation of resources.
b) Synchronisation of supply and demand
The vertical integration assist in synchronising the demand and supply of raw material and processing services which results in efficient allocation and cost reduction. .
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