Question

1. Define and discuss vertical integration (40-60 words).

2. What advantages and disadvantages might a first mover realize in a particular industry (40-60 words)?

Answer 1

Vertical integration is a concept where in a firm controls the entire or parts of supply chain of the goods produced by it. For e.g. an automobile company producing seat belts and car tires.

The purpose of vertical integration is to cut down on raw material costs and make production cheaper and faster, without compromising on quality.

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A first mover company is one which steps into the industry first and takes the first step.

Advantages: Become industry leader, Has control on resources, Excellent brand recognition, Has entire time without fear of competition to develop best quality products

Disadvantages: Fear of being copied, Hard to convince customers for a new product, Risk of failure, Others can come up in the market with better Technology after learning from your mistakes, New competition might make one obsolete