Question

Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input to its manufacturing process. This is an example of __________

- using related diversification to achieve value by leveraging core competencies to achieve economies of scope.
- using related diversification to achieve value by pooling negotiating power to achieve market power
- using related diversification to achieve value by integrating vertically in order to acquire market power
- using related diversification to achieve value by integrating vertically in order to attain economies of scope

Answer 1

The answer is: using related diversification to achieve value by integrating vertically in order to acquire market power

Step-by-step explanation:

Vertical integration happens when Shaw Industries controls more than one stage of the supply chain. The four stages of the supply chain are

1. commodities
2. manufacturing
3. distribution
4. retail

Shaw Industries ate least controls 2: commodities and manufacturing.

It took the decision of integrating vertically in order to increase its quality control over its key input, that way they can be sure their product has higher quality. By selling a better product in large quantities, they will gain market power