Question

20. wendy's restaurants must decide whether to grow their own potatoes for french fries or buy them. if they buy rather than grow, then they have opted to: a. integrate horizontally. b. allow market prices to guide resource allocation. c. integrate vertically. d. allow hierarchical control to guide resource allocation. e. form an authority relation.

Answer 1

Wendy's decision to buy potatoes instead of growing them is an example of allowing market prices to guide resource allocation. This approach is a strategic business decision that lets them focus on their core competencies. Therefore, the correct option is b. allow market prices to guide resource allocation.

Step-by-step explanation:

If Wendy's restaurants decide to buy potatoes for their french fries instead of growing them, they have opted to allow market prices to guide resource allocation.

This approach means the company is relying on the open market to purchase potatoes at the existing market rate rather than taking on the process of farming the potatoes themselves, which would represent vertical integration.

By purchasing potatoes, Wendy's can focus on its core competencies such as preparing and selling food, while leveraging the expertise of potato growers to provide the raw materials needed.