Question

Taco Rocket (Scenario)

Imagine that you are the president of Taco Rocket, a new and successful chain of 8 Mexican fast-food restaurants. The success you have experienced in the last 5 years has you thinking of what to do with the business next. Should you expand the business at the current rate? Open new and different restaurants? What?

Q: You are thinking of buying a tortilla factory in a nearby state. This action would be an example of...

A. Vertical Integration
B. Horizontal Integration
C. Market Diversification
D. Product Development

Answer 1

Buying a tortilla factory by Taco Rocket is an example of Vertical Integration, where the company integrates with part of its supply chain to control production of essential raw materials.

Step-by-step explanation:

If the president of Taco Rocket, a chain of Mexican fast-food restaurants, is considering buying a tortilla factory, this action would be an example of Vertical Integration. Vertical integration is a business strategy where a company acquires another company that operates within the supply chain of its products or services. In this case, by acquiring a tortilla factory, Taco Rocket would be integrating backwards to control the production of a raw material (tortillas) that is essential for their end product (tacos). This move can lead to more control over the supply chain, potential cost savings, and improved efficiency. It contrasts with horizontal integration, where a company would acquire another company that operates at the same level in an industry, such as buying another chain of restaurants.