Question

Which of the following best defines "vertical disintegration"?

a. Form of business strategy where by a company owns all of its suppliers distributors or retail locations.
b. Form of business strategy where one company does not seek to take over another that operates at the same level in the industry.
c. Form of business organization in which specialized firms are created and operate as a part of a network of subcontractors and suppliers, which was formerly dominated by one or a few firms.
d. Form of business consolidation where a cluster of old production facilities is destroyed to create one larger factory.

Answer 1

Vertical disintegration is a business strategy where the production process is split into distinct stages, handled by specialized firms, as opposed to vertical integration. This allows companies to focus on core competencies and collaborate with a network of suppliers and subcontractors.

Step-by-step explanation:

Vertical disintegration refers to a form of business strategy where there is an unbundling of the production process, resulting in specialized firms that were previously united under a single firm's control. This stands in contrast to vertical integration, which is a method of growth where a company acquires different stages of production or distribution of its products. Vertical disintegration involves the separation of these stages into different firms that may collaborate but remain legally independent entities.

Vertical disintegration can occur in industries where the production process is fragmented into distinct steps that can be handled by specialized units. This approach can allow businesses to achieve greater flexibility and responsiveness to market changes by focusing on their core competencies and relying on a network of suppliers and subcontractors for other stages of the production process.

In the historical context, such shifts in business organization can reflect broader economic changes. The late nineteenth century, for example, was a period of significant industrialization and technological advancement, leading to new ways of organizing business functions. The era saw inventors and businesses capitalizing on technological innovations to transform the nation and gain personal profits, necessitating different forms of business mergers and organizational strategies.