Question

Sweet Leaf Tea, a Texas-based maker of bottled iced tea, is a small but fast-growing firm that has gained a loyal following for its use of fresh, organic ingredients in its beverages. Although beverage industry experts recommended that Sweet Leaf replace the organic cane sugar and honey it uses with less costly high-fructose corn syrup, Sweet Leaf refused because of the company's mission to provide a high-quality, organic beverage to consumers. The 11-year old company has 50 employees, and its products are available in 30% of the U.S. market. Sweet Leaf Tea recently received multi-million dollar investments which will enable the business to expand its national presence.

Which of the following, if true, would most likely undermine the argument that Sweet Leaf Tea should
implement a corporate-level strategy of vertical integration?
A) Sweet Leaf Tea lacks the facilities or knowledge to produce the raw ingredients for its beverages.
B) Market research suggests that Sweet Leaf Tea customers primarily purchase only one flavor of tea.
C) Most loyal customers of Sweet Leaf Tea purchase the beverage at neighborhood convenience stores.
D) Sweet Leaf Tea has decided to lower its prices by replacing cane sugar with corn syrup in some of its beverages.
E) Sugar farmers used by Sweet Leaf Tea have agreed to a fixed price for the next 5 years so that the company can keep prices low.

Answer 1

The option that would most likely undermine Sweet Leaf Tea's argument for vertical integration is if it lacks the facilities or knowledge to produce the raw ingredients for its beverages, making vertical integration impractical.

Step-by-step explanation:

The argument that Sweet Leaf Tea should implement a corporate-level strategy of vertical integration would most likely be undermined if the company lacks the facilities or knowledge to produce the raw ingredients for its beverages, hence option A) Sweet Leaf Tea lacks the facilities or knowledge to produce the raw ingredients for its beverages. Vertical integration would require Sweet Leaf Tea to take on additional production processes that involve the raw ingredients used in their teas, such as organic cane sugar and honey. Without the necessary facilities or expertise, Sweet Leaf Tea may not be able to successfully integrate these steps into their business model, potentially compromising the quality of the product or increasing costs.