Question

The impact of the specified factors on the optimal method of procuring an input can be outlined as follows:

a. Benefits from specialization: Favors outsourcing or procurement from specialized suppliers, encouraging reliance on the external market.

b. Reduce the benefits of vertical integration: Promotes the use of external procurement methods rather than internal production to capitalize on market efficiencies and avoid the challenges associated with integrating the supply chain.

c. Reduce the benefits of spot exchange: Encourages the use of long-term contracts or strategic partnerships to secure input supply, minimizing the risks associated with price fluctuations in spot market transactions.

Answer 1

The impact of specified factors on the optimal method of procuring an input can be outlined as favoring outsourcing or procurement from specialized suppliers, promoting the use of external procurement methods, and encouraging long-term contracts or strategic partnerships.

Step-by-step explanation:

The impact of the specified factors on the optimal method of procuring an input can be summarized as follows:

1. Benefits from specialization: Favors outsourcing or procurement from specialized suppliers, encouraging reliance on the external market.
2. Reduce the benefits of vertical integration: Promotes the use of external procurement methods rather than internal production to capitalize on market efficiencies and avoid the challenges associated with integrating the supply chain.
3. Reduce the benefits of spot exchange: Encourages the use of long-term contracts or strategic partnerships to secure input supply, minimizing the risks associated with price fluctuations in spot market transactions.

These factors influence the optimal method of procuring inputs by considering the advantages and disadvantages of different procurement strategies in relation to specialization, vertical integration, and spot exchange.