Final answer:
The decision for a retail business to expand through vertical integration by taking over a supplier or through horizontal expansion by opening more shops depends on strategic factors such as control over the supply chain, the retail business's core competencies, and market conditions. A thorough analysis of these aspects will inform the best path for expansion, whether it's consolidating resources within the supply chain or enhancing market presence and benefiting from economies of scale.
Step-by-step explanation:
Whether a retail business should expand by taking over one of its suppliers or by opening more of its shops depends on various strategic factors. Taking over a supplier, a move known as vertical integration, can offer control over the supply chain, potentially reducing costs and enhancing supply chain reliability. This can be advantageous if the supplier has valuable assets, technologies, or capabilities that can provide a competitive edge. However, it also involves managing a different type of business, which can be complex and distract from the core retail operations.
On the other hand, opening more shops is a form of horizontal expansion. It can increase market presence and allow for economies of scale. If the brand is strong and consumer demand is high, this can be a quick way to increase revenue. However, it requires significant investment and may lead to overextension if not managed properly.
Ultimately, the decision should be based on the retail business's core competencies, market conditions, and long-term strategic plan. If the business is financially robust and the market is receptive, horizontal expansion can provide immediate financial gains. If supply chain control and cost reduction are critical, vertical integration might be the better path.