Question 19

Vertical integration

The company is using vertical integration by acquiring the supplier of its computer chips. This strategy allows the manufacturer to control more of its supply chain and reduce dependency on external suppliers.

A) Strategic alliance

Strategic alliance refers to a cooperative arrangement between two companies to pursue a set of agreed-upon objectives while remaining independent organizations. In this case, the manufacturer is not forming a partnership but rather acquiring a supplier, which makes this option incorrect.

B) Conglomerate diversification

Conglomerate diversification involves a company expanding its operations into different industries or markets that are not related to its existing business. Since the manufacturer is focused on integrating its supply chain rather than diversifying into unrelated fields, this option does not apply.

C) Domain selection

Domain selection pertains to the process of determining which markets or industries a company should compete in. This choice does not reflect the action of acquiring a supplier, which is more about controlling the supply chain than selecting a market domain.

D) Vertical integration

Vertical integration is the strategy of acquiring or merging with suppliers or distributors to enhance control over the supply chain. By purchasing the supplier of computer chips, the manufacturer is effectively implementing this strategy to streamline production and reduce costs.

Conclusion

The correct answer, vertical integration, aligns with the company's strategic move to acquire its supplier, thereby enhancing its control over the production process. The other options, including strategic alliance, conglomerate diversification, and domain selection, do not accurately represent the nature of the acquisition, as they involve different strategic intents unrelated to direct supply chain management.