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FSOT Full Test Bank

Category - Management

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When should a company consider vertical integration?

When lowered transactional costs and greater coordination are important
Whenever different, specialized companies will be combined
When the company is unable to expand profits within its segment of the value chain
When the company lacks liquidity

Explanation

Answer: A - A company should consider vertical integration when lowered transactional costs and greater coordination are important. Vertical integration lets the company take over a larger portion of the value chain; backward and forward integration are both examples of vertical integration.

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