Which of the following is a type of vertical integration along the industry value chain?

• A. Two competing firms merging to increase market share
• B. A company outsourcing its production to a third party
• C. A retailer merging with another retailer in a different region
• D. A manufacturer acquiring a supplier of raw materials

Answer: (D)

Verified step by step guidance

1. Understand the concept of vertical integration: it occurs when a company expands its operations into different stages of production within the same industry value chain, either backward (towards raw materials) or forward (towards distribution or retail).
2. Identify the options that involve movement along the supply chain stages rather than expansion within the same stage. For example, merging with competitors or retailers in the same stage is horizontal integration, not vertical.
3. Analyze the option 'A manufacturer acquiring a supplier of raw materials' as an example of backward vertical integration, since the manufacturer is moving upstream in the value chain to control inputs.
4. Recognize that outsourcing production to a third party does not represent integration but rather contracting out part of the process, so it is not vertical integration.
5. Conclude that vertical integration involves ownership or control over different stages of production, and the correct example is the manufacturer acquiring a supplier of raw materials.