Which of the following best describes vertical integration?

• A. A firm expands its control over different stages of production or distribution within the same industry.
• B. A firm outsources its production to independent suppliers.
• C. A firm merges with or acquires competitors producing similar products.
• D. A firm increases its product variety by entering unrelated markets.

Answer: (A)

Verified step by step guidance

1. Understand the concept of vertical integration: it occurs when a firm expands its control over different stages of production or distribution within the same industry, such as owning suppliers or distributors.
2. Compare vertical integration with other types of business strategies: outsourcing involves contracting independent suppliers rather than controlling them; mergers with competitors producing similar products refer to horizontal integration; entering unrelated markets is diversification.
3. Identify that vertical integration focuses on controlling the supply chain either upstream (suppliers) or downstream (distribution) rather than expanding product lines or markets.
4. Review the given options and match the definition of vertical integration to the option describing a firm expanding control over different production or distribution stages within the same industry.
5. Conclude that the correct description of vertical integration is the option stating: 'A firm expands its control over different stages of production or distribution within the same industry.'