Which of the following is an example of vertical integration?

• A. A clothing retailer opens new stores in different cities.
• B. A bakery buys another bakery in the same city.
• C. A car manufacturer acquires a tire company.
• D. Two competing smartphone companies merge.

Answer: (C)

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, typically involving suppliers or distributors.
2. Analyze each option to see if it involves expansion along the supply chain (vertical integration) or expansion within the same stage or market (horizontal integration).
3. Option 1: A clothing retailer opening new stores in different cities is expanding its retail presence, which is horizontal integration, not vertical.
4. Option 2: A bakery buying another bakery in the same city is merging with a competitor at the same production stage, which is horizontal integration.
5. Option 3: A car manufacturer acquiring a tire company involves moving into a supplier's role (tire production), which is vertical integration because it integrates different stages of the production process.