Talia owns the largest producer of ice cream in Easteros. She currently relies on several small manufacturers to produce the packaging for her products. She has contracts with each of her manufacturers and has quarterly meetings with them to discuss business for the next quarter. Other than this interaction, she has little oversight over their work. Over the last year, Talia’s business has boomed, and she is wondering whether she should begin packaging her product in-house. Write a brief recommendation to Talia, highlighting the costs and benefits of vertical versus horizontal integration.

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Vertical integration should be understood as a situation where the company combines the key stages of production into a single one, but not in the context of one stage.

Upstream integration has previously been supplied to it by other firms. In case the firm is involved in product processing or marketing, downstream integration occurs. Vertical integration can be beneficial to Talia in that it enables the company to reduce production and distribution costs by connecting successive production steps.

In addition, it may be vital for a firm to secure reliable sources of supply of inputs or distribution channels in order to maintain its competitiveness. On the one hand, vertical integration can lead to greater resource efficiency. On the other hand, limiting competition leads to a less efficient allocation of resources.

Horizontal integration refers to the merger of firms producing the same product. In the context of Talia’s business, horizontal integration will help reduce production and distribution costs and therefore is a profitable solution.

However, it is worth noting that both integration options have disadvantages. When a firm already dominates one or more stages of production, vertical integration can have various anti-competitive effects. Downstream integration can secure a market but also close it to competitors. It is important to clarify that bottom-up integration can lead to the lack of a source of resources from competitors.

The negative impact of horizontal integration on the functioning of the market lies in the fact that it worsens the efficiency of resource allocation and poses a threat to monopoly.

Thus, both vertical and horizontal integration can have both beneficial and harmful effects at the same time. However, Talia is more suited to the horizontal integration of her firm with suppliers. The fact is that Talia’s key need is to reduce the number of costs.

Since at the moment, the business is forced to spend money on small suppliers, it makes sense to carry out the process of merging all businesses into one large Talia. However, it needs to control its actions in terms of potential monopoly.

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Academic.Tips. (2023) 'Talia owns the largest producer of ice cream in Easteros. She currently relies on several small manufacturers to produce the packaging for her products. She has contracts with each of her manufacturers and has quarterly meetings with them to discuss business for the next quarter. Other than this interaction, she has little oversight over their work. Over the last year, Talia’s business has boomed, and she is wondering whether she should begin packaging her product in-house. Write a brief recommendation to Talia, highlighting the costs and benefits of vertical versus horizontal integration'. 27 May.

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Academic.Tips. (2023, May 27). Talia owns the largest producer of ice cream in Easteros. She currently relies on several small manufacturers to produce the packaging for her products. She has contracts with each of her manufacturers and has quarterly meetings with them to discuss business for the next quarter. Other than this interaction, she has little oversight over their work. Over the last year, Talia’s business has boomed, and she is wondering whether she should begin packaging her product in-house. Write a brief recommendation to Talia, highlighting the costs and benefits of vertical versus horizontal integration. https://academic.tips/question/talia-owns-the-largest-producer-of-ice-cream-in-easteros-she-currently-relies-on-several-small-manufacturers-to-produce-the-packaging-for-her-products-she-has-contracts-with-each-of-her-manufacturer/

References

Academic.Tips. 2023. "Talia owns the largest producer of ice cream in Easteros. She currently relies on several small manufacturers to produce the packaging for her products. She has contracts with each of her manufacturers and has quarterly meetings with them to discuss business for the next quarter. Other than this interaction, she has little oversight over their work. Over the last year, Talia’s business has boomed, and she is wondering whether she should begin packaging her product in-house. Write a brief recommendation to Talia, highlighting the costs and benefits of vertical versus horizontal integration." May 27, 2023. https://academic.tips/question/talia-owns-the-largest-producer-of-ice-cream-in-easteros-she-currently-relies-on-several-small-manufacturers-to-produce-the-packaging-for-her-products-she-has-contracts-with-each-of-her-manufacturer/.

1. Academic.Tips. "Talia owns the largest producer of ice cream in Easteros. She currently relies on several small manufacturers to produce the packaging for her products. She has contracts with each of her manufacturers and has quarterly meetings with them to discuss business for the next quarter. Other than this interaction, she has little oversight over their work. Over the last year, Talia’s business has boomed, and she is wondering whether she should begin packaging her product in-house. Write a brief recommendation to Talia, highlighting the costs and benefits of vertical versus horizontal integration." May 27, 2023. https://academic.tips/question/talia-owns-the-largest-producer-of-ice-cream-in-easteros-she-currently-relies-on-several-small-manufacturers-to-produce-the-packaging-for-her-products-she-has-contracts-with-each-of-her-manufacturer/.

Bibliography

Academic.Tips. "Talia owns the largest producer of ice cream in Easteros. She currently relies on several small manufacturers to produce the packaging for her products. She has contracts with each of her manufacturers and has quarterly meetings with them to discuss business for the next quarter. Other than this interaction, she has little oversight over their work. Over the last year, Talia’s business has boomed, and she is wondering whether she should begin packaging her product in-house. Write a brief recommendation to Talia, highlighting the costs and benefits of vertical versus horizontal integration." May 27, 2023. https://academic.tips/question/talia-owns-the-largest-producer-of-ice-cream-in-easteros-she-currently-relies-on-several-small-manufacturers-to-produce-the-packaging-for-her-products-she-has-contracts-with-each-of-her-manufacturer/.

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"Talia owns the largest producer of ice cream in Easteros. She currently relies on several small manufacturers to produce the packaging for her products. She has contracts with each of her manufacturers and has quarterly meetings with them to discuss business for the next quarter. Other than this interaction, she has little oversight over their work. Over the last year, Talia’s business has boomed, and she is wondering whether she should begin packaging her product in-house. Write a brief recommendation to Talia, highlighting the costs and benefits of vertical versus horizontal integration." Academic.Tips, 27 May 2023, academic.tips/question/talia-owns-the-largest-producer-of-ice-cream-in-easteros-she-currently-relies-on-several-small-manufacturers-to-produce-the-packaging-for-her-products-she-has-contracts-with-each-of-her-manufacturer/.

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