Question at position 36 Which one of the following statements is NOT true about vertical integration? A vertical integration framework is sometimes called a make-or-buy framework.Vertical integration can be backward or forward. It helps managers and practitioners make decisions about which assets and elements of a value chain a firm should own and which they can buy from other firms.The theory underlying the vertical integration framework is the Total Competitive Economics (TCE) theory.

Question

BlackTom AI · Accepted Answer

Transaction Cost Economics (TCE) — not “Total Competitive Economics” — is the foundational theory used to analyze vertical integration decisions.

1. Relevant knowledge points and concepts
- Vertical integration: the ownership by a firm of multiple stages in its value chain; can be backward (acquiring suppliers) or forward (acquiring distributors/customers).
- Make-or-buy framework: a decision framework asking whether to produce internally (make) or contract with the market (buy).
- Transaction Cost Economics (TCE): analyzes the costs of using the market versus hierarchical governance (internalizing transactions) and predicts when firms will integrate to minimize transaction costs (e.g., due to asset specificity, uncertainty, frequency).

2. Step-by-step reasoning
- Examine each statement in turn and evaluate against standard theory.
  Step 1: "A vertical integration framework is sometimes called a make-or-buy framework." Match with definition: correct. The framework explicitly compares internal production to market procurement.
  Step 2: "Vertical integration can be backward or forward." Match with definitions: correct. Backward = toward inputs/suppliers; forward = toward distribution/customers.
  Step 3: "It helps managers ... decide which assets/elements ... own or buy." Match with managerial purpose of make-or-buy and integration analysis: correct.
  Step 4: "The theory underlying the vertical integration framework is the Total Competitive Economics (TCE) theory." Compare to canonical literature: incorrect labeling — the correct theory name is Transaction Cost Economics, commonly abbreviated TCE.

3. Intermediate points (no numeric calculations required)
- Cite concepts: TCE explains choices by comparing transaction costs in markets versus hierarchies. The misnamed “Total Competitive Economics” is not a recognized framework in this context.

4. Why the correct answer is correct
- The false statement is the one that misidentifies the underlying theory. Because Transaction Cost Economics drives the make-or-buy/vertical integration analysis, any statement calling it “Total Competitive Economics” is incorrect.

5. Why the other options are incorrect (brief)
- Options 1–3 are accurate descriptions of vertical integration and the framework’s purpose; they align with standard strategic management and economics texts.

6. Conclusion
- Therefore, the NOT-true statement is: "The theory underlying the vertical integration framework is the Total Competitive Economics (TCE) theory." This matches the provided correct answer.

类似问题

The merger of two companies in the same industry that make products required at different stages of the production cycle is called ________.

Vertical integration occurs when:

Question at position 9 Which of the following is a risk of vertical integration?Higher coordination and influence costs.Lower exposure to supplier opportunism.Reduced transaction costs.Greater flexibility in supplier choice.Clear my selection

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