5: Economics of Organization
- Page ID
- 44790
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- 5.5: Alternatives to Vertical Integration
- If the reduction of risk related to the actions of an independent supplier or buyer is a motivation for vertical integration, the firm may have alternatives to formally integrating into another stage of the value chain through use of a carefully constructed agreement with a supplier or buyer. Done correctly, these agreements can result in some of the gains a business might expect from formal integration of the other stage of value-adding activity.