What are the disadvantages of vertical integration? What will ...

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What are the disadvantages of vertical integration?
 
  What will be an ideal response?

Question 2

Which of the following statements is most likely to be true regarding organizational inertia?
 
  A) An increase in organization inertia leads to a proportional increase in economies of scope.
  B) Organizational inertia is caused due to forces outside an organization that make it difficult for the organization to change.
  C) An increase in organization inertia leads to a proportional decrease in division of labor.
  D) Overly bureaucratic culture is one of the factors that cause organizational inertia.

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Answer to Question 1

Control of overlapping input and output domains enhances an organization's competitive advantage in its core domain and creates new opportunities for value creation. But an organization also needs to look at the bureaucratic costs associated with owning its suppliers and distributors.
The more an organization pursues vertical integration the larger it becomes, and the bureaucratic costs associated with managing the strategy rise sharply because of communication and coordination problems and the simple fact that managers are expensive to employ. Too much vertical integration can be a strategic mistake.

Answer to Question 2

D