Automakers do not manufacture chips and so when demand for automobiles and trucks crashed right after the Covid$-19$ pandemic, they cut their chip orders. However, when demand bounced back, their chip supply did not necessarily bounce back. Had they been vertically integrated, this situation would not have occurred:

Choices:

$[$ Choose $1]$

$-$ the incentive problem

$-$ differences in optimal scale in different stages of production

$-$ competitive effects

$-$ flexibility

$-$ compounding risk

$-$ developing distinctive capabilities

$-$ managing strategically different businesses