QUESTION TWO [15]

Read the following and answer the question that follows:

A company pursuing a strategy of vertical integration expands its operations either backwards into an industry that produces inputs for the companys products (backward vertical integration) or forward into an industry that uses, distributes or sells the companys products (forward vertical integration).

Vertical integration increases product differentiation, lowers costs, or reduces industry competition

when it (1) facilitates investments in efficiency-enhancing, specialised assets, (2) protects product

quality, and (3) results in improved scheduling. Today, companies have found that they can realise

many of the benefits associated with vertical integration by entering long-term cooperative

relationships with companies in industries along the value-added chain.

Hill, Schilling and Jones (2017) Strategic Management An Integrated Approach Theory and Cases 12th edition Cengage

With reference to the above extract, evaluate strategic alliances as a cooperative relationship to obtain the advantages associated with vertical integration.