Which of the following is not a condition that favors the success of vertical integration?
A. Availability of capital
B. Availability of managerial talent
C. Required demand
D. Small market share
E. All of the above
To determine which of the options is not a condition that favors the success of vertical integration, let's analyze each option and its relevance to vertical integration:
A. Availability of capital - This condition is generally favorable for vertical integration because it requires significant financial resources to acquire and integrate the different stages of the supply chain vertically. Therefore, this option may not be the correct answer.
B. Availability of managerial talent - Having capable managers is crucial for effectively managing the various stages of the integrated supply chain. Hence, this condition tends to favor the success of vertical integration. This option may not be the correct answer.
C. Required demand - For vertical integration to be successful, there must be a sufficient and stable demand for the integrated products or services. Without the necessary demand, the investment in vertical integration might not be financially viable. So, this condition does favor the success of vertical integration. This option may not be the correct answer.
D. Small market share - This condition is generally unfavorable for vertical integration. When a firm has a small market share, it may not have enough scale to justify the costs and risks associated with vertical integration. Therefore, this option may be the correct answer.
E. All of the above - This option includes all the previous options. If the correct answer is any of A, B, or C, then this option would be the correct answer. However, if the correct answer is D (Small market share), then this option would not be the correct answer.
Based on the analysis above, the correct answer seems to be D. Small market share is not a condition that favors the success of vertical integration.
What do you think?
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