What statement best defines vertical integration?

• A. Joint venture
• B. The combination in one company of two or more stages of production that could otherwise be operated by separate companies
• C. The process of acquiring companies at the same stage
• D. Outsourcing

Answer: (B)

Vertical integration occurs when one company owns and controls more than one step in its production and distribution process, bringing together different stages of the supply chain under a single firm. This can involve moving backward toward raw materials or forward toward distribution and sales. The statement that describes combining two or more stages of production into one company captures this idea directly. A joint venture, by contrast, is a collaboration between firms that remains separate entities; acquiring firms at the same stage is horizontal integration, not vertical; and outsourcing means contracting out activities to external providers rather than keeping them in-house.