... (A) integrates with firm (B), were both firms are at the same stage of production, in the same industry. Motives for vertical integration * Security When firms perform forward integration, firms safeguard their retail outlets for their products, therefore the firm establishes authority in how the products are sold and distributed. When backwards integration occurs, firms safeguard the production and quality of vital inputs * Efficiency Increased efficiency plays an important role in the integration of firms. Often the management of one firm sees another firm's management as incompetent, with the belief that they could increase the efficiency of the other firm. It is also highly likely that the advantages of the economies of scale may be gathered after integration. Furthermore if the particular stage of production can be preformed more efficiently or if the combined value of the two firms outweighs the individual value, an incentive for integration id ...

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