Question

If coal mine tonnage can be shipped elsewhere cheaply, but a coal-fired power plant adjacent to the mining operation is not redeployable to other uses, what organizational form would be adopted by the power plant owners?

Answer 1

Answer:

vertical integration

Explanation:

The plant owners would have to adopt a vertically integrated organization because the plant is not redeployable to other uses and is dependent on the supply chain/complementary assets. Vertical integration occurs when an organization owns and controls it's distribution or supply chain in order to maximise profits and reduce costs or inefficiency. By controlling the supply chain, the chain of distribution of the coal mine tonnage can be improved in terms of efficiency and value in revenue.