Question

If the owner of a jewelry store who normally purchased diamonds from a diamond brokerage firm were to open his own diamond brokerage firm, this would be an example of forward vertical integration. T/F

Answer 1

Answer:

False

Explanation:

Forward Vertical Integration occurs when a company acquires one of its suppliers.

In this case, we do not have an example of forward vertical integration because the owner of the jewerly store did not purchase the supplier: the diamond brokerage firm. He instead opted to start his own brokerage firm.

The case in the question is an example of forward vertical integration, that occurs when a company moves along the supply chain by starting its own subsidiares instead of buying existing ones.