Which economic practice involves controlling supply chains?

The correct answer is vertical integration, which involves a company controlling multiple stages of production or the supply chain. This practice allows a business to manage not only the manufacturing of products but also the sourcing of raw materials and the distribution processes. By owning and overseeing various parts of the supply chain, a company can reduce costs, improve efficiency, and exert greater control over its operations.

Vertical integration became prominent in the late 19th and early 20th centuries, especially during the rise of large corporations. It enabled companies to standardize production and minimize dependencies on outside suppliers or distributors. This practice can lead to increased market power and the ability to respond more quickly to demand changes.

In contrast, horizontal integration refers to the acquisition of competing firms to consolidate market power and reduce competition. Market competition emphasizes the dynamics between different firms within an industry without necessarily focusing on control over the supply chain. Outsourcing involves delegating certain business functions or processes to external companies, often to cut costs or access specialized services, rather than controlling those parts of the supply chain directly.