Vertical integration is defined as:

• A. When a business expands into unrelated industries
• B. When a business expands at different but related levels in the production and selling of a product (Buying the Supplier)
• C. When a business outsources production
• D. When a business merges with a competitor

Answer: (B)

Vertical integration means a business gains control over more than one stage of the production and distribution process for its product. This can involve moving up the chain to own suppliers (backward integration) or moving down to own distributors or retailers (forward integration). In this case, expanding at related levels in the production and selling of a product by buying the supplier is a classic example of backward vertical integration, because the company is taking control of its input source. This helps control costs, quality, and timeliness of supplies.

The other options describe different ideas: expanding into unrelated industries is diversification, not a move along the production chain; outsourcing production reduces integration by offloading work to others; merging with a competitor is horizontal integration, combining at the same stage of the value chain rather than across stages.