What is a potential disadvantage of both forward and backward vertical integration?

A potential disadvantage of both forward and backward vertical integration is the loss of focus on core activities. Vertical integration involves a company expanding its operations either by acquiring control over its suppliers (backward integration) or by taking control of the distribution of its products (forward integration). While this can lead to certain efficiencies and control over the supply chain, it may also result in the company diverting resources and attention away from its primary business functions.

When a company expands into areas where it does not have established expertise, it can lead to operational challenges and a dilution of its core competencies. This can result in a lack of innovation in the primary sector of the business and hinder growth. Companies may find themselves trying to manage a more complex organization that includes non-core activities, ultimately compromising the quality and focus of their main offerings.

In contrast, the other options do not reflect disadvantages of vertical integration. Reduced market prices due to competition typically occurs in more competitive markets and is not a direct consequence of integration. Improved management efficiency is often cited as an advantage of vertical integration, as it can lead to streamlined operations. Likewise, guaranteed market share is a potential benefit that can arise from integrating forward into distribution channels or backward into raw materials. However, these benefits do not address the inherent