Question at position 7 When Luckin acquires coffee farms to secure its bean supply, this is an example of:Market diversificationforward integrationHorizontal integrationvertical integration

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Question at position 7 When Luckin acquires coffee farms to secure its bean supply, this is an example of:Market diversificationforward integrationHorizontal integrationvertical integration

BlackTom AI · Accepted Answer

Question restatement: When Luckin acquires coffee farms to secure its bean supply, this is an example of: Market diversification, forward integration, Horizontal integration, vertical integration.
Option 1: Market diversification. This would involve expanding into new products or new markets that are not part of the current business model. Merely acquiring coffee farms to secure bean supply does not inherently diversify Luckin’s offerings or markets; it tightens control over existing supply rather than adding unrelated lines of business. Therefore, this option mischaracterizes the move.
Option 2: Forward integration. Forward integration refers to moving closer to the end customer, such as taking over distribution, retail, or sales activities that occur after the production process. Buying farms is not about moving toward the consumer or downstream activities; it’s about securing raw materials from the upstream side. This makes forward integration an unsuitable label for the action.
Option 3: Horizontal integration. Horizontal integration involves merging with or acquiring competitors at the same stage of production to consolidate market share or reduce competition. Acquiring coffee farms does not involve acquiring firms at the same production level; it targets suppliers of raw materials, so horizontal integration does not apply here.
Option 4: Vertical integration. Vertical integration encompasses expansions along the supply chain, including backward integration (toward sources of supply like farmers or suppliers) and forward integration (toward distribution or retail). By acquiring coffee farms to secure bean supply, Luckin is extending control upstream in the value chain, which aligns with vertical integration concepts. This option best captures the strategic move described.
Summary: The action targets the supply side of the value chain, reducing dependence on external bean suppliers and increasing control over inputs, which is characteristic of vertical (specifically backward) integration. The other options mislabel the strategic direction: diversification adds new products/markets, forward integration moves toward customers, and horizontal integration combines with peers at the same stage. The reasoning shows why vertical integration aptly describes securing upstream supply through ownership of producers.

Question at position 7 When Luckin acquires coffee farms to secure its bean supply, this is an example of:Market diversificationforward integrationHorizontal integrationvertical integration

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Question at position 7 When Luckin acquires coffee farms to secure its bean supply, this is an example of:Market diversificationforward integrationHorizontal integrationvertical integration

View Explanation

Log in for full answers

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