How can economies of vertical integration benefit a firm considering a takeover?

Vertical integration allows a firm to consolidate its supply chain by owning or controlling multiple stages of production. This integration can lead to significant benefits, particularly through improved coordination between related operations. When a firm takes over another entity within its supply chain, it can streamline processes, enhance communication, and reduce the time needed to bring products to market. This coordination enables the firm to respond more effectively to changes in demand, optimize production schedules, and minimize inefficiencies, ultimately leading to cost savings and increased competitiveness.

In contrast, increasing the number of competitors may lead to market saturation and does not directly relate to the concept of vertical integration. Reducing marketing costs exclusively would not encompass the broader benefits of vertical integration, which extends well beyond just marketing aspects. Lastly, while vertical integration can reduce dependency on suppliers by bringing them in-house, it does not entirely eliminate the need for them, as external market dynamics and specialization can still play a crucial role in production efficiency and cost management.