What does vertical integration involve?

Vertical integration involves acquiring and consolidating value chain elements, which allows a company to take control over multiple stages of its production process. This strategy can include expanding either upstream into suppliers or downstream into distribution and retail. By consolidating these elements, a firm can improve efficiency, reduce costs, and enhance control over the quality and supply of its products. Additionally, vertical integration can lead to competitive advantages by ensuring that different stages of production align with the company's overall strategic goals.

In contrast, the other options focus on different strategies that do not embody the core concept of vertical integration. Reducing the number of suppliers pertains to supply chain management rather than the consolidation of value chain elements. Outsourcing production emphasizes delegating tasks to third parties rather than integrating operations within the same company. Establishing partnerships with other firms suggests collaboration rather than the consolidation of operations, which is fundamental to vertical integration.