In this senario you are the owner-manager of a chain of coffee shops in Taiwan, brewing and selling the latest types of expresso drink inhouse but buying all necessary factors from the market. Your 50 or so shops located around the city can seat around 20 patrons each and currently only sell caffeinated drinks. At this stage of growing your business you are considering vertical and horizontal integration. Using the theory of the optimal boundary of the firm, discuss the make-or-buy decision as well as the scope for horizontal integration and diversification of your business. What stages of the vertical chain should you consider conducting inhouse? What other horizontal markets may you integrate into?

(What to include in the answer?)

This is an Optimal boundary for firms questions

Vertical and Horizontal dimension the firm is playing CURRENTLY

Pick a potential vertical integration and choose 3 most relevant questions to analyse to conclude should the firm 'integrate' (make) or 'outsource' (buy)

Pick a horizontal integration and analyse the option using the factors given in the notes

Pick a diversification strategy and evaluate using the factors given in the notes

Conclude on the "new" boundary of the firm after going through your analysis

Preparation work

Write-out the factors for vertical/horizontal integration and diversification with "delete wherever appropriate" options