Managerial Economics

Classifying Business Expansion in Terms of Value Chains

We noted earlier that many businesses sell goods or services that are intended to help other businesses in the creation of their goods and services. Many of the goods we consume as individuals are the result of a sequence of production operations that may involve several firms. If the final goods are traced backward through the intermediate goods that were acquired and utilized, we can usually envision the participant firms in a creation process as a network of production activities or a sequence of production stages.

For example, consider a loaf of bread purchased at a grocery store. The grocery store may purchase the loaf from a distributor of bakery products. The distributor likely purchased ...