A key challenge associated with vertical integration lies in the complexity in management. Vertical integration involves a company taking control over multiple stages of production or supply chains, such as acquiring suppliers or distributors. While this can lead to efficiencies and greater control over the production process, it also introduces significant operational challenges.
Managing a vertically integrated organization requires overseeing a broader array of activities, including those that may fall outside the company's core competencies. This can complicate decision-making processes, coordination among different divisions, and the overall organizational structure. The complexity increases as the company must address differing operational needs, maintain efficiency across various stages of production, and ensure effective communication among various departments or subsidiaries.
In contrast, while vertical integration can potentially simplify some aspects of the supply chain and provide greater marketing control, those benefits need to be carefully weighed against the inherent management challenges that arise from an expanded operational scope. Thus, the right answer reflects the critical issue of increased complexity that companies face as they integrate multiple stages of their production and supply processes.