What is one of the key characteristics of vertical integration?

Vertical integration is a business strategy that involves a company expanding its operations either backward into its supply chain (backward integration) or forward into the distribution of its products (forward integration). The key characteristic reflected in the correct choice is that it entails a company producing goods or services that it previously would have had to purchase from external suppliers.

This process allows a company to take control over more of its supply chain, potentially lowering costs, improving efficiencies, and ensuring a more consistent quality of inputs. By producing the goods or services itself, a company can enhance its competitive advantage and reduce its dependency on suppliers, which also contributes to more stability in pricing and availability.

Other choices do not align with the essence of vertical integration. Focusing solely on customer service, for instance, does not encompass the operational and strategic nature of vertical integration. Similarly, while forward integration is a type of vertical integration, the characteristic describes it more broadly to include backward integration as well. Lastly, while vertical integration can reduce reliance on suppliers, it does not completely eliminate the need for them, as there may still be instances where external suppliers are necessary even after integration occurs.