Gold Leaf Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Gold Leaf has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Gold Leaf should:

When a company itself produces different complete products in its different manufacturing units, and them assembles every complete product to make the final product, or sell the completed product as it is, it is called as vertical integration.

Like in the given example in question, Gold Leaf can produce processors, disk drives, memory, screens, etc, within its own facility and by producing all these products in house, they can lower the cost of a complete unit of the final product. If they source the components from different firms, it would cost them $235 in total, whereas they can make one unit in $200 if they make it in house. It means Gold Leaf should go for the vertical integration in which the firm is going to produce all the components within the house to lower the cost of each unit.

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