CA Intermediate · Financial Management and Strategic Management · Strategic Choices
A Coimbatore pump manufacturer buys castings from outside suppliers. To secure supply and control quality, it acquires one of its main casting suppliers. Which corporate-level strategy has it adopted?
The firm has adopted backward integration. By acquiring a casting supplier, it moves upstream in its value chain to control inputs and quality. Forward integration would involve buying distributors or customers, and horizontal integration would involve buying a rival manufacturer of pumps.
- AForward integration
- BBackward integrationCorrect
- CHorizontal integration
- DConcentric diversification
Explanation
Acquiring a supplier moves the firm upstream towards its source of inputs, which is backward integration. Forward integration would be acquiring distributors or retailers. Horizontal integration would be acquiring a competitor at the same stage of the value chain.
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