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CMA Intermediate · Operations Management and Strategic Management · Formulation and Implementation of Strategy

A Mumbai bakery chain that makes bread buys a large flour mill to control its own supply of flour. This is an example of:

This is backward vertical integration, because the bakery chain acquires a supplier of its key input, flour, moving upstream in its value chain. Forward integration would mean taking over distribution or retail, and horizontal integration would mean buying a competing bakery.

  1. ABackward vertical integrationCorrect
  2. BForward vertical integration
  3. CHorizontal integration
  4. DConglomerate diversification

Explanation

Acquiring a supplier of inputs moves the firm upstream, which is backward integration. Forward integration would be moving toward distribution or customers, horizontal integration would be acquiring a competitor, and conglomerate diversification would involve an unrelated business.

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