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CS Professional · Strategic Management and Corporate Finance · Strategic Analysis and Planning

A packaged-foods company in Pune decides to begin making its own packaging film, which it used to buy from outside suppliers. Which grand (corporate-level) strategy does this represent?

This is backward vertical integration, because the company is bringing in-house the production of an input (packaging film) that it earlier purchased from suppliers, thereby moving upstream in its value chain rather than toward distribution or customers.

  1. ABackward vertical integrationCorrect
  2. BForward vertical integration
  3. CConcentric diversification
  4. DRetrenchment through divestment

Explanation

Taking over an activity that supplies the firm's own inputs moves the firm upstream in its value chain, which is backward integration. Forward integration would mean moving toward distribution or customers. Concentric diversification means entering a related but different business, and divestment means selling units.

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