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

A Pune-based auto-component maker acquires its own steel-castings supplier to secure raw material and control costs. In corporate strategy terms, this is best described as:

This is backward vertical integration. The firm acquires a supplier of its own raw material, moving upstream in its value chain to secure inputs and control cost. Forward integration would involve buying distributors or customers, and diversification would involve entering new businesses.

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

Explanation

Acquiring a supplier moves the firm up the value chain towards inputs, which is backward integration. Forward integration would mean taking over distribution or customers. Diversification into unrelated or related new businesses is not involved because the supplier's output feeds the firm's own existing business.

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