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CMA Final · Entrepreneurship and Startup · Value Addition

A Pune startup buys plain cotton fabric and sells it to garment makers. It now plans to dye, print and stitch the fabric into finished kurtas sold under its own brand to consumers. In terms of value chain strategy, this move is best described as:

This is forward integration. The startup moves from selling fabric to doing dyeing, printing, stitching and branding, activities nearer the end customer, thereby capturing more of the value chain. Backward integration would instead mean moving upstream towards yarn or cotton supply.

  1. AHorizontal diversification into an unrelated industry
  2. BForward integration to capture more of the value chainCorrect
  3. CBackward integration into raw material supply
  4. DDivestment of a non-core activity

Explanation

Moving from supplying fabric to processing it into finished goods sold to consumers means taking over activities closer to the customer, which is forward integration. Backward integration would mean moving towards cotton or yarn production. The business stays in textiles, so it is not unrelated diversification, and nothing is being sold off.

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