CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge
A tyre manufacturer in Chennai acquires a rubber plantation company to secure its raw material supply and control input costs. Which corporate level strategy does this represent?
This is backward vertical integration, because the tyre maker is acquiring its own raw material supplier and moving upstream in the value chain to secure supply and control costs. Forward integration would involve distributors or retailers instead.
- AForward vertical integration
- BBackward vertical integrationCorrect
- CRelated horizontal diversification
- DRetrenchment through divestment
Explanation
Acquiring a supplier of key inputs moves the firm upstream in its value chain, which is backward vertical integration. Forward integration would mean taking over distribution or retail. Horizontal moves involve competitors or similar products, not suppliers.
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