CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Bharat Tyres Ltd, a Pune-based tyre maker, buys a rubber plantation in Kerala and starts producing its own natural rubber, which it earlier bought from outside suppliers. Which grand strategy does this move represent?
This is backward integration. The company has moved upstream to produce natural rubber, an input it previously purchased from suppliers. Forward integration would involve moving closer to customers, such as retail or distribution, so it does not apply to a firm taking over its own raw material supply.
- AForward integration
- BBackward integrationCorrect
- CConcentric diversification
- DMarket penetration
Explanation
Moving into the production of inputs that the firm earlier bought from suppliers is backward integration. Forward integration would mean taking over distribution or retail. Concentric diversification adds new related products, which is not the case here since the firm only secures its own raw material.
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