CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Kaveri Appliances makes refrigerators and decides to acquire its own supplier of compressors, so as to secure supply and control quality. Which grand strategy does this represent?
This is backward integration. Kaveri Appliances is taking over a supplier of compressors, an input to its own product, so it moves upstream in the value chain. Forward integration would involve acquiring distributors or retailers, and diversification means entering new businesses.
- AForward integration
- BBackward integrationCorrect
- CConcentric diversification
- DConglomerate diversification
Explanation
Acquiring a supplier moves the firm upstream towards the sources of its inputs, which is backward integration. Forward integration would mean acquiring distributors or retailers. Diversification would mean entering unrelated or loosely related businesses, not the firm's own supply chain.
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