CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Kaveri Motors, a car maker, acquires a chain of dealerships to control sales, and also separately decides to buy a small software firm unrelated to autos to reduce dependence on the car cycle. Which pair correctly classifies the two moves?
The dealership purchase is forward integration because it moves the firm closer to customers, and the software acquisition is conglomerate diversification because it has no link with the car business. Concentric diversification requires a related business, and horizontal integration requires buying a direct competitor.
- AForward integration; conglomerate diversificationCorrect
- BBackward integration; concentric diversification
- CForward integration; concentric diversification
- DHorizontal integration; conglomerate diversification
Explanation
Buying dealerships moves the firm downstream toward customers, so it is forward integration. Buying a software firm with no technological, marketing or product link to cars is unrelated, hence conglomerate diversification. Concentric diversification needs a related business, and horizontal integration means buying a competitor in the same business, neither of which applies.
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