CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Ruchi Textiles, an Indian firm, buys a small yarn-spinning unit that supplies its own weaving looms, so that it now controls its raw material source. Under corporate-level strategies, this move is best described as:
This is backward integration. Ruchi Textiles has acquired a supplier of its own raw material, yarn, thereby moving upstream in the value chain. Forward integration would mean taking over distribution or retail, and horizontal integration would mean acquiring a direct competitor at the same stage of production.
- AForward integration
- BBackward integrationCorrect
- CHorizontal integration
- DConcentric diversification
Explanation
Acquiring a supplier of its own inputs moves the firm up the value chain toward raw materials, which is backward integration. Forward integration would involve acquiring distributors or retailers. Horizontal integration would mean buying a competitor at the same stage.
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