CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Sundaram Textiles, a Coimbatore-based yarn maker, acquires a cotton-ginning unit that supplies it with raw cotton. Under Porter's classification of corporate-level strategic choices, this move is best described as:
The move is backward integration, because the acquired ginning unit supplies raw cotton to the yarn maker. The firm is moving towards its sources of input. Forward integration would instead involve acquiring businesses closer to customers, such as distribution or retail.
- AForward integration
- BBackward integrationCorrect
- CHorizontal integration
- DConcentric diversification
Explanation
The ginning unit is a supplier of raw material to the yarn maker, so the firm moves up the value chain towards its inputs. This is backward integration. Forward integration would mean moving towards customers, such as buying a fabric or retail unit.
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