CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Sundaram Textiles, a Coimbatore-based yarn maker, buys a spinning mill in Tamil Nadu that supplies the cotton yarn it currently purchases from outside vendors. Which grand strategy does this move represent?
This is backward vertical integration. Sundaram Textiles is taking over a supplier of its own input, cotton yarn, so it moves toward the source of raw materials. Forward integration would mean acquiring distributors or retailers closer to the customer, which is not described.
- ABackward vertical integrationCorrect
- BForward vertical integration
- CConcentric diversification
- DConglomerate diversification
Explanation
The firm is acquiring a business that supplies its own inputs, which means moving up the value chain towards raw material sources. This is backward integration. Forward integration would involve moving towards distribution or customers, which is not the case here.
Did you get it right without looking?
One question tells you little. A timed set on Strategic Choices shows your real accuracy, how long you take and where you lose marks.
More Strategic Choices questions
- Kaveri Foods, a packaged snack maker, has a flavoured peanut brand with a very high market share in a market growing at only 2% a year. It g…
- Vihaan Pharma has a drug with high market share in a market growing at about 3% a year, generating large cash surpluses. Its new drug has lo…
- Mehra Pharma, a Hyderabad firm, plans to grow in the generic medicines market. Its management is weighing a joint venture with a Japanese fi…
- Ruchi Textiles, an Indian firm, buys a small yarn-spinning unit that supplies its own weaving looms, so that it now controls its raw materia…
- A Mumbai bank and an Indian insurance company enter an agreement in which the insurer's products are sold through the bank's branches. Each …
- A Surat textile firm acquires a cotton-yarn spinning mill that currently supplies its weaving units, so that it controls its own raw materia…