Skip to content

CA Intermediate · Financial Management and Strategic Management · Strategic Choices

Sundaram Textiles, a Tiruppur-based garment maker, buys a fabric dyeing unit that supplies it with coloured cloth, which it earlier purchased from outside vendors. Which corporate-level strategy has the company adopted?

The company has adopted backward vertical integration. By acquiring a dyeing unit that supplies its own raw material, it moves upstream towards its sources of input. Forward integration would involve buying distribution or retail outlets, and diversification would mean entering new products or businesses.

  1. ABackward vertical integrationCorrect
  2. BForward vertical integration
  3. CConcentric diversification
  4. DConglomerate diversification

Explanation

The dyeing unit is a supplier of inputs to the firm, so acquiring it moves the firm upstream in the value chain. That is backward integration. Forward integration would mean acquiring distributors or retailers. Diversification would involve entering a new business unrelated to its supply chain.

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.

Practise Strategic ChoicesFree diagnostic mock

More Strategic Choices questions