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CA Intermediate · Financial Management and Strategic Management · Strategic Choices

Sundaram Textiles, a yarn spinner, acquires a chain of retail garment stores through which its yarn-based fabrics will be sold directly to consumers. Which strategy has it adopted?

Sundaram Textiles has adopted forward vertical integration. By acquiring retail stores it moves downstream toward the final customer in its value chain. Backward integration would mean buying suppliers, and horizontal integration would mean buying competing spinners.

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

Explanation

Moving into distribution/retail, which is a step closer to the customer in the value chain, is forward integration. Backward integration would mean acquiring suppliers such as cotton growers. Horizontal integration needs a competitor at the same stage, and conglomerate diversification needs an unrelated business.

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