CMA Intermediate · Operations Management and Strategic Management · Strategic Analysis and Strategic Planning
Tata Motors, a vehicle maker, decides to acquire a tyre manufacturing company that supplies its own plants so that it controls the source of a key input. Which growth strategy does this represent?
This is backward vertical integration, because the firm takes over a supplier of its own input. Moving upstream towards raw materials or components is backward integration, whereas moving downstream towards distributors or customers would be forward integration.
- ABackward vertical integrationCorrect
- BForward vertical integration
- CConcentric diversification
- DConglomerate diversification
Explanation
Acquiring a supplier of its own inputs moves the firm back along the value chain towards raw materials and components. That is backward integration. Forward integration would mean taking over distribution or retail, and diversification would involve new businesses not tied to the existing chain.
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