CA Intermediate · Financial Management and Strategic Management · Strategic Choices
Tirupati Agro Foods, a regional packaged-snacks maker, decides to acquire a leading edible-oil refiner that supplies it with raw material, so that it controls its input supply. Under corporate-level strategies, this move is best described as:
The move is backward vertical integration. The firm is acquiring its own raw-material supplier, which means moving upstream in its value chain. Forward integration would involve taking over distribution or retail, and diversification involves entering a different business rather than controlling inputs.
- ABackward vertical integrationCorrect
- BForward vertical integration
- CConcentric diversification
- DConglomerate diversification
Explanation
Acquiring a supplier of its own inputs moves the firm upstream in the value chain, which is backward integration. Forward integration would mean acquiring distributors or retailers. Diversification would apply only if the new business were unrelated to the existing value chain, which it is not here.
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