BUSINESS ADMINISTRATION
STRATEGIC MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Organization becomes its own supplier
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Organization becomes its own distributor
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Organization becomes its own seller
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Organization becomes its own buyer
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Detailed explanation-1: -Backward integration is a form of vertical integration in which a company expands its role to fulfill tasks formerly completed by businesses up the supply chain. In other words, backward integration is when a company buys another company that supplies the products or services needed for production.
Detailed explanation-2: -For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company: must be able to achieve the same scale economies as outside suppliers and match or beat suppliers’ production efficiency with no drop-off in quality.
Detailed explanation-3: -Vertical integration requires a company’s direct ownership of suppliers, distributors, or retail locations to obtain greater control of its supply chain. The advantages can include greater efficiencies, reduced costs, and more control along the manufacturing or distribution process.
Detailed explanation-4: -In backward vertical integration, the organization becomes its own supplier. In forward vertical integration, the organization becomes its own distributor. What is Horizontal integration? In horizontal integration, a company grows by combining with competitors.
Detailed explanation-5: -Backward integration occurs when an organization enters into an alliance with a manufacturer or supplier through an acquisition or merger. Sometimes organizations can establish their own subsidiary and complete backward integration. A backward integration example could be a bakery purchasing a grain processor.