Backward Integrationis a strategy where a company gains more control over the functions in the earlier stages of the value chain, i.e. moving “upstream”. The backward integration strategy results in the acquirer moving further away from serving its end customers. Therefore, the purchased companie...
Types of Vertical Integration There are three forms this strategy takes: backward integration, forward integration, and balanced integration. Each one involves a firm branching out within its supply chain and taking control of a part of it to gain more control of manufacturing, distributing, and/...
There are three types of vertical integration: 1. Forward integration, when the merger or investment strategy goes ‘upstream’. 2. Backward integration, when it goes ‘downstream’. 3. Balanced integration, when it moves in both directions. (Image created by Market Business News) Conglomerate in...
Zara is an example of backward vertical integration. The fashion brand owns a large portion of its production process and has its ownmanufacturing plants in Spain. With its own backward vertically integrated operation, Zara controls its quality and speed of production. This translates into higher qu...
Backward Integration The other type of vertical integration is termed “backward integration.” In contrast, backward integration –as implied by the name – is when an acquirer moves upstream to gain control of functions further away from the end customer. Forward Integration→ The acquirer moves ...
In addition, strategies such as forward, backward, or related integration fit into this quadrant. Forward integration involves a company taking over the activities of a customer; backward integration involves taking over the activities of a supplier from the production chain, and related integration ...
a) Backward integration:This type of FDI occurs when a company invests in a foreign country to acquire raw materials or intermediate goods that it needs to produce its final products. For example, a car manufacturer invests in a foreign country to acquire steel for car manufacturing. ...
are giants with a grip on multiple stages of their production process. This “vertical integration” can involve owning everything from raw material extraction to final product distribution, achieved through either backward integration (acquiring suppliers) or forward integration (taking over distributors)...
not involved in. For example, amanufacturermay acquire a raw materials distributor to have better control over the quantity, pricing, or timing of when it gets raw goods. The company is expanding from its current position in the manufacturing process and performing a backward vertical integration....
vertical mergers involve companies operating at different stages of the production or distribution chain. They integrate either with suppliers (backward integration) or customers (forward integration) to streamline operations, gain control over the value chain, and potentially achieve cost savings and syner...