Backward integration is a process in which a company acquires or merges with other businesses that supply raw materials needed in the production of its finished product. Businesses pursue backward integration with the expectation that the process will result in cost savings, increased revenues, and improved efficiency in the production process.
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- Backward integration is when a company expands its role to fulfill tasks formerly completed by businesses up the supply chain.
- Backward integration specifically focuses on the former aspect, where a company integrates backward into its supply chain.
- For example, a company can acquire the company behind it in the supply chain, hence the term "backward integration".
- Backward integration strategies are completed to obtain greater control over the earlier stages of the value chain, which encompass the functions performed by...
- Tesla is a company using vertical backward integration to increase early-stage manufacturing needed to produce its electric vehicles.
- 1. Cost Reduction Backward integration allows companies to reduce costs by eliminating supplier markups and gaining control over the production of raw materials...
- Backward integration refers to when a business takes over parts of the manufacturing process in its supply chain.
- These examples show how companies in different industries have used backward integration to improve control, reduce costs, and enhance their products.
- Backward integration guarantees source of raw material or inputs or deny competitors sources of inputs, increased profit because the inputs are cheaper.
- Backward integration is a business strategy where a company takes control of its supply chain by acquiring or establishing operations that produce raw materials or...
