What is an example of a backward integration strategy?

A backward integration strategy involves a company acquiring or merging with businesses that supply the raw materials or components it needs in order to decrease costs, enhance control over its supply chain, and improve efficiency. By purchasing raw material suppliers for production, a company secures its supply chain, reduces dependency on third parties, and potentially lowers its operating costs by eliminating intermediaries. This strategic move allows the company to ensure a steady supply of essential materials while also gaining greater control over the production process.

In the other scenarios, acquiring a retailer is an example of forward integration, where the focus is on moving closer to the end customer rather than backward through the supply chain. Merging with a competing firm represents horizontal integration, as it involves joining forces with direct competitors to increase market share. Similarly, a merger with a technology provider reflects a type of strategic alliance designed to enhance capabilities rather than control the supply of raw materials. Each of these alternatives does not fit the definition of backward integration, which is specifically concerned with integrating supply sources.