Backward vertical integration is when a business takes over an earlier sector such as a supplier. Which example illustrates backward vertical integration?

Backward vertical integration is when a business takes over an earlier sector such as a supplier. Which example illustrates backward vertical integration?

• A. A mobile phone manufacturer takes over Carphone Warehouse
• B. A coffee company takes over a coffee bean plantation
• C. Procter & Gamble takes over Gillette
• D. A mince pie company takes over a chocolate bar company

Answer: (C)

Backward vertical integration happens when a business buys a supplier to control the inputs it relies on for production. Owning the raw-material source helps secure supply, potentially cut costs, and improve quality control. The coffee company buying a coffee bean plantation fits this idea because it moves upstream to own the input source. The other scenarios show different moves: a phone maker acquiring a distributor moves downstream toward selling to customers; a consumer goods company buying a competitor is horizontal integration; and a pie company buying a chocolate bar producer is diversification into another product line, not upstream control of inputs.

Backward vertical integration happens when a business buys a supplier to control the inputs it relies on for production. Owning the raw-material source helps secure supply, potentially cut costs, and improve quality control.

The coffee company buying a coffee bean plantation fits this idea because it moves upstream to own the input source. The other scenarios show different moves: a phone maker acquiring a distributor moves downstream toward selling to customers; a consumer goods company buying a competitor is horizontal integration; and a pie company buying a chocolate bar producer is diversification into another product line, not upstream control of inputs.