Which type of multinational diversification occurs when the parent firm establishes foreign subsidiaries to produce intermediate goods going into the production of finished goods?
A) forward vertical integration
B) backward vertical integration
C) forward horizontal integration
D) backward horizontal integration

Question

Quizplus · Accepted Answer

Backward vertical integration occurs when a company expands its role to fulfill tasks formerly completed by businesses up the supply chain, in this case, producing intermediate goods that are used in the production of finished goods. This is distinct from forward integration, where a company moves closer to the end consumer in the supply chain. Horizontal integration, whether forward or backward, would involve expanding into operations at the same level of the value chain, not upstream (backward) or downstream (forward).

Which Type of Multinational Diversification Occurs When the Parent Firm