As companies expand and become more decentralized, they will often seek ways in which they can save money. Additionally, management will seek ways to increase efficiency, and that may include purchasing other companies. These acquisitions will involve an integration of the supply chain and will help the company better achieve long-term company goals. Which of the following is an example of backward vertical integration?
A) A customer service company purchases their largest competitor, creating a market-dominating entity.
B) A factory that produces handbags has purchased a company with a fleet of trucks so they can deliver their own goods.
C) A hot dog producer purchases a company that creates hot dog buns.
D) A toy company that designs all products in-house has acquired a company with a strong research and development department to assist in testing new products.

Question

Quizplus · Accepted Answer

This question requires familiarity with integration, specifically backward vertical. This type of integration involves a company acquiring another company that exists within the same value chain. Choice D is the only choice listed that accurately depicts a situation where a company is buying another company within the same value chain that is also backward vertical as it is moving upstream. The other choices are forms of integrations but not necessarily backward vertical.

As Companies Expand and Become More Decentralized, They Will Often