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 firm establishes foreign subsidiaries to produce intermediate goods needed in the production of finished goods. This allows the parent firm to have greater control over its supply chain and potentially reduce costs. Forward vertical integration would involve establishing foreign subsidiaries to distribute or sell finished goods, while horizontal integration would involve acquiring or merging with a foreign competitor in the same industry.

Which Type of Multinational Diversification Occurs When the Parent Firm