Definition of Backward integration:
The expansion of a company to gain control over processes which precede its own in the supply chain, such as manufacturing, acquiring raw materials, etc.
Type of vertical integration in which a consumer of raw materials acquires its suppliers, or sets up its own facilities to ensure a more reliable or cost-effective supply of inputs.
Companies often use integration as a means to take over a portion of the company's supply chain. A supply chain is the group of individuals, organizations, resources, activities, and technologies involved in the manufacturing and sale of a product. The supply chain starts with the delivery of raw materials from a supplier to a manufacturer and ends with the sale of a final product to an end-consumer.
Backward integration is a form of vertical integration in which a company expands its role to fulfill tasks formerly completed by businesses up the supply chain. In other words, backward integration is when a company buys another company that supplies the products or services needed for production. For example, a company might buy their supplier of inventory or raw materials. Companies often complete backward integration by acquiring or merging with these other businesses, but they can also establish their own subsidiary to accomplish the task.
How to use Backward integration in a sentence?
- Companies pursue backward integration when it is expected to result in improved efficiency and cost savings.
- There are times where it may be best to use backward integration to come up with new ways to improve profits.
- To ensure a more steady supply of inputs, we implemented something called backward integration that would help us out quite a bit.
- Backward integration can be capital intensive, meaning it often requires large sums of money to purchase part of the supply chain.
- Backward integration often involves is buying or merging with another company that supplies its products.
- Backward integration is when a company expands its role to fulfill tasks formerly completed by businesses up the supply chain.
- There was backward integration in the region as the beneficiary of our product for so many years decided to source it in house.
Meaning of Backward integration & Backward integration Definition