Backward Integration

Tax Glossary Definition

Backward Integration

Backward Integration – A strategic move in which a company broadens its operations by taking ownership of, or merging with, firms that supply its raw materials or components. This strategy allows the company to enhance control over its supply chain, stabilize input quality, cut production costs, and reduce reliance on external suppliers.

Example: A car manufacturer acquiring a steel production company to ensure a steady and cost-efficient supply of materials needed for automobile manufacturing.

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