backward integration

(redirected from Backward Vertical Integration)

Backward Integration

A business model whereby a company takes direct control of how its products are supplied. For example, a company may buy another company that previously supplied its raw material. That is, a butcher may own a ranch so that he does not have to buy slaughtered animals from an outside ranch. Alternatively, backward integration may involve the butcher buying the outside ranch. See also: Forward Integration.

backward integration

see VERTICAL INTEGRATION.

backward integration

the joining together in one firm of two or more successive stages in a vertically related production/ distribution process, with a later stage (for example, bread making) being combined with an earlier stage (for example, flour milling) Backward integration is undertaken to cut costs and secure supplies of inputs. See VERTICAL INTEGRATION, FORWARD INTEGRATION.
References in periodicals archive ?
Gross margins of the company are expected to improve because of the backward vertical integration.
Because of the fact that the magnetic resonance business is so concentrated, its backward vertical integration strategy seems quite appropriate.
Specifically, the study used six factors; namely, cost of divestment relative to the firm's asset base, operating fit, marketing fit, degree of forward vertical integration, degree of backward vertical integration, and number of years the unit has been with the firm.
For backward vertical integration, "high" means a unit whose sales contribute to a large fraction of the total purchases of the unit or units downstream.
BACKWARD-VI = Backward vertical integration of the unit (degree to which it sells to other units of the firm).
No significant difference was found between the mean relative weights of backward vertical integration and cost of divestment, or between operating fit and marketing fit.
Forward vertical integration is found to [TABULAR DATA FOR TABLE 5 OMITTED] raise a greater barrier than backward vertical integration in a declining industry.
As Harrigan (1985b) pointed out, however, the phase of the product life cycle is important, and can change the relative importance of forward and backward vertical integration.
Some of the larger companies are considering other strategies such as backward vertical integration into active pharmaceutical ingredients (API) manufacturing from low-cost manufacturing locations.