backward 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 ?
Through the integration in BASF s largest Verbund site in Ludwigshafen, Germany, the new production unit will have full backward integration into all key raw materials including ethylene oxide and propylene oxide.
infrastructure and construction, the benefits derived from the proximity of the plant to Kandla port for sourcing coal and iron ore, availability of power through a captive power plant and its effort towards backward integration through the proposed billet manufacturing facility.
These rating strengths are partially offset by Sona Textiles' small scale of operations and exposure to risks related to customer concentration in revenue profile, to volatility in raw material prices, and to project related risks from the proposed capital expenditure (capex) of Rs.400 million towards setting up a spinning unit for backward integration of operations.
The rating is however, constrained by the exchange risk on foreign currency debt, moderation in GPIL's liquidity position, future commitment towards various capital-intensive projects to be undertaken in its subsidiaries, lack of complete backward integration and the inherently cyclical nature of the steel industry.
BASF intends to further strengthen its backward integration into propylene and grow its propylene-based downstream activities, leading to a stronger market position in North America.
However, the ratings favourably factor in the positive demand outlook for the Indian steel industry, demonstrated ability of the promoters to bring in funds by way of equity and unsecured loans and the anticipated cost savings from the backward integration of manufacturing operations, which is expected to improve margins post stabilization of operations.
These strengths are slightly tempered by its small size, high costs, lack of backward integration, market concentration and exposure to the auto sector.
It is projected by the company to expand its steel manufacturing capacity to one million tonnes per annum with a backward integration unit by setting up a 0.7 million tonnes per annum pellet plant.
These rating strengths are partially offset by the lack of backward integration in SPRML's operations, intense competition the company faces in the structural elements segment, and pressure on its financial risk profile because of its ongoing debt-funded capex programme.
The steel maker has strategy to enlarge its steel manufacturing capability through a backward integration project via establishment of a 0.7 mt pellet facility, with the deployment of the available infrastructure in the existing sites.
As a backward integration move, the company acquired a coal mine in Australia in FY10 through one of its subsidiary, Bengal Coal Pty Ltd.
As a backward integration, the company has its own workshop, for the production of equipment's to be used in Seamless Pipe industry, known as Huffaz Engineering Workshop (HEW).

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