What is BACKWARD INTEGRATION ?

Backward integration is a form of vertical integration which involves companies acquiring or creating processes enabling the company to produce its own inputs. these processes are those which the company had previously assigned to other companies up the supply chain.

complete vertical integration is achieved when a company is involved in all the stages of the production process. this can be achieved by the firm either by mergers and acquisitions with the companies in the supply chain, or by starting its own subsidiary to perform the tasks which had formerly been assigned to these companies.

when a raw material producer supplies it to companies lying lower on the supply chain, it would charge a mark-up over the actual cost of production to gain profits.

 


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