Backward Integration

A company's ability to control its supply chain by owning or controlling its suppliers.

Implications

A strategic move where a company expands its operations into a previous stage of its supply chain, often to reduce costs or secure supplies.

Example: A car manufacturer acquiring a tire company to secure its supply of tires and reduce production costs is an example of backward integration.

Different from forward integration, where a company moves forward in its supply chain, such as a manufacturer opening retail stores.