A large fabricator of building components purchased a steel company to provide raw materials for its production process. This is an example of
A) backward integration.
B) economies of scale.
C) forward integration.
D) product differentiation.

Question

Quizplus · Accepted Answer

Backward integration occurs when a company acquires or merges with a supplier or a company that provides the raw materials needed for the production process. In this case, the fabricator buying a steel company to supply raw materials is a classic example of backward integration, as it is integrating a step back in the supply chain to secure its inputs.

A Large Fabricator of Building Components Purchased a Steel Company