Backward integrations

Backward integration is a form of vertical integration involves buying part of the supply chain that occurs prior to the company's manufacturing process. This form of vertical integration can be advantageous to the primary business if control of the business that is downstream the supply chain provides a guaranteed supply of inputs.

For instance, a company might buy inventory or raw materials from its supplier. Companies often complete backward integration by purchasing or combining with these undertakings

For example, backward integration might involve the clothing manufacturer buying a textile company that produces the material for their clothing. The Company gains control over the raw material suppliers by integrating them with their ongoing business.

The company does so to maintain a competitive advantage in the business and increase entry barriers. Businesses pursue backward integration with the expectation that the process will result in cost savings, increased revenues, and improved efficiency in the production process.

Advantages of backward integration
*Improved efficiency
*Cost savings
*Gain more control of the supply network
*Synergize business operations and increase profits

Apple Inc's use of backward vertical integration has been a great success and allowed the company to advance its new products and technology at a more rapid pace.

Backward integration reduces the cost of distribution. The result is the improved competitive advantage for the company over their competitors.
Backward integrations