DECADECA Travel and Tourism Practice Exam

Backward integration is best described as what kind of strategy?

1. A growth strategy involving diversification

2. A strategy where businesses acquire suppliers

3. A method for improving customer service

4. A tactic for reducing competition

The correct answer is: A strategy where businesses acquire suppliers

Backward integration is best described as a strategy where businesses acquire suppliers. This approach allows a company to take control of its supply chain by gaining ownership or direct control over the suppliers that provide the raw materials or components needed for production. By doing so, a business can enhance its operational efficiency, reduce costs, and ensure a more reliable supply of inputs, which is crucial for maintaining production schedules and quality standards. Additionally, backward integration can lead to increased bargaining power over suppliers, enabling the company to negotiate better prices and terms. It can also foster innovation within the supply chain, as companies can collaborate closely with their suppliers to improve products or processes. The other options, while relevant to various business strategies, do not accurately define backward integration. Diversification relates to expanding the range of products or services offered, customer service improvement focuses on enhancing the experience for consumers, and reducing competition typically involves strategies such as mergers or acquisitions rather than the specific act of acquiring suppliers.