Forward and Backward Integrations...

Forward and Backward Integrations Forward and backward integrations are two integration strategies which are adopted by organizations to gain competitive advantages in the market and to gain control over the value chain of the industry under which they are operating. These strategies are one of the major considerations when developing future plans for an organization. Together these two strategies are known as vertical integration.  The process of backward and forward integrations is shown in Fig 1 Fig 1 Process of backward and forward integration Vertical integration is the degree to which the organization owns its upstream suppliers and its downstream buyers for further product processing. Contrary to the horizontal integration, which is a consolidation of many organizations that handle the same part of the production process, vertical integration is typified by one organization engaged in different parts of production (e.g. production of raw materials, manufacturing, transporting, marketing, and/or downstream processing of end products. Vertical integration describes when an organization purchases or starts a company that it either buys from or sells to and integrates this new business into its own. In case of forward integration the organization integrates its businesses toward the end customer while in case of backward integration the organization integrates its activities in the direction away from the customer. Backward integration can be a part of the organizational strategy due to the competitive benefits it provides. Organizations which governs the entire value chain are, however, very rare. Some organizations choose to adopt for forward integration while other organizations opt for backward integration. Also some other organizations continue to operate disintegrated depending on the environment under which these organizations are operating and also depending upon the future strategic planning which these organizations have done for their future operations. Forward integration extends organizational...