Table of Contents
Q.1. “Volvo will lead the future of mobility, enriching lives around the world with safest and most responsible way of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded with the smile. We will meet our challenging goals by engaging the talent and passion of people, who believe there is always a better way “.
In light of this well-drafted mission statement of Volvo company, Discuss the salient features of a good mission statement. (10)
Organizations legitimize themselves by performing some function that is valued by society. A mission statement defines the basic reason for the existence of that organization. Such a statement reflects the corporate philosophy, identity, character, and image of an organization. It may be defined explicitly or could be deduced from the management’s actions, decisions, or the chief executive’s press statements. When explicitly defined it provides enlightenment to the insiders and outsiders on what the organization stands for. In order to be effective, the following characteristics of a mission statement need to be present in an organization.
Mission statement
1. It should be feasible
A mission should always aim high but it should not be an impossible statement. It should be realistic and achievable its followers must find it to be credible. But feasibility depends on the resources available to work towards a mission. In the sixties, the US National Aeronautics and Space Administration (NASA) had a mission to land on the moon. It was a feasible mission that was ultimately realized.
2. It should be precise.
A mission statement should not be so narrow as to restrict the organization’s activities nor should it be too broad to make itself meaningless. For instance, ‘Manufacturing bicycles’ is a narrow mission statement since it severely limits the organization’s activities, while mobility business’ is too broad a term, as it does not define the reasonable contour within which the organization could operate.
3. It should be clear
A mission should be clear enough to lead to action. It should not be a highsounding set of platitudes meant for publicity purposes. Many organizations do adopt such statements but probably they do so for emphasizing their identity and character. For example, Asian Paints stresses leadership through excellence’, while India Today see itself as ‘the complete news magazine’. The Administrative Staff College of India considers itself as ‘the college for practicing managers’ and Bajaj Auto believes in ‘Providing, value for money, for years’. To be useful, a mission statement should be clear enough to lead to action. The ITC’s stated corporate philosophy of aligning its organizational activities with national priorities helps it in choosing areas for diversification like the hotel, paper and agroindustry.
4. It should be motivating
A mission statement should be motivating for members of the organization and of society, and they should feel it worthwhile working for such an organization or being its customers. A bank, which lays great emphasis on customer service, is likely to motivate its employees to serve its customers well and to attract clients. Customer service, therefore is an important purpose for a banking institution.
5. It should be distinctive
A mission statement, which is indiscriminate, is likely to have little impact. If all scooter manufacturers defined their mission in a similar fashion, there would not be much of a difference among them. But if one defines it as providing scooters that would provide ‘value for money, for years’ it will create an important distinction in the public mind.
6. It should indicate major components of strategy
A mission statement along with the organizational purpose should indicate the major components of the strategy to be adopted. The chief executive of Indal expressed his intentions by saying that his company “begins its fifth decade of committed entrepreneurship with the promise of a highly diversified company retaining aluminum as its mainline business, but with an active presence in the chemical, electronics and industrial equipment business”. This statement indicates that the company is likely to follow a combination of stability, growth and diversification strategies in the future.
7. It should indicate how objectives are to be accomplished
Besides indicating the broad strategies to be adopted a mission statement should also provide clues regarding the manner in which the objectives are to be accomplished. The Centre for Development of Telematics (CDOT) had set its first three yearsmission (198487) as developing, designing, and engineering a large digital exchange suitable for Indian conditions and its second mission (198790) as developing the technological prerequisites for an integrated systems digital network of the future. These mission statements specially deal with the objectives to be achieved within a given time period.
Q.2. Discuss the benefits of SWOT analysis for a hotel chain in today’s hospitality environment. (10)
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. Its key purpose is to identify the strategies that will create a firm specific business model that will best align an organization’s resources and capabilities to the requirements of the environment in which the firm operates.
In other words, it is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment. It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends and also helps in including them in the decision-making process of the organization.
An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats)-
1. Strengths
Strengths are the qualities that enable us to accomplish the organization’s mission. These are the basis on which continued success can be made and continued/sustained.
Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in, the traits and qualities your employees possess (individually and as a team) and the distinct features that give your organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an organization, which includes human competencies, process capabilities, financial resources, products and services, customer goodwill and brand loyalty. Examples of organizational strengths are huge financial resources, broad product line, no debt, committed employees, etc.
2. Weaknesses
Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. These weaknesses deteriorate influences on the organizational success and growth. Weaknesses are the factors which do not meet the standards we feel they should meet.
Weaknesses in an organization may be depreciating machinery, insufficient research and development facilities, narrow product range, poor decision-making, etc. Weaknesses are controllable. They must be minimized and eliminated. For instance – to overcome obsolete machinery, new machinery can be purchased. Other examples of organizational weaknesses are huge debts, high employee turnover, complex decision making process, narrow product range, large wastage of raw materials, etc.
3. Opportunities
Opportunities are presented by the environment within which our organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Organizations can gain competitive advantage by making use of opportunities.
Organization should be careful and recognize the opportunities and grasp them whenever they arise. Selecting the targets that will best serve the clients while getting desired results is a difficult task. Opportunities may arise from market, competition, industry/government and technology. Increasing demand for telecommunications accompanied by deregulation is a great opportunity for new firms to enter telecom sector and compete with existing firms for revenue.
4. Threats
Threats arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. They compound the vulnerability when they relate to the weaknesses. Threats are uncontrollable. When a threat comes, the stability and survival can be at stake. Examples of threats are – unrest among employees; ever changing technology; increasing competition leading to excess capacity, price wars and reducing industry profits; etc.
Advantages of SWOT Analysis
SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a great subjective element. It is best when used as a guide, and not as a prescription. Successful businesses build on their strengths, correct their weakness and protect against internal weaknesses and external threats. They also keep a watch on their overall business environment and recognize and exploit new opportunities faster than its competitors.
SWOT Analysis helps in strategic planning in following manner-
• It is a source of information for strategic planning.
• Builds organization’s strengths.
• Reverse its weaknesses.
• Maximize its response to opportunities.
• Overcome organization’s threats.
• It helps in identifying core competencies of the firm.
• It helps in setting of objectives for strategic planning.
• It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.
• SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities with the competitive environment in which the firm operates.
Or Explain the concept of External Environment Analysis (PESTLE) with a few appropriate examples. (10)
A PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework or tool used to analyse and monitor the macro-environmental factors that may have a profound impact on an organisation’s performance. This tool is especially useful when starting a new business or entering a foreign market. It is often used in collaboration with other analytical business tools such as the SWOT analysis and Porter’s Five Forces to give a clear understanding of a situation and related internal and external factors. PESTEL is an acronym that stands for Political, Economic, Social, Technological, Environmental and Legal factors.
1. Political Factors
These factors are all about how and to what degree a government intervenes in the economy or a certain industry. Basically all the influences that a government has on your business could be classified here. This can include government policy, political stability or instability, corruption, foreign trade policy, tax policy, labour law, environmental law and trade restrictions. Furthermore, the government may have a profound impact on a nation’s education system, infrastructure and health regulations. These are all factors that need to be taken into account when assessing the attractiveness of a potential market.
2. Economic Factors
Economic factors are determinants of a certain economy’s performance. Factors include economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers and unemployment rates. These factors may have a direct or indirect long term impact on a company, since it affects the purchasing power of consumers and could possibly change demand/supply models in the economy. Consequently it also affects the way companies price their products and services.
3. Socio-Cultural Factors
This dimension of the general environment represents the demographic characteristics, norms, customs and values of the population within which the organization operates. This includes population trends such as the population growth rate, age distribution, income distribution, career attitudes, safety emphasis, health consciousness, lifestyle attitudes and cultural barriers. These factors are especially important for marketers when targeting certain customers. In addition, it also says something about the local workforce and its willingness to work under certain conditions.
4. Technological Factors
These factors pertain to innovations in technology that may affect the operations of the industry and the market favourably or unfavourably. This refers to technology incentives, the level of innovation, automation, research and development (R&D) activity, technological change and the amount of technological awareness that a market possesses. These factors may influence decisions to enter or not enter certain industries, to launch or not launch certain products or to outsource production activities abroad. By knowing what is going on technology-wise, you may be able to prevent your company from spending a lot of money on developing a technology that would become obsolete very soon due to disruptive technological changes elsewhere.
5. Environmental Factors
Environmental factors have come to the forefront only relatively recently. They have become important due to the increasing scarcity of raw materials, pollution targets and carbon footprint targets set by governments. These factors include ecological and environmental aspects such as weather, climate, environmental offsets and climate change which may especially affect industries such as tourism, farming, agriculture and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer. This has led to many companies getting more and more involved in practices such as corporate social responsibility (CSR) and sustainability.
6. Legal Factors
Although these factors may have some overlap with the political factors, they include more specific laws such as discrimination laws, antitrust laws, employment laws, consumer protection laws, copyright and patent laws, and health and safety laws. It is clear that companies need to know what is and what is not legal in order to trade successfully and ethically. If an organisation trades globally this becomes especially tricky since each country has its own set of rules and regulations. In addition, you want to be aware of any potential changes in legislation and the impact it may have on your business in the future. Recommended is to have a legal advisor or attorney to help you with these kinds of things.
Q.3. With the help of pictographic presentation, explain BCG matrix of corporate portfolio analysis. (5)
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue or develop products. It’s also known as the Growth/Share Matrix.
Product Life Cycle. A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue or develop products. It’s also known as the Growth/Share Matrix.
Q.4. With the help of grids, discuss the styles of leadership. (5)
Some of the important leadership styles are as follows:
1. Autocratic leadership style
In this style of leadership, a leader has complete command and hold over their employees/team. The team cannot put forward their views even if they are best for the teams or organizational interests. They cannot criticize or question the leader’s way of getting things done. The leader himself gets things done. The advantage of this style is that it leads to speedy decision-making and greater productivity under a leader’s supervision. Drawbacks of this leadership style are that it leads to greater employee absenteeism and turnover. This leadership style works only when the leader is the best in performing or when the job is monotonous, unskilled, and routine in nature or where the project is short-term and risky.
2. The Laissez Faire Leadership Style
Here, the leader totally trusts their employees/team to perform the job themselves. He just concentrates on the intellectual/rational aspect of his work and does not focus on the management aspect of his work. The team/employees are welcomed to share their views and provide suggestions that are best for organizational interests. This leadership style works only when the employees are skilled, loyal, experienced, and intellectual.
3. Democrative/Participative leadership style
The leaders invite and encourage the team members to play an important role in decision-making process, though the ultimate decision-making power rests with the leader. The leader guides the employees on what to perform and how to perform, while the employees communicate to the leader their experience and the suggestions if any. The advantages of this leadership style are that it leads to satisfied, motivated and more skilled employees. It leads to an optimistic work environment and also encourages creativity. This leadership style has the only drawback that it is time-consuming.
4. Bureaucratic leadership
Here the leaders strictly adhere to the organizational rules and policies. Also, they make sure that the employees/team also strictly follows the rules and procedures. Promotions take place on the basis of employees’ ability to adhere to organizational rules. This leadership style gradually develops over time. This leadership style is more suitable when safe work conditions and quality are required. But this leadership style discourages creativity and does not make employees self-contented.
Or Draw a model for Strategic review and evaluation. (5)
Q.5. State and give a brief on the various approaches to developing strategies. (5)
Various approaches adopted while developing strategies are –
1. Adaptive Approach
2. Intuition Approach
3. Strategic Factor Approach
4. Entrepreneurial Approach
5. Niche Approach
1. Adaptive Approach
Adaptive approach of strategic decision making is basically reactive and tries to assimilate the change in decision- making context—various factors, particularly envirovmental ones, affecting strategic decisions. Various features of strategic decision making under ADAPTIVE APPROACH are as follows:
• Decision making is basically meant for problem solving rather than going for new opportunities. Adaptation process is adopted to meet the threats by changed environment as against the decision making to meet the anticipated changes in environment which entrepreneurial approach suggests.
• Decision are made in sequential, incremental steps, one thing at a time necessitated by environmental changes i.e.to maintain flexibility to adapt the decisions to more pressing needs.
• Various interest groups and stakeholders put considerable pressure on decision making process so as to protect their own interests. Thus the ultimate decision is a compromised one which may be sometimes, at the cost of optimising organisational effectiveness.
2. Intuition Approach
The basic premise of this approach is that the strategy evolves in the mind of the chief executive without ever being explicitly and without the aid of formal procedures. Intuition, Steiner, has observed, is an excellent approach if it is brilliant. Along with intuition, personal judgment is also a necessary element in this approach. In the United States, Alfred Sloan of General Motors Corporation, Henry Ford of Ford Motor Car Company, and in India J R D Tata, G M Modi, G D Birla, to name a few among the pioneer industrialists, are often remembered for their imagination , drive and expensive vision, which led to corporate growth and prosperity in different fields. The strategies developed by each of them over the years may be attributed to their intuition and judgment.
3. Strategic Factor Approach
Identification of key strategic factors may lead to the assessment of organizational strengths and weaknesses in respect of these factors. Organizational strength on any factor can be defined as the contribution made by the factor towards the achievement of the organizational objectives. A factor may not necessarily contribute directly to the achievement of overall objectives but may contribute indirectly by achieving a lower level objective. An organizational weakness on a factor can be defined as the negative contribution of the factor in achieving the organizational objectives. Another way for assessing strengths and weaknesses is to make a comparative analysis of these factors with those of the competitors. For the assessment of organizational strengths and weaknesses, some techniques or tools likefinancial analysis, key factor rating, and functional area profile and resource-development matrix have been developed.
4. Entrepreneurial Approach
The thrust under this approach is related with the role of the manager as an entrepreneur. Drucker has depicted the role of an entrepreneurial manager as that of a systematic risk-maker and risk-taker, looking for and finding opportunity. Entrepreneurship is essentially the acceptance of change as an opportunity and the acceptance of the leadership in change as the unique task of the entrepreneur. The roll of an entrepreneur is opportunity focused and not problem focused. Briefly speaking, this general description of the entrepreneurial manager indicates what is expected of him, but it does not enlighten us on how he should go about performing his role.
5. Niche Approach
This approach is based on developing strategies by picking propitious niches in which the organization wishes to operate. A ‘niche’ is a sub-segment of a major market segment that no other firm has chosen to enter directly. For example, a particular buyer group, geographical area, or segment of the production line.
Or With the help of a neat diagram, discuss McKinsey’s 7 frameworks. (5)
The McKinsey 7S Framework is a management model developed by well-known business consultants Robert H. Waterman, Jr. and Tom Peters (who also developed the MBWA– “Management By Walking Around” motif, and authored In Search of Excellence) in the 1980s. This was a strategic vision for groups, to include businesses, business units, and teams. The 7S are structure, strategy, systems, skills, style, staff, and shared values.
The model is most often used as a tool to assess and monitor changes in the internal situation of an organization.
The model is based on the theory that, for an organization to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance or to maintain alignment (and performance) during other types of change.
Whatever the type of change – restructuring, new processes, organizational merger, new systems, change of leadership, and so on – the model can be used to understand how the organizational elements are interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration.
Objective of the model
• To analyze how well an organization is positioned to achieve its intended objective
Usage
• Improve the performance of a company
• Examine the likely effects of future changes within a company
• Align departments and processes during a merger or acquisition
• Determine how best to implement a proposed strategy.
The Seven Interdependent Elements
• The basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful
A. Hard Elements
• Strategy
• Structure
• Systems
B. Soft Elements
• Shared Values
• Skills
• Style
• Staff
Q.6. How do policies play a vital role in day to day operations of hotel industry ? (5)
A ‘Policy’ is a predetermined course of action, which is established to provide a guide toward accepted business strategies and objectives. In other words, it is a direct link between an organization’s ‘Vision’ and their day-to-day operations. Policies identify the key activities and provide a general strategy to decision-makers on how to handle issues as they arise. This is accomplished by providing the reader with limits and a choice of alternatives that can be used to ‘guide’ their decision making process as they attempt to overcome problems. I like to think of ‘policies’ as a globe where national boundaries, oceans, mountain ranges and other major features are easily identified.
Policies
• Are general in nature
• Identify company rules
• Explain why they exist
• Tells when the rule applies
• Describe who it covers
• Shows how the rule is enforces
• Describes the consequences
• Are normally described using simple sentences and paragraphs.
Benefits of the policy
Major benefits they provide are –
• Employees understand the constraints of their job without using a ‘trial and error’ approach, as key points are visible in well-written policies and procedures.
• Policies and procedures enable the workforce to clearly understand individual and team responsibilities, thus saving time and resources. Everyone is working off the same page; employees can get the “official” word on how they should go about their tasks quickly and easily.
• Clearly written policies and procedures allow managers to exercise control by exception rather than ‘micro-manage’ their staff.
• They send a “We Care!” message. ‘The company wants us to be successful at our jobs.’
• Clearly written policies and procedures provide legal protection. Juries apply the ‘common person’ standard. If written clearly so that outsiders understand, the company has better legal footing if challenged in court.
Q.7. Differentiate between (any two) (2×2.5=5)
a. Market Development and Market Penetration
| Market Penetration | Market Development | |
| Definition | Market penetration is a strategy in which the company sells existing products in the existing market in order to obtain more market share | Market development is a strategy in which the company sells existing products in a new market. |
| Strategy | Market penetration is referred to as a red ocean strategy. | Market development is referred to as a blue ocean strategy. |
| Risk | Market penetration is relatively a low risk strategy since the products are sold in familiar markets | High risk is inherent in Market development strategy as the company is entering into unfamiliar markets. |
| Type | Price adjustments, promotional strategies, and new distribution channels are types of market penetration | Entering a new geographical market or targeting new customers in new segments are ways in entering into new markets. |
b. Concentric and Conglomerate diversification
Concentric Diversification
A concentric diversification strategy lets a firm to add similar products to an already established business. For example, when a computer company producing personal computers using towers starts to produce laptops, it uses concentric strategies. The technical knowledge for new venture comes from its current field of skilled employees.
Concentric diversification strategies are rampant in the food production industry. For example, a ketchup manufacturer starts producing salsa, using its current production facilities.
Conglomerate Diversification
In conglomerate diversification strategies, companies will look to enter a previously untapped market. This is often done using mergers and acquisitions.
Moving into a new industry is highly dangerous, due to unfamiliarity with the new industry. Brand loyalty may also be reduced when quality is not managed. However, this strategy offers increasing flexibility in reaching new economic markets.
For example, a company into automotive repair parts may enter the toy production industry. Each company allows for a broader base of customers. There is an opportunity of income when one industry’s sales falter.
In Short, the concentric strategy is used when a firm wants to increase its products portfolio to include like products produced within the same company, and the conglomerate diversification strategy is used when a company starts operating in two or more unrelated industries.
c. Objectives and Goals
| Goal | Objective | |
| Meaning: | The purpose toward which an endeavor is directed. | Something that one’s efforts or actions are intended to attain or accomplish; purpose; target. |
| Example: | I want to achieve success in the field of genetic research and do what no one has ever done. | I want to complete this thesis on genetic research by the end of this month. |
| Action: | Generic action | Specific action |
| Measure: | Goals may not be strictly measurable or tangible. | Must be measurable and tangible. |
| Time frame: | Longer term | Mid to short term |
Q.8. Write Short Note with appropriate examples (any five)(5×1=5)
a. Divestiture
A divestiture is the partial or full disposal of a business unit through sale, exchange, closure, or bankruptcy. A divestiture most commonly results from a management decision to cease operating a business unit because it is not part of a core competency.
A divestiture may also occur if a business unit is deemed to be redundant after a merger or acquisition, if the disposal of a unit increases the sale value of the firm, or if a court requires the sale of a business unit to improve market competition.
In its simplest form, a divestiture is the disposition or sale of an asset by a company, a way to manage its portfolio of assets. As companies grow, they may find they are in too many lines of business and they must close some operational units to focus on more profitable lines.
b. Liquidation
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due. As company operations end, the remaining assets are used to pay creditors and shareholders, based on the priority of their claims. General partners are subject to liquidation.
The term liquidation may also be used to refer to the selling of poor-performing goods at a price lower than the cost to the business, or at a price lower than the business desires.
c. Joint venture
A joint venture (JV) is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity.
In a joint venture (JV), each of the participants is responsible for profits, losses, and costs associated with it. However, the venture is its own entity, separate from the participants’ other business interests. A common use of JVs is to partner up with a local business to enter a foreign market.
d. Product development
Product development typically refers to all of the stages involved in bringing a product from concept or idea through market release and beyond. In other words, product development incorporates a product’s entire journey.
There are many steps to this process, and it’s not the same path for every organization, but these are the most common stages through which products typically progress:
• Identifying a market need
• Quantifying the opportunity
• Conceptualizing the product
• Validating the solution
• Building the product roadmap
• Developing a minimum viable product (MVP)
• Releasing the MVP to users
• Ongoing iteration based on user feedback and strategic goals
e. Forward Integration
Forward integration is a business strategy that involves a form of downstream vertical integration whereby the company owns and controls business activities that are ahead in the value chain of its industry, this might include among others direct distribution or supply of the company’s products. This type of vertical integration is conducted by a company advancing along the supply chain.
A good example of forward integration would be a farmer who directly sells his crops at a local grocery store rather than to a distribution center that controls the placement of foodstuffs to various supermarkets. Or, a clothing label that opens up its own boutiques, selling its designs directly to customers instead of or in addition to selling them through department stores.
f. Horizontal integration
Horizontal integration is the acquisition of a business operating at the same level of the value chain in the same industry. This is in contrast to vertical integration, where firms expand into upstream or downstream activities, which are at different stages of production.
However, when horizontal mergers succeed, it is often at the expense of consumers, especially if they reduce competition. If horizontal mergers within the same industry concentrate market share among a small number of companies, it creates an oligopoly. If one company ends up with a dominant market share, it has a monopoly. This is why horizontal mergers are heavily scrutinized under antitrust laws.
g. Backward Integration
Backward integration is a form of vertical integration in which a company expands its role to fulfill tasks formerly completed by businesses up the supply chain. In other words, backward integration is when a company buys another company that supplies the products or services needed for production. For example, a company might buy their supplier of inventory or raw materials. Companies often complete backward integration by acquiring or merging with these other businesses, but they can also establish their own subsidiary to accomplish the task. Complete vertical integration occurs when a company owns every stage of the production process, from raw materials to finished goods/services.
Companies pursue backward integration when it is expected to result in improved efficiency and cost savings. Backward integration can be capital intensive, meaning it often requires large sums of money to purchase part of the supply chain.