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5 Examples of Backward Integration

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Backward integration is the expansion of a business to new levels of the supply chain moving in the opposite direction of the customer. This is often compared to forward integration, the expansion to new levels of the supply chain moving towards the customer. The following are illustrative examples of backward integration.

Suppliers

A supplier of silicon for the solar panel industry begins to produce its own polysilicon wafers.

Manufacturing

A manufacturer of coffee begins to run its own coffee plantations. This may be done to cut costs, secure a reliable supply and/or improve quality.

Distribution

A distributor of office suppliers begins to manufacture its own paper products. This may be done to improve profit margins by capturing more of the value-added process.

Retail

A fashion retailer begins designing and manufacturing its own line of clothing.

Services

A software consulting firm begins to develop its own software products.

Notes

Backward integration is a type of vertical integration.
Overview: Backward Integration
Type
Definition
The expansion of a business to new levels of the supply chain moving in the opposite direction of the customer.
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