Difference Between Forward Integration and Backward Integration
Differences between Forward Integration and Backward Integration
Differences between Forward Integration and Backward Integration are explained in the below table,
| Forward Integration | Backward Integration |
|---|---|
| The company gains control of the business activities that are ahead in the value chain | The company gains control of the business activities that were behind in their value chain |
| The company acquire or merge with a distributor | The company acquire/merge with a supplier or manufacturer |
| Gain control over the distribution chain | Gain control over the supply chain |
| The main purpose is to obtain a greater market share | The main purpose is to realize economies of scale |
| Example: FMCG goods production company acquires or starts a distribution company. Now the company can have control over its distribution process. | Example: Clothing manufacturing company acquires or starts a fabric company. Now the company can have adequate raw materials for producing cloths. |
Differences between Forward Integration and Backward Integration are explained in the below points,
- Forward integration is where the company gains control of the business activities that are ahead in the value chain. Backward integration is where the company gains control of the business activities that were behind in their value chain.
- In forward integration, the company acquires or merges with a distributor. In backward integration, the company acquires/merges with a supplier or manufacturer.
- In forward integration, the company gains control over the distribution chain. In backward integration, the company gains control over the supply chain.
- The main purpose of forward integration is to obtain a greater market share. The main purpose of backward integration is to realize economies of scale.
- Example of Forward Integration: A FMCG goods production company acquires or starts a distribution company. Now the company can have entire control over their distribution process.
Example of Backward Integration: A clothing manufacturing company acquires or starts a fabric company. Now the company can have enough raw materials for making dresses.
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