Which statement best describes backward integration?

• A. A firm expands by acquiring companies that sell similar products in different markets.
• B. A firm merges with or acquires its competitors to increase market share.
• C. A firm acquires or merges with its suppliers to control inputs for its production process.
• D. A firm acquires or merges with companies that distribute or sell its products.

Answer: (C)

Verified step by step guidance

1. Understand the concept of vertical integration, which involves a firm expanding its operations into different stages of production or distribution within the same industry.
2. Recognize that backward integration specifically refers to a firm acquiring or merging with its suppliers, which are the companies that provide the inputs or raw materials needed for production.
3. Contrast backward integration with forward integration, where a firm acquires or merges with companies that distribute or sell its products, moving closer to the final consumer.
4. Note that acquiring companies that sell similar products in different markets is an example of horizontal integration, not backward integration.
5. Similarly, merging with or acquiring competitors to increase market share is also horizontal integration, focusing on the same stage of production or market.