Concept Test-3

Integrative growth strategy: It refers to a process in which a company can

increase its sales and profits through backward, forward, or horizontal
integration within its enterprise. A company may take one or more of its
suppliers to gain more control or produce more profits (backward
integration). It might receive some wholesalers or retailers, especially if they
are highly profitable (forward integration). Or finally, it might gain one or
more competitors through acquisition (horizontal integration).
1. Backward Linkage: A company may acquire one or more of its suppliers
to gain more control or produce more profits.
Example: A garment industry deals with a supplier that all the raw
materials will be collected from them. In this deal, the company will get these
raw materials in low cost than previous, and they will generate more profit
from future products.
2. Forward Linkage: A forward linkage is created when investment in a
particular project encourages investment in subsequent stages of
production. It might acquire some wholesalers or retailers, especially if they
are highly profitable.
Example: Kazi farms food wants to increase the sales of their frozen
products, so they deal with some grocery shops or retailers that sell only
Kazi farms frozen food in their shop, not any other brands, then the
company will provide the extra benefits. Eventually, an increase in the
company's sales will increase profit.
3. Horizontal Linkage: Horizontal linkages are longer-term cooperative
arrangements among firms involving interdependence, trust, and resource
pooling to accomplish common goals jointly. Such linkages also facilitate
collective learning and risk-sharing while increasing the potential for
upgrading and innovation. Horizontal linkages acquire one or more
competitors through acquisition.
Example: Five Book shops are merged under the same claim and decide
their selling price will be the same.