Which arrangement occurs when a company buys one of its suppliers?

Which arrangement occurs when a company buys one of its suppliers?

• A. Backward Vertical Integration
• B. Forward Vertical Integration
• C. Decentralized Purchasing Organization
• D. Strategic Sourcing

Answer: (A)

This item tests what happens when a firm expands by acquiring its supplier. When a company buys a supplier, it moves upstream in the supply chain, which is backward vertical integration. Owning the supplier can improve supply security, give the firm more control over input costs and quality, and reduce dependence on external vendors. This is different from forward vertical integration, where a company buys entities downstream such as distributors or retailers to control the product’s path to customers. The other terms describe procurement structures or methods rather than ownership: a decentralized Purchasing Organization spreads buying authority within the firm, and strategic sourcing is the process of analyzing and selecting suppliers to optimize value, not acquiring them.

This item tests what happens when a firm expands by acquiring its supplier. When a company buys a supplier, it moves upstream in the supply chain, which is backward vertical integration. Owning the supplier can improve supply security, give the firm more control over input costs and quality, and reduce dependence on external vendors.

This is different from forward vertical integration, where a company buys entities downstream such as distributors or retailers to control the product’s path to customers. The other terms describe procurement structures or methods rather than ownership: a decentralized Purchasing Organization spreads buying authority within the firm, and strategic sourcing is the process of analyzing and selecting suppliers to optimize value, not acquiring them.