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

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

• A. Forward Vertical Integration
• B. Backward Vertical Integration
• C. Centralized Purchasing Organization
• D. Identify Suppliers

Answer: (A)

Vertical integration extends a company’s control along its supply chain, and moving closer to the end customer is moving downstream. When a company buys one of its customers, it is taking ownership of a downstream participant, which secures control over distribution, pricing, and access to that customer. This is forward vertical integration. Backward vertical integration would be the opposite—acquiring upstream suppliers. Centralized Purchasing Organization focuses on pooling purchasing power across units rather than acquiring a customer. Identifying suppliers isn’t an integration strategy.

Vertical integration extends a company’s control along its supply chain, and moving closer to the end customer is moving downstream. When a company buys one of its customers, it is taking ownership of a downstream participant, which secures control over distribution, pricing, and access to that customer. This is forward vertical integration.

Backward vertical integration would be the opposite—acquiring upstream suppliers. Centralized Purchasing Organization focuses on pooling purchasing power across units rather than acquiring a customer. Identifying suppliers isn’t an integration strategy.