Backward Vertical Integration in Supply Chain Expansion

Steps:

• Identify the company's core activity: manufacturing computer chips, which is a downstream production stage.
• Note the acquisition: a computer chip designer, an upstream stage that supplies designs to manufacturers.
• Determine the integration direction: moving backward to control an earlier supply chain link.
• Classify the strategy: this matches backward vertical integration, securing inputs for production.

Why A is correct:

• Backward vertical integration is defined as a firm acquiring a supplier or prior production stage to gain control over essential inputs, as seen here with design preceding manufacturing.

Why the others are wrong:

• B: Forward vertical integration involves acquiring a downstream buyer or distributor, like a retailer, not an upstream designer.
• C: Diversification means entering unrelated industries, but chip design remains in the same tech sector.
• D: Horizontal integration is merging with a same-level competitor, such as another manufacturer, not a different-stage designer.

Final answer: A