Backward Integration is a form of vertical integration in which a company expands its role in the production of goods or services beyond the stage at which it originally occurred. A company may backward integrate in order to expand production, or to gain control over the goods or services it produces. If a company's goal is to expand production, it may backward integrate in order to provide a greater supply of raw materials to its production process. If it wishes to gain control over the goods or services it produces, it may do so by obtaining the stage(s) at which the goods or services are produced and marketed.Backward integration is different from vertical integration because it does not involve acquiring ownership of companies that are already involved in some aspect of the production process. Backward integration usually requires purchasing existing stages in the production process or setting up new stages, rather than acquiring an existing business that is already producing and marketing the product or service in question.Backward integration occurs when a firm acquires an upstream stage in the production.Backward integration usually occurs from the market distribution in a company. A company may acquire a product that was previously sold under an exclusive contract, or a company may acquire distribution outlets.A company may also acquire an upstream stage in the production process. A firm may acquire companies that produce raw materials that are necessary for production, or it may acquire companies that produce components or parts that are necessary for production.Backward integration may be characterized as defensive or offensive, depending on the reasons for the acquisition. Defensive backward integration occurs when a company acquires an upstream stage in order to gain control over the means of production so as to protect itself from a hostile takeover. Offensive backward integration occurs when a company acquires an upstream stage in.
