Question

What are the six differences between concentric diversification and backward integration ?

400words

Answer 1

1. Backward integration is a form of integration in which the companies merge backwards with their supply chain. Where as concentric diversification is a type of diversification in which a company develops new products (close to the current business) to enter new markets.

2. In backward integration we are in the same line of business as we just try to get our supplier with us. Where as in concentric diversification the line of business may change as we develop new products.

3. The main objective of backward integration is to reduce cost, where as of concentric diversification is to get a strategic fit.

4. Backward integration does not involve development of any new product where as concentric diversification requires develop of new products.

5. Concentric diversification creates synergy because in this kind of diversification a firm may be acquired having similar business to the company, and the company may not develop any product, where as there is no synergy created in case of backward integration.

6. Concentric diversification might have difficulty in supply of raw material and co ordination due to diversification , where as in backward integration we merge with the supply chain, therefore there won't be any problem with supply of raw material.