Advantages of Backward integration
(I) Regular supply: It ensures regular supply of raw materials or components.
(ii) High return on investment: It facilitates higher return on investment for the company as a whole through better use of overhead facilities
(iii) Competitiveness: It improves the competitive power of the company. As it controls more elements of the production process, it has advantages over the uninterested firms in the form of lower costs, lower prices and lower risks.
(iv) Quality control: It improves quality control over imports for the final product.
(v) Bargaining power: It improves the company’s power of negotiation with suppliers on the basis of known costs.
(vi) Tax saving: It saves indirect taxes payable on the purchase of inputs.
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