Disadvantages of Backward integration:



(a) If an existing input producing unit is taken over, it may involve large investment

(b) By investing heavily in backward integration the developments of the final products nay get hampered. This in turn may lead to undue pressure on pricing and sales effort.

(c) In the absence of backward integration the firm may purchase at a lower cost from technically more efficient suppliers. With backward integration, this opportunity gets lost.

(d) Any adverse Changes in the economy affecting the present product market will also affect adversely the production of inputs.

(e) When the divisions using the inputs do not have the freedom of comparing market conditions of supply, the problem of transfer pricing may become acute.

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