Question 37

Backward integration enables an organization access to a raw material source.

Backward integration is a strategy where a company expands its role to fulfill tasks formerly completed by businesses up the supply chain, specifically to gain direct access to raw material sources.

A) Insourcing

Insourcing refers to the practice of using an organization's own resources to perform tasks that could be outsourced. While it may enhance control over processes, it does not specifically pertain to accessing raw material sources from suppliers.

B) Backward integration

Backward integration is the correct choice as it involves a company acquiring control over its suppliers or the raw material sources itself. This strategy allows organizations to secure their supply chains and reduce dependency on external suppliers.

C) Outsourcing

Outsourcing involves contracting out business processes or functions to third-party companies. This approach typically reduces costs but does not provide access to raw material sources, making it the opposite of what is required in this context.

D) Horizontal integration

Horizontal integration refers to a company acquiring or merging with competitors to increase market share or expand product offerings. This strategy does not facilitate access to raw material sources, as it focuses on expanding within the same production stage.

Conclusion

The rationale clearly indicates that backward integration is the mechanism that allows an organization to gain direct access to raw materials, effectively securing its supply chain. Other options—insourcing, outsourcing, and horizontal integration—do not serve this purpose and thus fail to meet the question's requirement.