Legal Definitions - backward integration

Backward integration is when a company acquires ownership of facilities that produce raw materials or parts for the company's products. This means that the company is bringing the production of these materials or parts in-house instead of relying on external suppliers.

For example, a car manufacturer may decide to acquire a steel mill to produce the steel needed for their cars instead of buying it from a third-party supplier. This allows the car manufacturer to have more control over the production process and potentially reduce costs.

Another example is a restaurant chain that decides to start their own farm to grow the vegetables and raise the animals needed for their menu items. This is backward integration because the restaurant is bringing the production of these ingredients in-house instead of relying on external suppliers.