DECA Retail Merchandising Practice Exam

Which integration occurs when a retailer handles both wholesaling and manufacturing?

1. Vertical integration

2. Forward integration

3. Backward integration

4. Conglomerate integration

The correct answer is: Backward integration

The correct integration type when a retailer handles both wholesaling and manufacturing is vertical integration. Vertical integration refers to a strategy where a company expands its operations either backwards into manufacturing (to produce products) or forwards into wholesaling (to sell products directly to consumers). By integrating these functions, a retailer can streamline operations, reduce costs, improve supply chain management, and gain better control over the production process. In this context, when a retailer engages in both wholesaling and manufacturing, they are essentially controlling multiple levels of the supply chain. This can lead to efficiencies, as they can manage production costs along with pricing strategies directly related to the retail aspect. The other options generally refer to different types of business strategies. For instance, backward integration specifically focuses on acquiring or merging with suppliers (moving up the supply chain), while forward integration involves acquiring or merging with distribution channels or retailers (moving down the supply chain). Conglomerate integration, on the other hand, occurs when a business diversifies into unrelated industries, which does not align with the scenario described. Therefore, vertical integration is the most appropriate term for a retailer managing both wholesaling and manufacturing processes.