Pertamina is an Indonesian Oil & Gas corporation that wishes to enter India & is competing against Reliance Industries Limited.
As a consultant you are required to recommend whether backward integration or forward integration is a superior strategy to compete against RIL in India? Which one of the alternatives would you choose to your client & why? Justify with reasons.
Answers
Answer:
Reliance Industries and a new competition
Explanation:
Reliance Industries Limited (RIL) is an Indian multinational conglomerate company headquartered in Mumbai, Maharashtra. Reliance owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail, and telecommunications.
On the other hand PT Pertamina (Persero) or Pertamina (was Perusahaan Pertambangan Minyak dan Gas Bumi Negara, lit. 'State Oil and Natural Gas Mining Company') is an Indonesian state-owned oil and natural gas corporation based in Jakarta. It was created in August 1968 by the merger of Pertamin (established 1961) and Permina (established 1957)
Both forward and backward integration are forms of vertical integration, i.e., where the company integrates with other companies who are in different steps on the same production path; for instance, with manufacturers and distributors. Forward integration is an instance where the company acquire or merge with a distributor or retailer whereas backward integration is an instance the company acquire or merge with a supplier or manufacturer. This the key difference between forward and backward integration.