What is 'Backward-vertical' FDI primarily associated with?

Backward-vertical foreign direct investment (FDI) is primarily associated with investing in raw material suppliers. This type of investment occurs when a company seeks to gain control over the supply chain by investing in businesses that provide the necessary raw materials needed for production. By doing so, a company can secure a steady supply of inputs, reduce costs, and enhance its competitive advantage. This strategy allows companies to ensure quality control and mitigate risks associated with supply chain disruptions, which are especially important in global business environments where sourcing can be complex and varied.

In the context of global business management, backward-vertical FDI is crucial for companies looking to strengthen their base of resources, fostering enhanced operational efficiency and positioning themselves more strategically in their respective markets. This approach contrasts with other forms of investment like focusing on distribution or consumer retail environments, which relate more to forward-vertical integration rather than backward integration.