The first chapter of Competitive Strategy talks about structural analysis of industries, which aims to relate "a company to its environment." Among the five competitive forces surrounding a company are industry competitors, potential entrants, substitutes, suppliers, and buyers. A buyers or supplier can exert competitive force with credible threat of backward or forward integration, respectively.
Buyer can engage in backward integration by purchasing the parts it typically procures from suppliers. This poses competitive force on the suppliers. On the other hand, suppliers can engage in forward integration by expanding activity "to include control of the direct distribution of its products," posing competitive force on the buyers typically involved in the distribution. The same company can be both a buyer or supplier in different markets. A manufacturing company, for example, may be the buyer in the market for raw materials, but becomes the supplier in the market of the assembled goods to other companies.
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