The correct answer is option 3- Creates opportunities for the suppliers of inputs.
Every new business creates opportunities for the suppliers of inputs (this is referred to as backward linkages) and the marketers of the output (what is referred to as forward linkages).
The concept of backward and forward linkages refers to the connections that a new business creates within an economy, both in terms of its suppliers and the markets for its products.
- Backward Linkages: These refer to the relationships a business has with its suppliers or producers of the inputs (such as raw materials, labor, and components) required for its production process. Example: If a new car manufacturing plant is established, the suppliers of steel, rubber, electronics, and other materials benefit from the business because they provide the necessary components. This increases demand for their products and creates additional economic activity in the supply chain. Backward linkages stimulate economic activity in the supply sector, increasing demand for raw materials and services. This can lead to the creation of more jobs and investment in industries that supply the new business.
- Forward Linkages: These refer to the relationships between the new business and the markets or consumers of its products or services. Example: In the case of the car manufacturing plant, the forward linkages would involve the marketers, distributors, and retailers of the cars. The business creates opportunities for car dealerships, repair shops, insurance companies, and even marketing firms that promote the car to consumers. Forward linkages drive the demand for products in the market. The more successful the business is in selling its output, the greater the opportunities it creates for related businesses in distribution, marketing, and after-sales services.
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