MARKET
INTEGRATION
Market integration is when
prices of the same product
When barriers between
in different places start
markets are removed,
to match up. If a
prices get more synced.
product’s price goes up in
Free trade between
one place, it’ll probably
countries helps this
go up in another place
happen too.
too. Basically, markets
are connected.
REASONS FOR MARKET INTEGRATION
To remove transaction costs
Foster competition
Provide better signals for optimal generation and consumption
decisions.
Improve security of supply
Theoretically one can integrate two markets without
interconnection.
TYPES OF INTEGRATION
HORIZONTAL INTEGRATION -This occurs when a company buys another
company that produces the same product or service. The goal is to be
stronger in the market and reduce competition.
VERTICAL INTEGRATION -This occurs when a company does different parts
of the process from start to finish. That is, they own all the steps
from making the product to selling it.
A) Forward integration -If a firm assumes another function of
marketing which is closer to the consumption function, it is a case of
forward integration.
B) Backward integration -This involves ownership or a combination of
sources of supply.
CONGLOMERATION
• A combination of agencies or activities not
directly related to each other may, when it
operates under a unified management be
termed a conglomeration
DEGREE OF INTEGRATION
Contract integration
Ownership integration
-This involves an
- This occurs when
agreement between two
all the decisions and
firms on certain
assets of a firm are
decisions, while each
completely assumed by
firm retains its
another firm.
separate identity.
EFFECTS OF
INTEGRATION
VERTICAL INTEGRATION
A. More profits by taking up additional functions
B. Risk reduction through improved market co-
ordination
C. Improvement in bargaining power and the
prospects of influencing prices
D. Lowering costs through achieving operational
efficiency
HORIZONTAL INTEGRATION
A. Buying out a B. Gaining larger C. Attaining D. Specializing in
competitor in a time share of the market economies of scale the trade
bound way to reduce and higher profits
competition
CONGLOMERATION
A. Risk
B.
reduction
Acquisition C. Empire –
through
of financial building urge
diversificati
leverage
on
