MARKET

INTEGRATION
ANGELICA ARELLANO
JERWIN ALONZO
 • A market is a place where buyers and sellers can meet to
facilitate the exchange or transaction of goods and services.
• Markets can be physical like a retail outlet, or virtual like
MARKET an e-retailer. Other examples include illegal markets, auction
markets, and financial markets

• Is a set of affairs or a process of involving attempts to

combine separate national economic into larger economic
regions.

INTEGRATION
HISTORY ● Agricultural integration
-how to domesticate plants and animals-farming enables societies to create
surpluses which led to significant development such as permanent settlements ,
trade networks and population growth.
● Industrial revolution
steam engines ,manufacturing and production were all introduced-
capitalism(system which all natural resources and means of production are
privately owned with profit maximization and competition serving as a
primarily drivers of efficiency led to inequalities in the economy) and
socialism (collective ownership property owned by the government and it is
distributed to the citizen who cannot afford it) existed
● Information revolution
increasing social and technological role of information
● Global corporation
is a term used when you are investing products or services on a global scale
International regulatory organizations such as WTO(world trade organization
and transnational trade agreements such as NAFTA have both created and
supported an increase in international trade, where there isn’t a single
country that is completely self-sufficient and all rely on international trade to
some extent for their own prosperity.
MARKET INTEGRATION
• Khols and Uhl defined as a process which refers to the expansion of firms by consolidating additional marketing
functions and activities under a single management.
• According to Malcolm Tatum, market integration is a term used to identify a phenomenon in which market of
good and services that are somehow related to one another being to experience similar pattern of increase or
decrease in term of the prices of the products.

• Group of prices often move proportionally to each other and when this relation is very clear among different
markets it is said that the markets are integrated.
• Removal of barriers between two markets for the same product, so that prices on the two markets become more
closely linked. Trade liberalization contributes to international market integration.

• Markets differ in the extent of integration and therefore there is a variation in their degree of
efficiency
• Shows the relationship of firms in a market/Fusion of multiple markets places to one
• Example of market integration: Are the establishment of wholesaling facilities by food retailers and
the setting up of another plant by a milk processor
Reasons for Market Integration

To remove transaction cost

Foster competition

Provide better signals for optimal generation

and consumption decisions

Improve security and supply

Theoretically one can integrate two markets

without interconnection
 TYPES OF MARKET

Vertical
Horizontal integration
• Forward Conglomeration
Integration integration
• Backward
integration
 HORIZONTAL
INTEGRATION Landbank of the
Philippines- Facebook-
Postal Savings Instagram
Bank
● This occurs when a firm or agency gains
control of firms or agencies performing
similar marketing functions at the same Jollibee Foods
SM prime-SM
level in the marketing sequence. Corp.(JFC)- Development
Mang Inasal Corp.(SMDC)-
Philippines Highlands Prime
● In this type of integration, some marketing Inc. Inc.(HP)

agencies combine to form a union with a view

to reducing their effective number and the
extent of actual competition in the market. EXAMPLES
It is advantageous for the members who join
the group.
 Firm A

Parent
Firm C Business Firm B
Firm

Firm D
 CORPORATION
(Jollibee Foods Corp.(JFC))
 Horizontal
ADVANTAGES Integration
 Lower costs
 Higher efficiency
 Increased product differentiation
 Increased market power
 Reduced competition
 Access to new markets
 Economics of scale
 Economics of scope –a proportionate saving by producing
two or more distinct goods, when the cost of doing so is less
than of producing each separately
 International trade
 Horizontal
disadvantages Integration
 Destroyed value
 Legal repercussion-an
unintended consequence of
an event or action
 Reduced flexibility
 Vertical Pldt-smart-
piltell
integration
Globe and innove(
● This occurs when a firm performs more than one
activity in the sequence of the marketing process. It is
former isla EXAMPLES
communications inc.
a linking together of two or more functions in the
or islacom)
marketing process within a single firm or under a
single ownership.

● This type of integration makes it possible to exercise

control over both quality and quantity from the Pldt-digitel
beginning of the production process until the product
is ready for the consumer. It reduces the number of
middle men in the marketing channel.
Vertical Integration Parent
agribusiness
firm
TYPES OF VERTICAL INTEGRATION

Forward Backward Balanced vertical

integration integration integration

● If a firm assumes ● This involves • A combination of

another function of ownership or a the backward
marketing which is combination of and the forward
closer to the sources of supply. vertical
consumption integration
function. Example:
When a processing firm
Example: assumes the function of
Wholesaler assuming assembling/ purchasing
the function of retailing the produce from the
villages.
 raw material

manufacturing

BACKWARD INTEGRATION

distribution

Example
ikea
FORWARD INTEGRATION retail
Example
Apple
mcdonalds After sales
services
 Vertical Integration
ADVANTAGES
 It allows to invest in assets that are highly
specialized
 It gives more control over the business
 It allows positive differentiation
 It requires lower costs of transaction
 It offers more cost control
 It ensures a high level of certainty when it
comes to quality
 It provides more competitive advantages
 Vertical Integration
disadvantages
 Capacity- balancing problems
 Bring about more difficulties
 Results in decreased flexibility
 Create some barriers to market entry
 Cause confusion within the business
 Requires a huge amount of money
 Conglomeration Sm investments
corp.-2go

The ayala group-

• A combination of agencies or zalora- bf jade e-
activities not directly related to EXAMPLES
services,inc.
each other may, when it operates
under a unified management.
Viva
communications
inc.-ipvg
 Agri-business Conglomerate

Fruit sales and

Food
Retail repair of Manufacture
grains processing Cloth mill
chain electronic of vanaspati
trade unit
goods
 Effects of integration
Vertical Horizontal
integration integration
conglomeration

• More profits by taking up • Buying out a competitor in a • Risk reduction through

additional functions time bound way to reduce diversification
• Risk reduction through competition • Acquisition of financial
improved market co- • Gaining larger share of the leverage
ordination market and higher profits • Empire-building urge
• Improvement in bargaining • Attaining economics of scale.
power and the prospects of • Specializing in the trade
influencing prices.
• Lowering costs through
achieving operational
efficiency.
 DEGREE OF INTEGRATION

Ownership Contract
Integration Integration
This occurs when all the This involves agreement between
decisions and assets of a two firms on certain decisions,
firm are completely while each firm retains its
assumed by another firm. separate identity.

Example : Example:
A processing firm which buys a Tie up of a dhal mill with pulse
wholesale firm traders for supply of pulse
grains.
Thank you !