This document discusses different types of market integration: horizontal, vertical, and conglomeration. Horizontal integration occurs when similar firms combine, such as independent oil refineries joining a large oil company. Vertical integration links functions in the marketing process under single ownership, like a meat company owning slaughterhouses, packaging plants, and wholesalers. Conglomeration combines unrelated businesses under unified management, for example a food grains trader and fruit processing unit. The document provides examples and discusses the advantages and disadvantages of each type of integration.

1. Integration shows the relationship of the firm in a
market.
 Kohls and uhl have defined market integration as a
process which refers to the expansion of firms by
consolidating additional marketing functions and
activities under a single management.
 Examples of market integration are the
establishment of wholesaling facilities by food retailers
and the setting up of another plant by a milk processor.
 In each case, there is a concentration of decision
making in the hands of a single management.

2. Types of Market Integration :- There are three basic
kinds of market integration
1.Horizontal integration.
2.vertical integration.
3.Conglomeration.

3. 1. Horizontal integration :-
● This occurs when a firm or agency gains control of
other firms or agencies performing similar marketing
functions at the same level in the marketing sequence
● In this type of integration, some marketing agencies
combine to form a union with a view to reducing their
effective number and the extent of actual competition
in the market.
● It is advantageous for the members who join the
group.

4. PARENT AGRIBUSINESS FIRM
FIRM - A FIRM - B FIRM - C FIRM - D

5. In most markets, there is a large number of agencies
which do not effectively compete with each other.
● This is indicative of some element of horizontal
integration.
● It leads to reduced cost of marketing.
● In this reduced competition possible.

6. Example:- independent oil refineries coming under U.S oil company

7. Effects of Horizontal integration
● Buying out a competitor in a time bound way to
reduce competition.
● Gaining larger share of the market and higher profits.
● Attaining economies of scale.
● Specializing in the trade.

8. Advantages of Horizontal integration
(1)Lower costs.
(2)Higher efficiency.
(3)Increased differentiation.
(4)Increased market power.
(5)Reduced competition.
(6)Access to new markets.
(7)Economics of scale.
(8)Economics of scope.
(9)International trade.
Disadvantages of the Horizontal integration
(1)Destroyed value.
(2)Legal repercussions.
(3)Reduced flexibility.

9. 2. Vertical integration :-
● This occurs when a firm performs more than one
activity in the sequence of the marketing process.
● It is a linking together of two or more functions in the
marketing process within a single firm or under a
single ownership.
● It reduces the number of middle men in the
marketing channel.

10. Example :- Meat industry buys all the functioning plants needed for
running this meat industry.

11. Arrangement of PARENT
AGRI BUSINESS FIRM
Wholesaling
of feed
Feed mill
Transport
agency
Food grains
trade

12.  Types of vertical integration :-
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. Example: wholesaler assuming the
function of retailing.
b) Backward integration :- This involves ownership or
a combination of sources of supply. Example: when a
processing firm assumes the function of
assembling/purchasing the produce from the villages.

13. Advantages of Vertical Integration
1. It allows you to invest in assets that are highly
specialized.
2. It gives you more control over your business.
3. It allows for positive differentiation.
4. It requires lower costs of transaction.
5. It offers more cost control.
6. It ensures a high level of certainty when it comes to
quality.
7. It provides more competitive advantages.

14. Disadvantages of Vertical Integration
1. It can have capacity-balancing problems.
2. It can bring about more difficulties.
3. It can result in decreased flexibility.
4. It can create some barriers to market entry. 5. It can
cause confusion within the business. 6. It requires a
huge amount of money.
7. It makes things more difficult

15. Effects of Vertical integration
 ● More profits by taking up additional functions
 ● Risk reduction through improved market co-
ordination
 ● Improvement in bargaining power and the
prospects of influencing prices
 ● Lowering costs through achieving operational
efficiency

16. 3. Conglomeration/ circular integrating :- A
combination of agencies or activities not directly
related to each other may, when it operates under a
unified management, be termed a conglomeration.
 MANUFACTURE OF VANASPATI SALES AND
REPAIRS OF ELECTRONIC GOODS
 CLOTH MILLRETAIL
 CHAIN FRUIT PROCESSING UNIT
 FOOD- GRAINS TRADE
AGRI -BUSINESS CONGLOMERATE

17. Examples
● Hindustan uni lever ltd.
● Delhi cloth and general mills.
● Birla group.
● Tatas Group.
● J.K.Group.
● ITC. And
● NAFED
Effects of Conglomeration ● Risk reduction through
diversification ● Acquisition of financial leverage ●
Empire – building urge.

18. Effects of Conglomeration:-
 Risk reduction through diversification
 Acquisition of financial leverage
 Empire – building urge.

19. Degree of integration
● Ownership integration :- This occurs when all the
decisions and assets of a firm are completely assumed
by another firm. Example: a processing firm which
buys a wholesale firm.
● Contract integration :- This involves an agreement
between two firms on certain decisions, while each
firm retains its separate identity. Example: tie up of a
dhal mill with pulse traders for supply of pulse grains.

20. Reasons of market integration
1. To remove transaction
2. Foster competition
3. Improve security of supply
4. Consumption decision.