2. Introduction
CHAPTER 3 2
• Economy is the social institution that has the biggest impact
on society. We usually think of economy in terms of numbers –
number of unemployed, GDP, or how the stock market is doing
today.
• While we often talk about numerical terms, the economy is
composed of people. The people is the social institution that
organizes everything happening in the society; production,
consumption, and trade of goods.
3. Introduction
CHAPTER 3 3
• There are may ways in which products can be
made, exchanged, and used.
• Think about capitalism and socialism.
• These economic systems – and the economic
revolutions that created them – shape the way
people live their lives.
4. Introduction
CHAPTER 3 4
• Market integration refer to a situation in which
the prices of related goods and services sold in a
defined geographical location also begin to move
in some sort of similar pattern to one another.
• When markets are integrated, the supply of food
adjusts spatially to meet demands.
• Example: Price and Supply of Soda (Soft drinks)
5. Learning Objectives
5
1. Narrate a short history of global
market integration in the twentieth
century.
2. Identify the attributes of global
corporations.
3. Explain the role of international
financial institutions in the creation
of a global economy.
CHAPTER 2
7. HISTORY OF GLOBAL MARKET INTEGRATION
CHAPTER 3 7
• As early as 19th century global market integration became a
reality because of the advance development of technology.
• From the development of steam engines down to the
development of railroads and ports which paved way to
faster world transport network.
• Market integration first peaked in 1913 when unfettered
markets ruled the day.
8. HISTORY OF GLOBAL MARKET INTEGRATION
CHAPTER 3 8
• Integration declined over the next 60 years as countries
experienced the Great Depression and shunned international
capital markets.
• Global market integration began when large American companies
began to emerge after the second world war.
• International telegraph buy Avis car rental, hotel Sheraton,
continental banking and more.
• Then, Japan and Europe followed suit.
9. Avis car rental
• Avis Car Rental, LLC is an American car rental
company headquartered in Parsippany, New
Jersey.
• Along with Budget Rent a Car, Budget Truck
Rental and Zipcar, Avis is a unit of Avis Budget
Group.
• Avis Budget Group operates the Avis brand in
South Africa, North America, South America,
India, Australia, and New Zealand.
CHAPTER 2 9
HISTORY OF GLOBAL MARKET
INTEGRATION
10. Hotel Sheraton
• Sheraton Hotels and Resorts is an
international hotel chain owned by Marriott
International.
• As of June 30, 2020, Sheraton operates 446
hotels with 155,617 rooms globally, including
locations in North America, Africa, Asia
Pacific, Central and South America, Europe,
the Middle East and the Caribbean, in addition
to 84 hotels with 23,092 rooms in the pipeline.
CHAPTER 2 10
HISTORY OF GLOBAL MARKET
INTEGRATION
11. HISTORY OF GLOBAL MARKET INTEGRATION
CHAPTER 3 11
• The two revolutions of history of global market
integration are The Agricultural Revolution and the
Industrial Revolution.
• The Agricultural Revolution
➢ It is the name given to a number of cultural
transformations that initially allowed humans to
change from a hunting and gathering subsistence to
one of agriculture and animal domestications.
12. HISTORY OF GLOBAL MARKET INTEGRATION
CHAPTER 3 12
• The Industrial Revolution
➢The Industrial Revolution transformed economies that
had been based on agriculture and handicrafts into
economies based on large-scale industry, mechanized
manufacturing, and the factory system.
➢New machines, new power sources, and new ways of
organizing work made existing industries more
productive and efficient.
13. • Market integration in the global
economy refers to the degree to
which distinct markets of different
regions or nations operate as a
single market.
• This operation is often indicated by
similar prices and a high volume of
cross-border transactions.
CHAPTER 2 13
GLOBAL MARKET INTEGRATION
14. GLOBAL MARKET INTEGRATION
CHAPTER 3 14
• Market integration is a crucial aspect of globalization, as it
refers to the process of removing trade barriers and allowing
for the free flow of goods, services, and capital across
international borders.
• All goods imported into the Philippines are subject to duty and
tax upon importation, including goods previously exported
from the Philippines, except as otherwise provided for in the
CMTA (Customs Modernization and Tariff Act –RA 10863) or in other laws.
• The Philippines applied duty rates for certain products to
protect local producers.
15. GLOBAL MARKET INTEGRATION
CHAPTER 3 15
• As a rule, imported manufactured goods competing with
locally produced goods face higher tariffs than those without
local competition.
• The Philippines implemented the 2017 version of the ASEAN
Harmonized Tariff Nomenclature (AHTN).
• The Philippines’ simple average Most Favored Nation (MFN)
applied tariff rate was 6.1% in 2022.
• The Philippines’ simple average MFN applied tariff rate was
9.8% for agricultural products and 5.5% for non-agricultural
products in 2022.
16. GLOBAL MARKET INTEGRATION
CHAPTER 3 16
• The Philippines eliminated tariffs on approximately
99% of all goods from ASEAN trading partners under
the ASEAN Free Trade Area (AFTA) agreement.
• Under the Regional Comprehensive Economic
Partnership (RCEP) agreement, the Philippines
retained zero tariff rates or existing MFN rates for
98.1% of all goods from China, Japan, South Korea, New
Zealand, Australia, and ASEAN trading partners.
17. The importation and exportation of the following
goods are prohibited in the Philippines
CHAPTER 3 17
• (a) Written or printed goods in any form containing any matter advocating or inciting
treason, rebellion, insurrection, sedition against the government of the Philippines,
written or printed goods containing any threat to take the life.
• (b) Goods, instruments, drugs and substances designed, intended or adapted for
producing unlawful abortion;
• (c) Written or printed goods, negatives or cinematographic films, photographs,
engravings, lithographs, objects, paintings, drawings or other representation of an
obscene or immoral character;
• (d) Any goods manufactured in whole or in part of gold, silver or other precious metals
or alloys and the stamp, brand or mark does not indicate the actual fineness of quality
of the metals or alloys;
• (e) Any adulterated or misbranded food or goods for human consumption or any
adulterated or misbranded drug in violation of relevant laws and regulations;
• (f) Infringing goods as defined under the Intellectual Property Code and related laws;
Source: Section 118 of CMTA (CMTA-RA-10863.pdf)
18. DEGREE OF INTEGRATION
CHAPTER 3 18
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. Example: tie up of a company with traders to supply
grains.
19. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 19
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.
➢ Horizontal integrations help companies grow in size and revenue,
expand into new markets, diversify product offerings, and reduce
competition.
20. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 20
Acquiring company Acquired company
21. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 21
Acquiring company Acquired company
22. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 22
1. Horizontal integration.
➢ Some well-known recent examples of horizontal integration
include Walt Disney Company's acquisition of 21st Century Fox,
Marriott International's acquisition of Starwood Hotels & Resorts
and the Facebook (Meta) acquisition of Instagram.
➢ Disney, Facebook, and Coca-Cola are good examples of horizontal
integration: they merged with their competitors and smaller
companies from the same niche to gain a bigger market share.
23. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 23
IN THE PHILIPPINES
24. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 24
1. Horizontal integration.
➢ If a company owns every bit of a production process, then it is known as a
horizontal monopoly.
➢ Although this is much more difficult to achieve than a vertical monopoly.
➢ Horizontal Integration was made famous by John D. Rockefeller's Standard
Oil company.
25. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 25
Three primary forms of Horizontal Integration
• Mergers - the joining of two similar sizes, independent
companies to make one joint entity
➢ In recent years, there are many notable mergers of large banks.
These include: the Bank of the Philippine Islands and Far East
Bank and Trust Co. merger in 2000, Banco de Oro and Equitable
PCI Bank merger in 2007; and Philippine National Bank and Allied
Banking Corporation merger in 2012.
26. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 26
Three primary forms of Horizontal Integration
• Acquisitions - the purchase of another
company
➢Jollibee Food Corporation acquiring Mang
Inasal for P3 billion pesos with 30% being
retained by the original owner.
27. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 27
Three primary forms of Horizontal Integration
• Internal expansions - Internal expansion is a strategy businesses use to
grow organically, focusing on enhancing existing operations, products, and
markets. It's about leveraging core strengths to innovate and increase market
share without merging with or acquiring other companies
• A notable horizontal expansion example.
28. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 28
1. Horizontal integration.
➢Among the benefits are an increase in market share,
reduced competition, and increases in other synergies.
➢There are disadvantages, such as antitrust issues and
legalities, a reduction in flexibility, and destroying value
rather than creating it.
29. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 29
2. Vertical integration.
➢It is a business arrangement in which a company controls
different stages along the supply chain.
➢Instead of relying on external suppliers, the company
strives to bring processes in-house to have better control
over the production process.
30. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 30
2. Vertical integration.
➢ The most famous vertical integration examples are Apple,
McDonald's and Amazon.
➢ A good example of vertical integration is Apple, which keeps
controlling the whole manufacturing process.
➢ Having used to outsource producing some parts before, the
company now manufactures basically everything: from chipsets to
cases.
31. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 31
2. Vertical integration.
➢In the Philippines, fast food giant
Jollibee, is the epitome of efficient
vertical integration as the brand
controls the manufacture of its
primary products, logistics and sale
of the products through retail
outlets.
33. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 33
2. Vertical integration.
➢ Vertical integration can be difficult to capitalize on — it's costly,
complex and not easily undone.
➢ However, when well executed, it can confer a number of
advantages, including greater control, reduced costs, increased
profitability, better product or service quality, increased customer
and market insights and more.
34. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 34
3. Conglomeration
➢ A conglomerate is a type of multi-industry company that
consists of several different and unrelated business entities that
operate in various industries under one corporate group.
➢ For some firms, the formation of a conglomerate enables them to
stay afloat and increase profitability by being able to lean on the
combined efforts and resources of multiple companies.
35. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 35
3. Conglomeration
➢Examples of conglomerates are Berkshire Hathaway,
Amazon, Alphabet, Meta (formerly Facebook), Procter &
Gamble, Unilever, Diageo, Johnson & Johnson, and Warner
Media.
➢All of these companies own many subsidiaries.
36. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 36
3. Conglomeration.
➢ In the Philippines, Ayala corporation is another prominent
conglomerate in the Philippines. Its diverse business portfolio
includes real estate development, banking and financial services,
water utilities, telecommunications, and power generation.
➢ San Miguel Corporation, SM investments, BDO, PLDT, Aboitiz,
Jollibee, and many more.
38. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 38
3. Conglomeration.
➢Conglomeration allows a company to diversify its revenue
stream, reduce its market risk, and the possibility of a
takeover.
➢If not managed well, conglomerates can lead to
vulnerabilities in the parent company by being spread too
thin from managing too many companies.
39. 3 BASIC TYPES OF MARKET INTEGRATION
CHAPTER 3 39
3. Conglomeration.
➢Despite its rarity, conglomerate mergers have several
advantages: diversification, an expanded customer base,
and increased efficiency.
➢Through diversification, the risk of loss lessens. If one
business sector performs poorly, other, better-performing
business units can compensate for the losses.
40. THE IMPACT OF MARKET INTEGRATION TO GLOBAL ECONOMY
CHAPTER 3 40
• Increased economic efficiency:
➢ Market integration allows for the efficient allocation of resources,
enabling countries to specialize in the production of goods and
services in which they have a comparative advantage.
➢ Market integration has a profound impact on global trade and
economy.
➢ It leads to greater synchronization in price movements, a wider
range of suppliers and commodities, and improved market
efficiency.
41. CHAPTER 2 41
INTERNATIONAL FINANCIAL
INSTITUTIONS
▪ An international financial institution (IFI) is a
financial institution that has been established (or
chartered) by more than one country, and hence is
subject to international law.
▪ The international financial institutions play a major
role in the social and economic development of
countries with emerging economies such as changing
market positions.
▪ This includes advising, funding, and assisting on
development projects to: reduce global poverty and
improve living conditions and standards.
42. THE ROLE OF INTERNATIONAL FINANCIAL INSTITUTIONS IN THE
CREATION OF GLOBAL ECONOMY
CHAPTER 3 42
– The World Bank’s role is to reduce poverty by lending money
to the governments of its poorer members to improve their
economies and to improve the standard of living of their people.
– The Bank is also one of the world's largest research centers in
development.
– The IMF promotes global macroeconomic and financial stability
and provides policy advice and capacity development support to
help countries build and maintain strong economies.
43. HOW INTERNATIONAL FINANCIAL INSTITUTIONS HELP THE
PHILIPPINES?
CHAPTER 3 43
– IFC provides and mobilizes capital to encourage private
investments in the Philippines, especially in underfinanced sectors
such as renewable energy, energy efficiency, water, and agriculture.
– IFC also work with the government to attract investors to much-
needed infrastructure projects.
– IFC helps lay the foundation for long-term growth by improving
the business environment, promoting sustainable and reliable
energy in rural areas, and enabling small businesses and out
grower farms to access credit, increase productivity, and reach
profitable markets.
44. HOW INTERNATIONAL FINANCIAL INSTITUTIONS HELP THE
PHILIPPINES?
CHAPTER 3 44
IFC’s projects in the Philippines
▪ Increasing Access to Finance
▪ Financing Sustainable Energy Projects
▪ Building Infrastructure for the Future
▪ Small Farmers, Bigger Markets
▪ Making Doing Business Easier
▪ Harnessing Power from Beneath the Earth
45. GLOBAL CORPORATIONS
CHAPTER 3 45
• A global corporation, also known as a global company, is coined
from the base term ‘global’, which means all around the world. It
makes sense to assume that a global company is a company that
does business all over the world.
• To be a global company, you need to introduce not only your
products, but also your company to people who live in another
country.
• These organizations are motivated to make profit, since that is
what they exist for.
47. ATTRIBUTES OF GLOBAL CORPORATIONS
CHAPTER 3 47
• Neubauer (2014) identifies three of them -
➢ an agent of desired economic development,
➢ an economic prominence, and
➢ a very powerful entity that can create a crisis.
• These corporations may hit their target of economic development by
making their consumer products available in many parts of the globe.
48. ATTRIBUTES OF GLOBAL CORPORATIONS
CHAPTER 3 48
• They have a wider marketing area and use complex marketing
strategies and functions.
• They use global standardization for the products they produce.
• They focus on resources, such as human, money, and physical assets,
and on global consumer satisfaction.
• They have a market presence, a supply base, a capital base, and a
corporate mind-set that span multiple countries.
• They lack a dominant headquarters and are governed by the laws of
the country where they are incorporated.
49. SUMMARY
CHAPTER 3 49
• Market integration is the interconnectivity of prices among different
locations or related goods.
• Reduced transportation costs, the minimization of trade barriers, and
advancements in communication technology have all contributed to
increased market integration.
• Market integration is important because it Increased economic efficiency.
• Market integration allows for the efficient allocation of resources, enabling
countries to specialize in the production of goods and services in which they
have a comparative advantage.
50. SUMMARY
CHAPTER 3 50
• Lastly, Market Integration affect our lives:
• Lower prices: Market integration often leads to increased
competition among businesses, which can result in lower
prices for consumers.
• This means that an ordinary person can potentially afford
more goods and services, improving their overall standard of
living.
