Market integration refers to the interconnectedness of prices across different locations or related goods, driven by reduced transportation costs and trade barriers. It improves global trade efficiency and market competition, while offering benefits such as higher profits, new market access, and varied product availability; however, it can also lead to potential downsides like reduced quality and flexibility. There are three primary types of market integration: horizontal, vertical, and conglomeration, each with specific advantages and disadvantages.

1. MARKET INTEGRATION

2. Market integration is the interconnectivity
of prices among different locations or
related goods.
Market Integration

3. Reduced transportation costs, the minimization
of trade barriers, and advancements in
communication technology have all contributed
to increased market integration.
Higher market integration often leads to more
competition, better product quality, and
increased efficiency in the market.

4. MARKET INTEGRATION
- Refers to the unification of
different markets into one, allowing
for the free movement of goods and
services.
This process is facilitated by
reducing barriers, such as tariffs or
quotas, between countries.

5. Market Integration refers to the closeness of
association between prices in two or more
markets.
An increased integration essentially signifies
that the markets are working collectively as one
broader market.
Here, prices are likely to move together and goods,
services, or assets are substituted based on the change
in prices.

6. PRIMARY CHARACTERISTICS OF MARKET
INTEGRATION
•Harmonization of Prices: Integrated markets often exhibit
harmonized or similar price levels.
•Cross-Border Transactions: Integrated markets typically have a
high volume of cross-border transactions.
•Competition: In an integrated market, firms compete not only with
local companies but also with firms in other integrated areas.
•Varied Source of Supply: Market integration allows consumers to
choose from a more extensive array of goods and services.

7. IMPACT OF MARKET INTEGRATION
• 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.
• It helps global trade flourish by making the entire world
a single large market where suppliers can access a
broader set of consumers, and consumers enjoy a wider
choice of products.

8. •Market integration thus plays a crucial role
in shaping global macroeconomic trends,
influencing policy choices, and promoting
competition among firms and economies.

9. BENEFIT OF INTEGRATION
•Growth
• Integration is an efficient and effective method of growing the size of a
company. Growth can help companies provide higher workplace
standards for employees. It can also give companies more resources to
expand sales territories and improve their products.
•Product or Service Improvement
• Integrating two companies can lead to a higher-quality overall product.
For example, if a large technology company merges with a startup with
new security technology, they could integrate their services to make
their overall software product more secure for customers.

10. BENEFIT OF INTEGRATION
•Higher profits
• If a company buys and integrates its services with those of a competitor,
it can lead to higher profits for the merged companies. Growth and
product improvement can also result in higher profits for integrated
companies.
•Cost savings
• Horizontal integration can lower the costs of production for the
acquiring company. For example, if a midsize sports equipment business
acquires another business of the same size and type, the integrated
business can operate with higher output and more efficiency.

11. BENEFIT OF INTEGRATION
•New market access
• Integration can allow companies to sell to new markets or territories. For
example, if a women's clothing company integrates with a fashion brand
serving teens and young adults, this can introduce the women's clothing
company to a new market segment.
•Increased efficiency
• In many cases, integration can lead to greater efficiency. This can affect
other benefits of integration, like higher profits, because a company that
works faster can complete more sales. For example, if a large shoe
company buys a small distribution company that can help increase
shipping productivity, this can result in greater efficiency.

12. BENEFIT OF INTEGRATION
•Lower competition
• If a company buys its competitor, it can enjoy less competition in the
market. Lower competition can give a company more control over its
pricing. It also offers an opportunity to expand sales territories and
develop more products or services to offer customers.
•More variety
• Integrating companies can allow the larger resulting company to offer a
wider variety of products or services. For example, if a hotel chain
purchases a vacation rental company, the integration can result in the
company offering both hotel rooms and vacation properties to customers.

13. BENEFIT OF INTEGRATION
•More market power
• When two companies in an industry merge to integrate their
processes, they can enjoy more power over their distributors
and suppliers. For example, if two construction companies
integrate their services, they can negotiate more lucrative
deals with their suppliers and distributors, which can give
the larger company more resources while increasing profits.

14. POTENTIAL DISADVANTAGES OF INTEGRATION
•Reduction in quality
• A monopoly happens when one company is the only
supplier of a product or service. The lack of competition
can lower a company's incentive to maintain the quality of
its products. It can also lead to low production. A company
can prevent this integration drawback by following laws
and regulations around monopolies and ensuring there
will still be competition even after a merger.

15. POTENTIAL DISADVANTAGES OF INTEGRATION
•Lower returns
• Sometimes, an organization acquires another company with the
belief that the integration will provide financial benefits, but
instead the integration isn't as profitable as the buying company
believed it would be. A company can prevent an integration that
results in a lower valuation by thoroughly researching and
vetting a company it plans to buy. This can also help ensure that
a company is paying a fair price in an acquisition.

16. POTENTIAL DISADVANTAGES OF INTEGRATION
•Less flexibility
• The larger company that results from integration can be
harder to manage because the corporate structure can
become more complicated as a company grows. To
prevent this loss of flexibility, companies considering an
integration can plan for the way it will manage the larger
number of people in the company.

17. > Horizontal Integration
> Vertical Integration
> Conglomeration
THERE ARE THREE BASIC KIND OF MARKET INTEGRATION:

18. HORIZONTAL INTEGRATION
- Is a business strategy where a company
acquires, merges with, or creates alliances
with other companies that operate in the
same industry and at the same level of the
supply chain. This strategy is used to
increase market share, reduce competition,
or access new markets.
TYPES OF MARKET INTEGRATION

19. Horizontal integration occurs when an
organization acquires a company that does
related business on a similar supply chain level.
Horizontal integration is the common form of
business integration between two companies
in the same industry and production level.
For example, a physical therapist staffing company
acquires a company that staffs occupational
therapists.

20. 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.

21. 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

22. DISADVANTAGES OF THE HORIZONTAL INTEGRATION
1. Destroyed Value.
2. Legal Repercussions.
3. Reduced Flexibility

23. VERTICAL INTEGRATION
- Is a business strategy where a company
takes control of more than one stage of its
supply chain. This could involve a company
merging with or acquiring businesses that
operate at different stages of the production
process, from the sourcing of raw materials
to the sale of the final product. The goal is to
increase efficiency, reduce costs, and have
greater control over the production process.

24. EFFECTS OF VERTICAL INTEGRATION
* More profits by taking up additional functions
* Risk reduction through improved market
coordination
*Improvement in bargaining power and the
prospects of influencing prices
* Lowering costs through achieving operational
efficiency

25. 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.

26. 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.

27. CONGLOMERATION/CIRCULAR
INTEGRATING
Is a combination of agencies or activities
not directly related to each other may,
when it operates under a unified
management, be termed a conglomeration.

28. EFFECTS OF CONGLOMERATION
*Risk reduction through diversification
*Acquisition of financial leverage
*Empire - building urge

29. ADVANTAGES OF CONGLOMERATION
1. Diversification
2. Synergies
3. Economies of Scale

30. DISADVANTAGES OF CONGLOMERATION
1. Complexity and Lack of Focus
2. Limited Synergies
3. Lack of Specialization
4. Accountability and Transparency

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