Market Integration

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MARKET INTEGRATION

Now let’s proceed to our next topic, which is market


integration, so what do we mean by market integration?
Market integration is a process in which marketplaces
for goods and services that are connected in some way
begin to exhibit comparable patterns of price increase or
decrease.
And according kohls and uhl they 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
Market integration also shows the relationship of the
firm in a market, and the behavior of a highly integrated
market is different from a disintegrated market.

TYPES
So, there are 5 types of market integration which is the
horizontal integration, vertical integration. Forward
integration, backward integration And conglomeration.
The first type of market integration is Horizontal
integration. Horizontal integration occurs when a firm
gains control of other firms performing similar marketing
functions at the same level in the marketing sequence
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,
which leads to reduced cost of marketing. So, in this
type of integration, some marketing agencies combine
with a view to reducing their effective number and the
extent of actual competition in the market.

The 2nd type is vertical integration, vertical integration


occurs when a firm performs more than one activity in
the sequence of the marketing process
This type of integration makes it possible to exercise
control over both quality and quantity of the product
from the beginning of the production process until the
product is ready for the consumer.

Now we have forward integration. The term 'forward


integration' refers to the way in which a company
becomes closer to interacting directly with its end
customers. So, if a firm assumes another function of
marketing which is closer to the consumption function,
it is a case of forward integration

Next is Backward integration it is the process by which a


company moves further from serving its end markets
directly and is now more oriented around product
development and manufacturing. Backward integration
strategies are completed to obtain greater control over
the earlier stages of the value chain, such as the
functions performed by specialized manufacturers and
suppliers.
Lastly is conglomeration. Conglomeration is a
combination of agencies or activities that are not directly
related to each other.
A conglomerate is not only a group of several or more
than one separate companies, but also a very large
corporation, composed of several combined companies
that were formed by takeovers or mergers. In most
cases, a conglomerate supplies a variety of goods and
services that are not necessarily related to one another.
EXAMPLES
I have here 3 examples of horizontal integration which
is Heinz, kraft foods, and sysco

The examples of vertical integration are categorized by


6 categories which is the mobile phone, consumer
electronics, oil, gas and energy, ecommerce,
automobiles, and lastly is media and entertainment.

These are examples of conglomeration in the


Philippines
• ABS-CBN Corporation
• Ayala Corporation
• GMA Network Inc.
• GT Capital Holdings
• JG Summit Holdings
• Lopez Group of Companies
• Metro Pacific Investments
• Motortrade
• San Miguel Corporation
• SM Investments Corporation
EFFECTS
The effects of horizontal integration are gaining larger
share of the market and higher profits, buying out a
competitor in a time bound way to reduce competition.

Effects of vertical integration are


More profits by taking up additional functions
Improvement in bargaining power and the prospects of
influencing prices.

Effects of conglomeration are


Risk reduction through diversification, and acquisition of
financial leverage

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