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Lesson 5

Market integration refers to the expansion of firms through consolidating additional functions under single management. There are three main types: horizontal integration combines same industry firms; vertical integration links functions in the marketing process; and conglomeration combines unrelated activities. Market integration aims to reduce costs, foster competition, provide optimal signals, and improve supply security. Firms integrate through full ownership or contractual agreements while retaining separate identities.

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49 views17 pages

Lesson 5

Market integration refers to the expansion of firms through consolidating additional functions under single management. There are three main types: horizontal integration combines same industry firms; vertical integration links functions in the marketing process; and conglomeration combines unrelated activities. Market integration aims to reduce costs, foster competition, provide optimal signals, and improve supply security. Firms integrate through full ownership or contractual agreements while retaining separate identities.

Uploaded by

Carla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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TRADING GAME

LESSON 5: MARKET
INTEGRATION
• Explain the role of international financial institutions in the
creation of a global economy;
• Narrate a short history of global market integration in the
twentieth century; and
• Identify the attributes of global corporations
WHAT IS MARKET INTEGRATION?
• a process which refers to the expansion of firms by
consolidating additional functions and activities under
a single management
TYPES OF MARKET INTEGRATION
• Horizontal Integration
• Vertical Integration
• Conglomeration
HORIZONTAL INTEGRATION
• same marketing agencies combine to form a
union to reduce their effective number and the
extent of actual competition in the market
• e.g. Facebook with Instagram (2012 for $1
billion)
HORIZONTAL INTEGRATION
Acquiring company Acquired Company
• Kraft Foods • Cadbury
• PepsiCo • Quaker Oats
• Pfitzer • Wyeth
• Pfitzer • Pharmacia Corporation
• AT&T • T-Mobile
• Porsche • Volkswagen
• Daimier Benz • Chrysler
• Facebook • WhatsApp
• Google • Motorola
HORIZONTAL INTEGRATION
Acquiring company Acquired Company
• Quaker Oats • Snapple
• AT&T • Bell South
• HP • Compaq
• Delta • Northwest Airlines
• United Airlines • Continental
• Microsoft • Taleo
• Microsoft • Yahoo
• Apple • AuthenTec
• BP • Amoco
VERTICAL INTEGRATION
• a firm performs more than one activity in the
sequence of the marketing process
• Linking together two or more functions in the
marketing process within a single firm or
ownership
• e.g. wholesale as well as retailing
• MEAT Industry
• Cattle
• Slaughter House
• Refrigerate Railroad Cars
• Cooled Warehouse
• Meat Packing Plants
• Delivery Wagons
• AGRI-BUSINESS FIRM:
• Wholesaling of feed
• Feed Mills
• Transport Agency
• Food grains trade
TYPES OF VERTICAL INTEGRATION

FORWARD INTEGRATION BACKWARD INTEGRATION


• activities close to the • Combination of sources of
consumption function supply
• Wholesale assuming the • Processing firm assumes the
function of retailing function of assembling or
purchasing
VERTICAL INTEGRATION
• Farmer
• Processor
• Wholesaler
• Retailer
• Customer
FORWARD VERTICAL INTEGRATION
• Rogers (Canadian Communication which
operates local television channels)
• Cooking and Talk Shows: advertise and sell digital
products using electronic version of a retail store
BACKWARD VERTICAL INTEGRATION
• amazon.com ( a book seller and a book
publisher)
• buys books from various suppliers
• publishes and sells books with its own publishing
company
CONGLOMERATION
• combination of activities or agencies not directly
related to each other may operate in a unified
management
• e.g. Hindustan Unilever Ltd. (processed
vegetables and soaps) ; Delhi Cloth and General
Mills (Cloth and Vanaspati)
CONGLOMERATION
• Agri-Business Conglomerate:
• Food Grains trade
• Fruit Processing Unit
• Cloth Mill
• Sales and Repairs of Electronic Goods
REASONS FOR MARKET INTEGRATION
• To remove transaction costs
• Foster competition
• Provide better signals for optimal generation and
consumption decisions
• Improve security of supply
DEGREE OF INTEGRATION
• OWNERSHIP INTEGRATION
• all decisions and assets of a firm are completely assumed
by another firm
• e.g. a processing firm which buys a wholesale firm
• CONTRACT INTEGRATION
• agreement between two firms on certain decisions
while each firm retains its separate identity
• e.g. tie up of mill with traders for supply of grains

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