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Module 4 - Market Integration

Market integration refers to connecting markets through arbitrage so that prices are interdependent. There are three main types of market integration: backward vertical, forward vertical, and horizontal. Backward vertical involves acquiring suppliers, forward vertical involves acquiring distributors, and horizontal involves combining similar businesses. Global corporations face challenges including managing public relations, ethics, organizational structure across countries, and attracting effective international leaders.

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1K views24 pages

Module 4 - Market Integration

Market integration refers to connecting markets through arbitrage so that prices are interdependent. There are three main types of market integration: backward vertical, forward vertical, and horizontal. Backward vertical involves acquiring suppliers, forward vertical involves acquiring distributors, and horizontal involves combining similar businesses. Global corporations face challenges including managing public relations, ethics, organizational structure across countries, and attracting effective international leaders.

Uploaded by

Jeprox Martinez
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© © 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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The Contemporary

World
Module 4:
Market Integration
Introduction
This lesson centers on market
integration, its three basic
types, and the advantages and
disadvantages of each type of
market integration.
Intended Learning Outcomes (ILOs)

Define market integration.

Discuss the three basic types of market integration.

Differentiate the pros and cons of each type of


market integration.
Define global corporation and identify the
challenges encountered by multinational
corporations (MNCs).
DISCUSSIO
N
Defining Market Integration
• Markets are said to be integrated if they are
connected by a process of arbitrage. A well-
integrated market system is central to a well-
functioning market economy. The economic
proposition of integration is that an element of
efficiency is attainable in the unified operation
than in independent actions.
• the integrated economy is
one in which various
economic processes are
McDonal so functionally related to
d (1953) every other process that
the totality of separate
operation forms a single
unit of production with
characteristics of its own.
Signs of integration (McDonald, 1953)
• Many diverse, specialized and independent economic
processes or operations, none of which is complete
or self-sufficient.
• A system of relations between the various processes
which serves to register this interdependence upon
the conduct of each process so that all are caused, in
some manner to fall under the overall plan.
Signs of integration (McDonald, 1953)

• A concatenation of processes in unified


pursuance of the aims and purposes of the
larger scheme of things.
• A mutual replenishment to spent resources to
the end that the continuity of each and all
processes shall not be jeopardized.
• integrated markets are
those where prices are
Faminow determined
and interdependently; which
Benson is assumed to mean that
(1990) price change in one
market affects the prices
in other markets.
• integrated market
Monke in which prices of
and differentiated
Petzel products do not
(1984) perform
independently.
• market integration
Behura as a situation in
and which arbitrage
Pradhan causes prices in
(1998)
described different markets to
move together.
Backward vertical
integration
• This involves acquiring a business
operating earlier in the supply chain – e.g.
a retailer buys a wholesaler, a brewer buys
a hop farm.
Conglomerate
integration

•This involves the combination of


firms that are involved in
unrelated business activities.
Forward vertical
integration
• This involves acquiring a business
further up in the supply chain – e.g. a
vehicle manufacturer buys a car parts
distributor.
Horizontal
integration
• Here, businesses in the same industry
and which operate at the same stage of
the production process are combined.
(Riley 2018)
Global Corporations
• A global company is generally referred to as a multinational
corporation (MNC).
• An MNC is a company that operates in two or more countries,
leveraging the global environment to approach varying markets
in attaining revenue generation.
• These international operations are pursued as a result of the
strategic potential provided by technological developments,
making new markets a more convenient and profitable pursuit
both in sourcing production and pursuing growth.
MNC’s Challenges
• Public Relations: Public image and branding are
critical components of most businesses. Building this
public relations potential in a new geographic region is
an enormous challenge, both in effectively localizing the
message and in the capital expenditures necessary to
create momentum.
MNC’s Challenges
• Ethics: Arguably the most substantial of the challenges
faced by MNCs, ethics have historically played a dramatic
role in the success or failure of global players. For example,
Nike had its brand image hugely damaged through utilizing
‘sweat shops’ and low wage workers in developing
countries. Maintaining the highest ethical standards while
operating in developing countries is an important
consideration for all MNCs.
MNC’s Challenges
• Organizational Structure: Another significant hurdle is the
ability to efficiently and effectively incorporate new regions
within the value chain and corporate structure. International
expansion requires enormous capital investments in many
cases, along with the development of a specific strategic
business unit (SBU) in order to manage these accounts and
operations. Finding a way to capture value despite this fixed
organizational investment is an important initiative for
global corporations.
MNC’s Challenges
• Leadership: The final factor worth noting is attaining
effective leaders with the appropriate knowledge base to
approach a given geographic market. There are differences
in strategies and approaches in every geographic location
worldwide, and attracting talented managers with high
intercultural competence is a critical step in developing an
efficient global strategy.
• Combining these four challenges for global corporations
with the inherent opportunities presented by a global
economy, companies are encouraged to chase the
opportunities while carefully controlling the risks to
capture the optimal amount of value. Through effectively
maintaining ethics and a strong public image, companies
should create strategic business units with strong
international leadership in order to capture value in a
constantly expanding global market. (Lumen Learning
“Global Corporation,” 2019)
THANK YOU!
KEEP SAFE

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