Adelphi College

Lingayen, Pangasinan

SUBJECT: Contemporary World.

TOPIC: Chapter 3. Market Integration
PROFESSOR: Ms. Juliet B. Mapanao
REPORTER: Teresa S. Calica
Mary joy Rabadon
Hannah Alliah Maring
Rosalyn Fernandez
Jorica Yanza
Glaiza Alipio
Michelle Arogana
John Ruzzel DA. Castro
Joyce Resuelto
Kimberly C. Delacruz
Camille Bustamente
Ruffa Mae Quinto

Market Integration

 Occurs when prices among different locations or related goods follow similar patterns over

a long period of time. Groups of good often move proportionally to each other and when

this relation is very clear among different markets it is said that the markets are integrated.

Thus market integration is an indicator that explains how much different markets are

related to each other.

 1. Horizontal integration

 Is the process of company increasing production of goods or services at the same part of

the supply chain?

 A company may do this via internal expansion, acquisition or merger. The process can lead

to monopoly if a company captures the vast majority of the market for that product

service.

ADVANTAGE OF HORIZONTAL INTEGRATION

 Lower costs.

 higher efficiency

 Increased differentiation.

 increased market power

 reduced competition

 Access to new markets.

 Economics of scales.

 economics of scope

 international trade

DISADVANTAGE OF HORIZONTAL INTEGRATION

 Costs

 Increased work load

 Increased Responsibilities

 Anti-trust issues

 Creating a monopoly
 2. CONGLOMERATE INTEGRATION

 It is the combination of firms in different industries or firms operating in different

geographic areas.

 Conglomerate merger can serve various purposes, including extending corporate

territories and extending a product range.

ADVANTAGE OF CONGLOMERATE INTEGRATION

 Diversification of Business

 Gain synergies

 Utilization of excess Cash

 Improve Customer base

 Utilization of human resources.

 Economics of scale

DISADVANTAGE OF CONGLOMERATE INTEGRATION

 No past experience

 shift in focus

 complication

 Governance Issue

3. VERTICAL INTEGRATION

 Vertical integration backwards occurs when a firm merges with its suppliers. Vertical

integration forward occurs when a firm merges with its market outlets.

ADVANTAGE OF VERTICAL INTEGRATION

  It allows you to invest in assets that are highly specialized

 It gives you more control over your business.

 It allows for positive differentiation.

 It requires lower cost of transaction.

 It offers more cost control.

 It ensures a high level of certainly when it comes to quality and,

 it provides more competitive

DISADVANTAGE OF VERTICAL INTEGRATION

 Capacity balancing ; Making sure that inputs will match outputs at all levels

 Potential higher cost due to lack of supplier compaction

 Decreased flexibility

 Developing new competencies may compromise existing competencies

 Increase bureaucratic cost

 Monopolization of markets

EFFECT OF INTEGRATION ON MARKET DEVELOPMENT

 Market integration provides opportunity to expand market coverage by selling

local products in the global market.

 Market integration also help to reduce market failure.

 If the market are not well integrated it indicates that market are not efficient, that

will help to form new strategy to develop the market. Different in the prices in

integrated market should be equal if they are well integrated.

REASON FOR MARKET INTEGRATION

 TO REMOVE TRANSACTION COSTS.

 FOSTER COMPETITION

 PROVIDE BETTER SIGNALS FOR OPTIMAL GENERATION AND CONSUPTION

DECISIONS.

 IMPROVE SECURITY OF SUPPLY

DEGREE OF MARKET INTEGRATION

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, while each firm

retains its separate identity.

Example; tie up of dhal mill with pulse traders for supply of pulse grains.

MEASUREMENT OF MARKET INTEGRATION

The measurement or assessment of the extent to market integration is helpful in the formation

of appropriate policies for increasing the efficiency of marketing process.

The measurement or assessment of market integration may be attempted at two levels.

1) Integration among firms of a market

 2) Integration among spatially separated markets.

The General Agreement on Tariffs and Trade (GATT) and the World Trade Organization
(WTO)

GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)

 Is a legal agreement between many countries whose overall purpose was to promote

international trade by reducing or eliminating trade barriers such as tariffs and quotas?

 OCTOBER 1947- GATT was signed by 23 Nations in Geneva and took effect on January

1948.

 APRIL 1994-It remained in effect until the signature by 123 Nations in Marrakesh.

 GATT focused through negotiation trade agreements conducted in many rounds of

negotiation. It was out of Uruguay Rounds (1986-1993) agreement which established

the world trade organization on jan.1995

INTERNATIONAL MONETARY FUND (IMF) AND THE WORLD BANK

-IMF and the Bank were founded after the World War II.

-Their establishment was mainly because of peace advocacy after the war.

-Most of the world’s countries were member of the two institutions. But, of course, the

richest countries were those who handled most of financing and ultimately, those who

had the greatest influence.

 -The IMF’S main goal was to help countries which were in troupe at the time who could

not obtain money by any mean

-Yemen loaned 93 million dollars from IMF on April 5, 2012 to address its struggle with

terrorism.

-Its main goals revolved around the eradication of poverty and it funded specific projects

that helped them reach their goals, especially in poor countries.

IMPLICATIONS OF UNEMPLOYMENT

 -Unemployment can have various implications to individuals, the society, and the whole

country.

The decrease in the supply of goods would also mean less goods to be taxed and

therefore less income for the government.

-And if the government’s taxed source of income is affected, it would affect its ability to

provide basic social service.

-This would mean budget cuts on social service including education, health, housing,

transportation, and technical and vocational job training.

-Increase in the taxation of business may lead to stricter management of workers, hiring

limited manpower, and stagnant income and salary of worker.

-The loss of job many also results to despair, anguish, low self-esteem and self-worth,

which could lead to depression.

 -For the children of the unemployed, it could result to their loss of educational

opportunity and a chance to have a good future.

-However in the Philippines this could be deterred as family member and relatives

support those with financial needs.

ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD)

-The ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD) is a

unique forum where the governments work to promote economic growth, prosperity,

and sustainable development.

-The most encompassing club of the richest countries in the world is the

ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT (OECD) with 35

member states as of 2016, with LATVIA as its latest member.

-It is highly influential, despite the group having little formal power.

ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC)

-ORGANIZATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) is a union of oil

producing countries that regulate the amount of oil each country is able to produce.

-In 1960, OPEC was originally comprised of Saudi Arabia, Iraq, Kuwait, Iran and

Venezuela.

They are still part of the major exporters of oil in the world today.
 It was formed because member countries wanted to increase the price of oil.

EUROPEAN UNION (EU)

 The EUROPEAN UNION (EU) is made up of 28 member states.

 Most members in the Eurozone adopted the euro as basic currency but some

Western European nations like the Great Britain, Sweden, and Denmark did not.

 The policies of the European Central Bank are considered to be significant

contributor in these situations.

Causes of Unemployment

Education Mismatch

 Education Mismatch can be equated to the relevance of degree programs

offered in the country to the needs of the labor market. The preparation

of future job seekers must be able to answer the demand of the labor

market in the following years. It should also provide the future job

seekers with the skills that they need to land a job.

Frictional Unemployment

 Frictional Unemployment refers to the period when a job seeker is in search of a

needed in the job which leads his or her to transfer to another job that is

more aligned with his or her skills stable job or is in between jobs. This can be
 attributes to unsatisfactory salary, benefits, or work environment, and also the

person’s lack of relevant skills.

Number of Graduates

 Education is seen by most people as the key to rise from poverty. This belief is a

prevalent not only in developing countries but also in highly developed ones

such as japan and South Korea. With people knowing the value of education, the

number of graduates increase each year but unfortunately, so do the number of

unemployment graduates. Singapore and India have seen the increasing number

of graduates without jobs in the year 2012 to 2013. In the Philippines the

situation is also the same. Professional land in jobs not suited to what they are

trained for. An example is the number of nurses who are unemployment, second

after teacher, for demand in nurses has stagnated since 2006 in the US, Canada

and since 2019, in Japan. Demand has also went down in the united kingdom in

the last three years.

Inadequate Skills and Talents

 Inadequate skills and talents pertain to the lack of training and preparation of

Filipinos who are looking for jobs. The misalignment of the education and

training of student to the needs of the labor market is a hindrance to anyone

looking for suitable and stable job. This explains why a good percentage of young

graduates are unemployment. The situation is true not only for the Philippines
 but also for countries such as China, Japan and India. Which have reported the

lack of suitable candidates for vacant jobs

NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA)

 The North American free trade agreement (NAFTA) is a trade pact between the United

States, Mexico, and Canada created on January 1, 1994 when Mexico joined the two

other nations. It was first created as trading partners. NAFTA helps developing and

expanding world by broadening international cooperation. The creation of NAFTA has

caused manufacturing jobs from developed nations (Canada or United States) to

transfers to less developed nations (Mexico) in order to reduce the cost their products.

During this time, consumer food prices rose, causing 20 million Mexicans, about 25% of

their population, in lives “food poverty”. As for Canada, 76% of Canadian exports go to

United States and about a quarter of the jobs in Canada are dependent in some way on

the trade with the United States. This means that if NAFTA changes or is eradicated, it

would be devastating for Canada’s economy. Generally, NAFTA has it positive and

negative consequences. It lowered prices by removing tariffs, opened up new

opportunities for small and medium sized businesses to establish as a name for itself,

quadrupled trade between the three countries, and created five million U.S jobs. Some

of the negative effects, however, include excessive pollution, loss of more than 682,000

manufacturing jobs, exploitation of workers in Mexico, and Mexican farmers out of

business.

HISTORY OF GLOBAL MARKET INTEGRATION

  Before the rise of today’s modern economy, people only produced for their family.

Nowadays, economy demands the different sectors to work together in order to

produce, distribute, and exchange products and services. What caused this shift in the

way people produce of their needs? In orders to understand this, we will be going back

in time, 12,000 years ago.

UNEMPLOYMENT IN THE MIDST OF ECONOMIC GROWTH

 The Philippines, in spite of the positive reports of the world economic forum for the past

years, still experiencing a high rate of unemployment or the number of people still

looking for jobs. The increase in the labor force demands the creation of more jobs

which, according to the report, has resulted to 1.8 million Filipino leaving the country to

work abroad. This led 2013 remittance from the abroad to reach USD 23 billion which

greatly helped the economy of country. The Philippine labor force is expected to

increase by 14.9 million between 2015 and 2030. That means that new jobs must be

created to maintain if not decrease, the current unemployment rate. A big section of

unemployed are those with some level; of education.

The Agricultural and Industrial Revolution

 The first big economic change was the Agriculture revolution. When people learn how to

domesticate plans and animals they realized that it was much more productive than

hunter-gatherer society.
  The second major economic revolution is the Industrial Revolution of the 1800’s. With

the rise of industry came new economic tools, like steam engines, manufacturing, and

mass production

 Factories popped up and changed how to work functioned.

Every economic revolution comes with economic casualties. The workers in the

factories who were mainly poor women and children worked in dangerous

conditions for low wages.

SOLUTION OF UNEMPLOYMENT

 Equal economic opportunities on rural and urban areas

The development of rural areas through the establishment of small-scale

industries will spur the interest of locals to stay and work in the countryside.

 Link between education and employment

The legislation of the K to 12 programs is an important step in strengthening

the country’s human capital.

 Government support of business

The government’s effort in encouraging investors to invest in the country

must be done unceasingly through different programs and activities.

 Education as a socially relevant institution

 Education must be made relevant. Education can serve as a way for the

citizens to realize their goals not only for personal satisfaction but also for the

service of the country.

 Labor market information system

The government must continue investing of the improvement of the labor

market information system.

CAPITALISM AND SOCIALISM

CAPITALISM

Is an economic system in it the government plays a secondary role, people and companies

make most of the decision, and own most of the decisions and own most of the

property .

This means of production are largely or entirely and privately owned (by individuals or

companies) and operated for profit.

An economic and political system in which country trade and industry are controlled

by private owner for profit rather than by state.

CAPITAL

 Meaning something value this can be money (financial capital) or any goods that

can be treated. In the word (CAPITAL) originally come from the Latin words

(CAPUT) meaning “HEAD” or “CATTLE” a rich person

Capitalist Countries

 A prerequisite to capitalism is freedom. According to the  Index of Economic Freedom,

a database that measures economic freedom based upon quantitative and qualitative

factors i.e. regulatory efficiency, the following countries can be considered capitalist

countries, listed in order of those with the greatest quantifiable economic freedom:

1. Hong Kong

2. Singapore

3. New Zealand

4. Switzerland

5. Australia

6. Estonia

7. Canada

8. United Arab Emirates

9. Ireland

10. Chile

11. Taiwan

12. United Kingdom

13. Georgia

14. Luxembourg

15. The Netherlands

 16. Lithuania

17. United States

18. Denmark

19. Sweden

20. Latvia

21. Mauritius

22. Iceland

23. South Korea

24. Finland

25. Norway

ADAM SMITH

 A PHILOSOPHER, ”THE WEALTH OF NATION” book was and important that develop the

ideas of capitalism and the free market, the word capitalism was not used until the 19 th

century the greatest invention of capitalism is often said to be joint stock company.

 A joint stock company is a business where different stocks can be bought and owned by

shareholders.

5 MAIN CHARACTERISTICS OF CAPITALISM

 PRIVATE PROPERTY
  IS a legal designation for the ownership of property by non-governmental legal entities,

which is owned by state entity and from collective property which is owned by a group

of non-governmental entities?

CAPITAL ACCUMULATION

 Is the dynamic that motivates the pursuit of profit, involving the investment of money or

any financial asset with the goal of increasing the initial monetary value of said asset

as a financial return whether in the form of profit, rent or interest royalties.

WAGE LABOR

 IS the socioeconomic relationship between a worker and a employment, where the

worker sells their labor power under a formal or informal employment contract

VOLUNTARY EXCHANGE

 IS the act of buyers and seller freely and willingly engaging in market transaction are

made in such a way that both the buyer and seller are better off exchange than before it

occurred.

PRICE SYSTEM

 Is a component of any economic system that uses prices expressed in any form of money

for the valuation and distribution of goods and service and the factor of production?

COMPETITIVE MARKET
 IS one in which a large numbers of producers compete with each other to satisfy the wants

and need of a large number of consumers, in competitive market no single producer or

group of producers and no single consumer, or group consumer can dictate how the

market operates. SOCIALISM

 IS an economic and political system where the ways of making living (factories, office, etc.)

are owned by workers who run them and people who depend on them, meaning the value

made belong to the people who make it, instead of a group of private owners.

 Any various economic and political theories and evocating collective or governmental

ownership and administration of the means of production and distribution of goods.

 A system of society or group of living in which there is no private property.

The term socialism refers to any system in which the production and distribution of goods and

services is a shared responsibility of a group of people. Socialism is based upon economic and

political theories that advocate for collectivism. In a state of socialism, there is no privately

owned property.

Understanding Socialism

In theories developed by Karl Marx, socialism is the transitional period between capitalism and

communism.

Socialism can exist within countries as an overall economic system or within factions thereof

such as corporations, healthcare, public education, and education.

Countries cannot be wholly defined as socialist if they have not declared themselves as such in

a constitution or through their national name. Throughout history socialism may have been

practiced in many countries but the country itself has not been labeled as socialist.

Countries Declared As Socialist

 People's Democratic Republic of Algeria

 Republic of India

 United Republic of Tanzania

 Republic of Angola

 Portuguese Republic

 People's Republic of Bangladesh

 Democratic Socialist Republic of Sri Lanka

 Cooperative Republic of Guyana

 Republic of Mozambique

SOCIOECONOMIC IMPACT OF GLOBAL WARMING AND CLIMATE CHANGE

 Global warming and climate change have varying degrees of effects particularly on

agriculture. On the other hand, subtropical and tropical areas such as the

Philippines have already been affected negatively with the decrease in the yield of

crops.
  EL NINO declaration of the state of calamity in nine barangay in kabacan. North

Cotabato in January 2016. 13-million of agricultural products particularly rice and corn,

barangay of kabacan. 600 hectares of land were destroyed.

GLOBAL CORPORATION

a global corporation, also known as a global company, is coined from the base

term “global”, which means all around the world.

EXAMPLES OF GLOBAL CORPORATIONS

The idea of doing business globally and the characteristics of a global corporation

aren’t all that new, however. Consider Coca - Cola, which in 1886, was struggling

to get by.

Cola now sells its beverages in more than 200 countries. Not only does the Coca

Cola company sell its popular fizzy drinks such as Coke, Fanta and Sprite.

The Coca - Cola company also sells juiced, iced teas, bottled water and a lot

more.

All contemporary global companies once had been more star ups. Coca - Cola was once

a drugstore in Atlanta, Georgia.

THE BENEFITS OF GLOBAL CORPORATION

 The United States small business administration points out that only 4 percent of

global consumers reside in the U.S.

  This means that you stand benefit, in term of sales revenue, by expanding

globally.

 There are also lots of other benefits to globalizing your corporation.

INCREASE YOUR COSTUMER BASE

 When you expand your business into other country, your costumers base

expands along with it.

 The market in the United States could be full of products just like yours.

BOGGED DOWN BY SEASONALITY

 If you sell a seasonal product that experiences fluctuating sales a different times

of the year then you can expand to countries. That have seasons opposite to

those in your base country, enabling you to have high sales figures all year.

THE GROWTH RATE OF YOUR COMPANY

 If your company has been growing rapidly in your locate, chances are that this

growth may eventually stall because of market saturation.

CREATE A NEW JOBS

 You’re likely to employ locals and, in the process, you will create new job

opportunities in the country where you are expanding.

  This helps boost the local economy and it also gives you company a good

reputation.

 Global Warming and climate change will also affect people’s health since some diseases

are determined by the climate.

 >Climate Change will also have effects on malnutrition for it affects the production of

food. Aside from this, rising temperatures cause the increase of heat waves that can kill

humans and animals.

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