Market Integration

Arbitrage- is the practice of taking advantage of a difference in prices in two or more markets;
-One criteria to be considered for integrated market.

Integrated economy is one in which various economic processes are so functionally related to
every other process that the totality of separate operation forms a single unit of production with
characteristics of its own( McDonald (1953)

signs of Market integration

(a) Many diverse, specialized and independent economic processes or operations, none of
which is complete or self-sufficient.
(b) 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 plan.
(c) A concatenation of processes in unified pursuance of the aims and purposes of the larger
scheme of things.

Market integration - is the phenomenon by which price interdependence takes place.

-integrated markets are those where prices are determined interdependently.
-which is assumed to mean that price change in one market aspects the prices in other
markets.

Not Integrated Market- May convey inaccurate price information which might distort producer
marketing decisions and contribute to inefficient product movements.

Spatial market integration - refers to a situation in which prices of a commodity in spatially

separated markets move together and price signals and information are transmitted smoothly across
the markets.

Spatial market performance can be evaluated by the knowing relationship between the prices of
spatially separated markets and spatial price behavior in regional markets may be used as a measure
of overall market performance (Ghosh, 2000)”

The main types of integration are:

1.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.
2.Conglomerate integration.
This involves the combination of firms that are involved in unrelated business activities.
3.Forward vertical integration.
This involves acquiring a business further up in the supply chain – e.g. a vehicle manufacturer
buys a car parts distributor.
4.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 (from lumenlearning.com, 2019)

Global company - is generally referred to as a multinational corporation (MNC).

Multinational Corporation -is a company that operates in two or more countries, leveraging the
global environment to approach varying markets in attaining revenue generation.
International operations -are therefore a direct result of either achieving higher levels of revenue
or a lower cost structure within the operations or value-chain.
-often attain economies of scale, through mass producing in external markets at substantially
cheaper costs, or economies of scope, through horizontal expansion into new geographic
markets.
Opportunities

As gross domestic product (GDP) growth migrates from mature economies, such as the
US and EU member states, to developing economies, such as China and India.

Challenges

These challenges can loosely be defined through four factors:

 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.
 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.
 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.
 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.

 How can a small local business enterprise compete against a global corporation?