MODULE 2 UNIT 2

MARKET
INTEGRA
TION
 MARKET
INTEGRATION
Market integration occurs when
prices among different locations or
related goods follow similar patterns
over a long period of time. Groups of
goods often move proportionally to
each other and when this relation is
very clear among different markets it
is said that the markets are
integrated.
 ROLE OF INTERNATIONAL FINANCIAL
INSTITUTIONS
They play a major role in the
social and economic development
of countries with emerging
economies. This includes advising,
funding, and assisting on
development projects to: reduce
global poverty and improve living
conditions and standards. support
sustainable economic, social and
institutional development.
 HISTORICAL FOUNDATION OF MARKET
INTEGRATION
The nineteenth century saw substantial advances in international market
integration, and the creation of a truly world economy. Technological advance
was critical in this. The railroad locomotive and the marine steam engine
revolutionized world transport from the 1830s onwards. Steamships
connected the world's ports to each other, and from the ports the railroads
ran inland, creating a new and faster world transport network.

Freight rates fell, and goods could be carried across the world to ever
more distant markets and still be cheaper in those faraway places than the
same item produced locally. Linked closely to these changes was the electric
telegraph, whose lines often ran along the new railroad networks. Telegraph
systems were established in most countries, including the major market of
British India, until 1854.
 Beginning with the first transatlantic cable, which was laid by steamship
in 1866, these existing domestic telegraph systems were linked together by
marine cables. The resulting international information network was crucial in
communicating details of prices and price movements, reducing the cost of
making deals and transactions.

An infrastructural change of major significance came in 1869 with the

opening of the Suez Canal, which linked the Mediterranean Sea by way of
Egypt to the Red Sea: now ships sailing from Europe to Asia could take the
new shortcut rather than sail all the way around Africa. Immediately Asia was
some 4,000 miles closer to Europe in transport terms, and freight costs fell.

Yet the low efficiency of early steamships meant that many bulk cargoes
such as rice still were carried to Europe from Asia by sail around the Cape of
Good Hope.
 Technological change in the shape of
steel hulls and steel masts made sailing
ships larger and more efficient, and they
continued to be active until the more
efficient triple-expansion engine finally
drove the sailing ships from the oceans
during the last quarter of the nineteenth
century.
ATTRIBUTES OF GLOBAL
CORPORATIONS
Global companies have the
characteristics of exporting
distribution, having production units
outside the country of origin and
making alliances with foreign
companies. Global Company (Global
company) is a company that exists /
operates in several countries in the
world.
TYPES OF MARKET INTEGRATION
1. HORIZONTAL INTEGRATION
Horizontal integration occurs when an organization
acquires a company that does related business on a
similar supply chain level. The acquiring company’s
goal is to grow its market share. Horizontal integration
is the common form of business integration between
two companies in the same industry and production
level. For example, a physical therapist staffing
company acquires a company that staffs occupational
therapists.
TYPES OF MARKET INTEGRATION
2. VERTICAL INTEGRATION
When an organization buys a company
in the same industry but at an earlier stage
of production, the acquisition is made
through vertical integration. For example,
a game production company buys a
company with artificial intelligence
technology.
TYPES OF MARKET INTEGRATION
3. FORWARD INTEGRATION

Forward integration is a form of vertical

integration that occurs when an organization
takes over a company in the same industry but
at a later stage of production. For example, a
podcast streaming service that hosts other
shows begins to create and stream its content
through the purchase of a production company.
TYPES OF MARKET INTEGRATION
4. BACKWARD INTEGRATION
When an organization acquires a
company that supplies a raw material or
service, the merger is a form of backward
integration. Backward integration is also a
form of vertical integration. For example, a
company that sells furniture buys a
company that processes wood to create
furniture.
TYPES OF MARKET INTEGRATION
5.CONGLOMERATION
A less frequently used type of integration is a
conglomeration. This occurs when an organization
acquires a company providing an unrelated product or
service. The main goal is diversification allowing
business growth in new areas. The acquiring company is
known as the holding company responsible for the entire
group’s objectives and policies, but each company
operates as a separate business. For example, a lumber
company might buy a sports team to increase brand
recognition.
ECONOMIC
FACTORS
Economic factors
influence consumer
behavior, affect the
standard of living, and
inform business
decisions. Consider the
following economic
factors
 EXCHANGE RATE:
The exchange rate influences the sales of goods
on the global level.

INTEREST RATE:
Interest rates can affect borrowing costs,
dictating business opportunities to finance
projects.
 TAX RATE:
The tax rate affects the
price of goods, which
determines who is willing to
buy a product given its
price point.

WAGES:
Demand, supply, and
unemployment rates can
affect wages. An increase in
wages can boost purchasing
power; a decrease can lower
overall spending.