MARKET

INTEGRATION
R E Y R . D E L A V I C T O R I A , M PA
 Outline
05/07/2022

• Assumptions
• Documentary: Undercover Boss
(Chiquita)
• Global Corporations
• Looking back
• Role of International Financial Institutions
• Types of Market Integration
• Types of Business defined

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 Assumptions
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• Students have a little

background on market
operations.
• Basic economics is a given.
• Appreciation on the importance
of institutions (formal and non-
formal)
• WB and IMF
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 Learning Outcomes
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• Narrate a short history of global market

integration in the twentieth century;
• Identify the attributes of global corporations;
• Explain the role of international financial
institutions in the creation of a global economy;
• Assess the different types of Market Integration;
• Compare and contrast the different forms and
types of business.

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 Rationale
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• Since the World Bank and the International Monetary

Fund (IMF) were launched at Bretton Woods, global
economy has undergone transformation in several
important respects:
✓Globalization has progressed a great deal over the
preceding quarter century.
✓WWII destruction and economic recovery as well as
expansion led to rise of American corporations.

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 Rationale
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• The poor performance of statist models of development—

so popular in the past—led to a re-examination of the role
of the state, which in turn motivated a strong shift
towards private, market-based approaches.

• THUS, in these transformations, the private sector and

private international finance have become prime agents
of economic development

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 MARKET
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INTEGRATION
• Is a situation in
which separate
markets for the
same product
become one
single market.

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 MARKET
INTEGRATION
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It occurs when prices

among different locations or
related goods follow similar
patterns over a long period
of time. Groups of prices
often move proportionally to
each other and when this
relation is very clear among
different markets it is said
that the markets are
integrated.

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 MARKET
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INTEGRATION
• Thus, market
integration is an
indicator that
explains how much
different markets are
related to each
other.

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 Market Integration
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• OLD • New
• Kinds of things
traded now are
different in earlier era
• Market integration
now go far beyond
simple goods
• Location of natural resources used
in production of a good (ex:
computer) does not determine
where to produce
• Value of physical materials in the
final product is often trivial
• Technologies can be repeatedly
reused once discovered
• Rare to find purely Japanese or
Filipino product

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 Contemporary Globalization
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• Economic recovery of capital structures (Japan and Europe) and reentry

to global markets
• 1970s-80s, 3 innovations changed global corporations
• Digitalization
• Global communications (CP)
• Structural transformation of global commerce
• From producer driven to consumer driven
• Post-war: 3 structural periods
• Investment based (1950-1970)
• Trade-based globalization (1970-95)
• Digital globalization (1995 onwards)
• Foreign Direct Investments (FDI)
• Major driver of extended global corporate development

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 World financial markets have witnessed profound
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changes over the last few decades.

• strong growth of private capital flows to developing countries

• 2001 was a turbulent year for the global economy and the global financial
markets
• collusion of foreign investors with bureaucracies in search of competition
restraints and privileges,
• the downgrading of value-added components in enterprises acquired by
foreigners.
• But foreign direct investment (FDI) has contributed positively to
development and growth.
• reform process which opens opportunities for profitable investment and
which, through its impact on risks and returns.

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 Objectives of IFIs
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• poverty alleviation,
• economic growth and
• protection of the environment

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Assessment

Where does my
iPhone come from?
Has iPhone brought
benefits to the
workers who make
it?

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 TYPES OF MARKET
INTEGRATION
• 1. Horizontal Integration
• 2. Vertical Integration
• -Forward Vertical Integration
• -Backward Vertical Integration
• 3. Conglomeration

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HORIZONTAL
INTEGRATION
 HORIZONTAL
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INTEGRATION
Also known as
lateral integration.
The merger of two
or more companies
that occupy similar
levels in the
production supply
chain.

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 VERTICAL
INTEGRATION
 VERTICAL
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INTEGRATION
• Is a competitive strategy by which
a company takes complete control
over one or more stages in the
production or distribution of a
product.
• TYPES:
• -Forward Vertical Integration
• -Backward Vertical Integration

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 FORWARD VERTICAL
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INTEGRATION
Business activities are expanded
to include control of the direct
distribution or supply of a
company's products.

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Process in which a
company purchases
or internally
produces segments
of its supply chain.

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CONGLOMERATION
 CONGLOMERATION
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A conglomerate is the
combination of two or
more business entities
engaged in entirely
different businesses that
fall under one corporate
group, usually involving
a parent company and
many subsidiaries.

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ADVANTAGES AND
DISADVANTAGES
H O R I Z O N TA L A N D V E R T I C A L
I N T E G R AT I O N
 HORIZONTAL INTEGRATION
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ADVANTAGES DISADVANTAGES
• Lower Costs • Tough transition
• Higher power in the change
market • Lack of competition
• Reduced competition
• Increased
differentiation
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 VERTICAL INTEGRATION
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ADVANTAGES DISADVANTAGES
• Doesn’t have to rely on • Expense
suppliers
• Gives a company • Reduces flexibility
economies of scale
• Loss of focus
• Retailer can know, what is
selling well • Cultural diversity in
• Low prices the workplace

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TYPES AND FORMS OF
BUSINESS
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BUSINESS ENTITY

It is an organization that uses

economic resources or inputs to
provide goods or services to
customers in exchange for
money or other goods and
services.

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TYPES OF
BUSINESS
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SERVICE BUSINESS
• A service type of business
provides intangible products
(products with no physical form).
Service type firms offer
professional skills, expertise,
advice, and other similar products.

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 MERCHANDISING BUSINESS
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 MANUFACTURING BUSINESS
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• Unlike a merchandising business, a

manufacturing business buys products with
the intention of using them as materials in
making a new product. Thus, there is a
transformation of the products purchased.
• A manufacturing business combines raw
materials, labor, and factory overhead in its
production process. The manufactured goods
will then be sold to customers.

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 HYBRID BUSINESS
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• Hybrid businesses are companies that may be

classified in more than one type of business. A
restaurant, for example, combines ingredients in
making a fine meal (manufacturing), sells a cold bottle
of wine (merchandising), and fills customer orders
(service).
• Nonetheless, these companies may be classified
according to their major business interest. In that
case, restaurants are more of the service type – they
provide dining services.

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FORMS OF
BUSINESS
 SOLE PROPRIETORSHIP
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• A sole proprietorship is a business owned by

only one person. It is easy to set-up and is the
least costly among all forms of ownership.
• The owner faces unlimited liability; meaning,
the creditors of the business may go after the
personal assets of the owner if the business
cannot pay them.
• The sole proprietorship form is usually
adopted by small business entities.

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 SOLE PROPRIETORSHIP
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ADVANTAGES DISADVANTAGES
• Ease of starting and going out • Unlimited liability
of business
• Difficulty in raising financial
• Control over profits and
business operations
capital
• Pride of ownership • Responsibility for all losses
• Lower taxes (no corporate • Management knowledge may
income taxes) be limited

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 PARTNERSHIP
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• A partnership is a business owned by two or

more persons who contribute resources into
the entity. The partners divide the profits of
the business among themselves.
• In general partnerships, all partners have
unlimited liability. In limited partnerships,
creditors cannot go after the personal assets
of the limited partners.

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 PARTNERSHIP
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ADVANTAGES
• Better decision can be made.
• You share the business risk
and responsibility.
• Is easier to form than
cooperative and corporation.
• Lower extent to the government
regulation
• Greater capital than some
proprietorship.
DISADVANTAGES
• Unlimited liability
• Tax like corporations
• Limited life
• You don’t keep all the profits.
• Making business decisions
may give rise to conflict
among the partners.
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 CORPORATION
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A corporation is a business organization

that has a separate legal personality
from its owners. Ownership in a stock
corporation is represented by shares of
stock.

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 LIMITED LIABILITY COMPANY
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Limited liability companies (LLCs) in the

USA, are hybrid forms of business that
have characteristics of both a corporation
and a partnership. An LLC is not
incorporated; hence, it is not considered a
corporation.

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COOPERATIVE
A cooperative is a business organization
owned by a group of individuals and is
operated for their mutual benefit. The
persons making up the group are called
members. Cooperatives may be
incorporated or unincorporated.

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Sources:
• Introduce textbook: Manfred Steger, Paul Battersby, and Joseph M. Siracusa,
eds. 2014.
• The SAGE Handbook of Globalization. Two vols. Thousand Oaks: SAGE.
• Steger, M. (2015). Approaches to the Study of Globalization. United Kingdom:
Blackwell Publishing.
• World Systems Analysis: An Introduction. Durham & London: Duke University
Press, pp. 23-41.
• https://www.youtube.com/watch?v=P5xwuY87Yu0&t=856s
• https://www.youtube.com/watch?v=X0apvSB791I
• https://www.slideshare.net/sakthivelRamar/market-integration-
80094070?qid=0bdf2ac1-2910-41c8-94b3-
a6163065c282&v=&b=&from_search=4

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