Professional Documents
Culture Documents
Integrati
CONTENT
Introduction
Types of market integration
Examples for market integration types
2.vertical integration.
3.Conglomeration.
Horizontal integration
●
This occurs when a firm or agency gains control of other
firms or agencies performing similar marketing functions at the
same level in the marketing sequence
● In this type of integration, some marketing agencies combine
to form a union with a view to reducing their effective number
and the extent of actual competition in the market.
● It is advantageous for the members who join the group.
PARENT AGRIBUSINESS FIRM
●
In most markets, there is a large number of agencies
which do not effectively compete with each other.
●
This is indicative of some element of horizontal
integration.
● It leads to reduced cost of marketing.
● In this reduced competition possible.
Example: independent oil refineries coming under
U.S oil company.
Effects of Horizontal integration
●
Buying out a competitor in a time bound way to
reduce competition.
● Gaining larger share of the market and higher
profits.
● Attaining economies of scale.
● Specializing in the trade.
Advantages of Horizontal integration
(1)Lower costs.
(2)Higher efficiency.
(3)Increased differentiation.
(4)Increased market power.
(5)Reduced competition.
(6)Access to new markets.
(7)Economics of scale.
(8)Economics of scope.
(9)International trade.
Disadvantages of the Horizontal integration
(2)Legal repercussions.
(3)Reduced flexibility.
Companies using horizontal integration
Hp Compaq
Facebook WhatsApp
Google Motorola
2. Vertical integration
●
This occurs when a firm performs more than one activity in
the sequence of the marketing process.
●
It is a linking togetherof two or more functions in the
marketing process within asingle firm or under a single
ownership.
●
This type of integration makes it possible to exercise control
over both quality and quantity of the product from the
beginning of the production process until the product is ready
for the consumer.
●
It reduces the number of middle men in the marketing
channel.
Arrangemet of vertical integration
Wholesaling of feed
Feed mill
PARENT AGRI
BUSINESS
FIRM Transport agency
SALES
CLOTH AND MANUFACTURE
FOOD- FRUIT RETAIL -
MILL REPAIRS OF
GRAINS PROCESSING
TRADE UNIT CHAIN OF VANASPATI
ELECTRONIC
GOODS
Examples
● Hindustan unilever ltd.
● Delhi cloth and general mills.
● Birla group.
● Tatas.
● J.K.group.
● ITC. And
● NAFED.
Effects of Conglomeration
Contract integration
This involves an agreement between two firms on
certain decisions, while each firm retains its separate
identity.
●
Example: tie up of a dhal mill with pulse traders for
supply of pulse
grains.
Measurement of market
integration
The measurement or assessment of the extent of market
integration is helpful in the formation of appropriate policies
for increasing the efficiency of marketing process.
●
The result of a study on the exsistence of vertical and horizontal
integration in the marketing of wheat in eight main wheat producing
districts of Rajasthan revealed that about half of the marketing firms
(50.5%) were integrated vertically because they performed two or
three functions.
● The extent to which prices in spatially seperated
markets move together or are related to transport
costs reflects the degree of integration.
● A two-way analysis of prices in spatially seperated
markets may be used to assess the degree of
integration.
1) Price correlations.
2) Spatial price differential and Transportation
costs.
●
The degree of correlation between two prices is
taken as an index of the extent to which the two
markets are integrated.
● A higher degree of correlation coefficient
indicates a greater degree of integration atleast in
terms of the pricing of the product between market
centres and vice versa.
●
The correlation in the price of commodity in
any markets is unity under spatial price integration.
●
Correlation method.
●
Ravallion procedure.
●
Co integration approach. Parity
●