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Market Integration: Ms. Ethel D. Nabor, LPT
Market Integration: Ms. Ethel D. Nabor, LPT
INTEGRATION
MS. ETHEL D. NABOR, LPT
CONTENT
Introduction
●
The behaviour of a highly integrated market is different from
that of a disintegrated market.
●
Markets differ in the extent of integration and therefore,there
is a variation in their degree of efficiency.
CONTD.,
●
Kohls and uhl have defined market integration as a process
which refers to the expansion of firms by consolidating additional
marketing functions and activities under a single management.
●
In each case, there is a concentration of decision making in
the hands of a single management.
TYPES OF MARKET
INTEGRATION
2.vertical integration.
3.Conglomeration.
HORIZONTAL
INTEGRATION
● This occurswhen a firm or agency gains control
firmsof or
other
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.
COMING
Example: independent oil refineries
UNDER
U.S oil company.
EFFECTS OF HORIZONTAL
INTEGRATION
●
Buying out a competitor in a time bound
way to reduce competition.
●
Gaining largershareof 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
(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 together of two or more
●
functions in the marketing process within a
single firm or under a single ownership.
This type of integration makes it possible to exercise control
●
Wholesaling of feed
Feed mill
PARENT AGRI
BUSINESS
FIRM Transport agency
Meatindustry
buys all the
plants neededfor
functioning
running this meat
industry
.
CONTD.,
a) Forward integration
INTEGRATION
SALES
RETAIL CLOTH
FOOD- FRUIT AND MANUFACTUR
MILL REPAIR E OF
GRAINS PROCESSING - CHAIN
TRADE S OF
UNIT VANASPATI
ELECTRONIC
GOODS
EXAMPLES
●
ITC.
And
NAFED.
EFFECTS OF CONGLOMERATION
●
To remove transaction
●
costs Foster competition
●
Provide better signals for optimal generation
and consumption decisions.
●
Improve security of supply
DEGREE OF 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 a dhal mill with pulse traders for supply of pulse
●
grains.
MEASUREMENT OF MARKET
INTEGRATION
SEPARATED MARKETS
●
The extent to which prices in spatially seperated markets
move together or are related to transport costs reflects the
degree of integration.
●
1) Price correlations.
2) Spatial price differential and Transportation costs.
PRICE CORRELATION
●
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
any markets in thespatial
is unity under priceprice
of commodity
integration.
in
SPATIAL PRICE DIFFERENTIAL AND
TRANSPORTATION
COSTS.
● Correlation method.
● Ravallion procedure.
● Co integration approach.
● Parity bound models (PBM).
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