Market

Integration
Group 2
John Jerome G. Basmayor
Jessa Marie G. Basmayor
 Market Integration
At the end of this presentation, you are expected to:

 Explain the role of international financial institutions in the

creation of a global economy
 Narrate a short history of global market integration in the
twentieth century
 Identify the attributes of global corporations
Market
Integration
Integration shows the
relationship of the
firm in a market.
Markets differ in the extent of integration
and therefore, there is a variation in their
degree of efficiency.

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.
Types of Market Integration

1.Horizontal
Integration

2.Vertical Integration

3.Conglomeration
Integration
 MARKET
INTEGRATION
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.
Advantage of Horizontal
Integration:

 Economies of Scale
 Market Power
 Product Differentiation
 Reduced Competition
 Access to New Markets
 Lower Costs and Reduce risk
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.
Advantage of Vertical
Integration:

 Strengthening company’s
supply chain
 Lowering production costs
 Capturing upstream or
downstream profits
 Gaining access to new
distribution channels
Conglomeration
Integration
- A combination of
agencies or activities not
directly relation to each
other may, when it
operates under a unified
management, be termed
a conglomeration
 Role of International
Financial Institutions in
the creation of Global
Economy
 Role of International Financial Institutions in the
creation of Global Economy 1
The key global institution mobilizing political
cooperation among nations on these issues is the
United Nations (UN) system. Mobilization of
economic and financial cooperation, including
issues related to the transfer of resources, is one of
the key responsibilities of the international financial
institutions (IFIs). Together, the UN and IFIs make
up the bulk of the global governance system in
place today.
International Financial Institutions
- Are institutions that provide financial support and professional
advise for economic and social development activities in developing
countries and promote international economic cooperation and stability.

- typically refers to the International Monetary Fund (IMF) and the

five multilateral development banks (MDBs):

 the World Bank Group

 the African Development Bank
 the Asian Development Bank
 the Inter-American Development Bank
 the European Bank for Reconstruction and Development.
All IFIs admit only sovereign countries as owner-members,
but all are characterized by a broad country membership,
including both borrowing developing countries and developed
donor countries; membership in the regional development
banks is not limited to countries from the region but
includes countries from around the world. Each IFI has its
own independent legal and operational status, but because a
considerable number of countries have membership in
several IFIs, a high level of cooperation is maintained among
them
Broadly speaking, IMF provides temporary financial assistance to
member countries to help ease balance of payments adjustment.
MDBs provide financing for development to developing countries
through the following:
■ Long-term loans - (with maturities of up to 20 years) based on
market interest rates. To obtain the financial resources for these
loans, MDBs borrow on the international capital markets and re-
lend to borrowing governments in developing countries.
■ Very-long-term loans - (often termed credits, with maturities
of 30 to 40 years) at interest rates well below market rates. These
are funded through direct contributions by governments in the
donor countries.
 Grant financing - is also offered by some MDBs,
mostly for technical assistance, advisory services, or
project preparation.

All IFIs are active in supporting programs that are

global in scope, in addition to their primary role of
financing and providing technical assistance to
programs at the country level.
History of Global
Market Integration
in the Twentieth
Century
 History of Global Market Integration in the
Twentieth Century 2
Two thousand years ago, the Romans unified their far-
flung empire through an extensive transportation network
and a common language, legal system, and currency. One
historian recently observed that "a citizen of the empire
traveling from Britain to the Euphrates in the mid-second
century CE would have found in virtually every town along
the journey foods, goods, landscapes, buildings,
institutions, laws, entertainment, and sacred elements not
dissimilar to those in his own community." (Hitchner,
2003, p. 398). This unification promoted trade and
economic development.
A millennium and a half later, at the end of the fifteenth
century, the voyages of Columbus, Vasco da Gama, and other
explorers initiated a period of trade over even vaster distances.
These voyages of discovery were made possible by advances in
European ship technology and navigation, including
improvements in the compass, in the rudder, and in sail design.
The sea lanes opened by these voyages facilitated a thriving
intercontinental trade--although the high costs of and the risks
associated with long voyages tended to limit trade to a relatively
small set of commodities of high value relative to their weight
and bulk, such as Course Module sugar, tobacco, spices, tea,
silk, and precious metals.
Much of this trade ultimately came under the control of the
trading companies created by the English and the Dutch. These
state-sanctioned monopolies enjoyed--and aggressively
protected--high markups and profits. Influenced by the
prevailing mercantilist view of trade as a zero-sum game,
European nation-states competed to dominate lucrative
markets, a competition that sometimes spilled over into military
conflict. The expansion of international trade in the sixteenth
century faced some domestic opposition. For example, in an
interesting combination of mercantilist thought and social
commentary, the reformer Martin Luther wrote in 1524.
But foreign trade, which brings from Calcutta and India and
such places wares like costly silks, articles of gold, and
spices--which minister only to ostentation but serve no useful
purpose, and which drain away the money of the land and
people--would not be permitted if we had proper government
and princes... God has cast us Germans off to such an extent
that we have to fling our gold and silver into foreign lands and
make the whole world rich, while we ourselves remain
beggars. (James, 2001, p. 8)
During the period between the end of the Napoleonic Wars in
1815 and the beginning of World War I. International trade
again expanded significantly as did cross-border flows of
financial capital and labor. Once again, new technologies
played an important role in facilitating integration: Transport
costs plunged as steam power replaced the sail and railroads
replaced the wagon or the barge, and an ambitious public
works project, the opening of the Suez Canal, significantly
reduced travel times between Europe and Asia.
For the most part, government policies during this era
fostered openness to trade, capital mobility, and migration.
Britain unilaterally repealed its tariffs on grains (the so-
called corn laws) in 1846, and a series of bilateral treaties
subsequently dismantled many barriers to trade in Europe.
A growing appreciation for the principle of comparative
advantage, as forcefully articulated by Adam Smith and
David Ricardo, may have made governments more receptive
to the view that international trade is not a zero-sum game
but can be beneficial to all participants.
Attributes of Global
Corporations
 Attributes of Global
Corporations 3
Value Opportunity to Expand: High-growth companies view international markets as
untapped markets full of potential. These are the companies that become successful
on a higher scale than those that stunt the growth of their company by not seeing the
value in this opportunity.

Understand Different Cultures: American companies that have a strong presence

internationally often have a founder or leading executive on their team who is from a
foreign country or a first-generation American. These executives’ worldly experience
helps prioritize the global market and answer any unknowns. Companies without this
knowledge should research and understand the different cultures they are tapping
into in order to be successful in not only building key relationships that will open up
doors down the road, but connecting with the right consumers as well.
Turbo-charged by the Internet: Companies that invest in the Internet and produce web-
based products are more likely to grow globally because there is less money involved in their
international expansion. The most successful of these businesses is Amazon. This company is
solely based on the Internet and was able to reach a global market with ease.

Carefully Chosen International Partners: Choosing the right partners to help you grow your
company in other countries is vital. Without the right people to vouch for you in that country
and build trust with the consumers, becoming the market leader could be close to
impossible. Again, this means companies must be aware of different cultures and business
practices among countries in order to connect, be efficient, and stay on the same page.
Example is Apple made a strategic partnership with China Mobile, the largest wireless
network in the world. This partnership enabled Apple to become the number one
smartphone maker in China and beat out the previously dominating five local competitors.
Measure Success: When expanding to other countries it is important
to keep track of the success and make sure it is worth the company’s
resources. According to Albert Subbloie, CEO and Founder of Tangoe,
a good benchmark of whether your company should continue efforts
in a country is when 20-50 percent of your business is coming from
outside the United States.

Think Globally: The most essential characteristic of any successful

international business is implementing a global way of thinking. If
this is the main thought process behind a company’s decisions, the
rest of their international marketing strategies can be implemented
with ease.