Lesson 3 Market Integration

Lesson 3

Market Integration
AARON SIBAOT MUNAR
Market Integration

• Integration shows the relationship of firms in a market. The extent of

integration influences the market conduct of the firms and consequently
their marketing efficiency.
• Markets differ in the extent of integration and, therefore, there is a
variation in their degree of efficiency.
According to Ulrich Koester
• INTEGRATION
• -IS A STATE OF AFFAIRS OR A PROCESS INVOLVING ATTEMPTS TO
COMBINE SEPARATE NATIONAL ECONOMIES INTO A LARGER
ECONOMIC REGIONS.
FORMS OF INTEGRATIONS
1. Preferential agreement
- Involves lower trade barriers between those countries, which have signed the agreement.
2. Free Trade Area
- Reduces barriers to trade among member countries to zero, but each member country still
has autonomy in deciding the external rate of tariff for its trade with non-member countries.
3. Custom Union
- In this form, Countries agree to abolish tariff and non-tariff barriers to trade in goods
flowing between them.
4. Common Markets
- allows for free movement of labor and capital within the member countries.
5. Economic Union
- is the highest form of economic integration.
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.
• Market integration is an indicator that explains how much different
markets are related to each other.
• Market integration is the fusing of many markets into one.
TWO TYPES OF MARKET
INTEGRATION
NEGATIVE MARKET INTEGRATION
-This type of Market integration is reduces the Non-tariff and tariff barrier to trade as
main tool for integrating markets
(Note: Tariff is a tax or duty to be paid on a particular class of imports or exports or
the fix price of product according to a tariff.)
“ the reduction of trade barriers and import tariffs”.
POSITIVE MARKET INTEGRATION

-This type of market integration is it adjusts the domestic policies and institutions
through the creation of supranational arrangements.
(Note: Supranational arrangements is a type of multinational political union where
negotiated power is delegated to an authority by governments of member states. The
Governments of Governments)
• Global market integration means that price differences between countries
are eliminated as all markets become one. One way to the progress of
globalization is to look at trends how prices converge or become similar
across countries.
• Trading cost fall when new product invented or developed becomes
cheaper and also, some cost is man-made like when they impose a barrier
for trade.
• Trade
• refers to countries within the region which create deals like cheaper tariffs
to for easier import/export. Through Politics, leaders of countries within
the region often perform social visits to talk agreements despite
differences and show solidarity and support to those they are in agreement
with.
EXAMPLE TYPE OF TRADE
BARTER SYSTEM
-IS AN ALTERNATIVE METHOD OF TRADING WHERE
GOODS AND SERVICES ARE EXCHANGED DIRECTLY FOR ONE
ANOTHER WITHOUT USING MONEY AS AN INTERMEDIARY
The Cambridge Business English Dictionary
defines Market Integration
• Market Integration as “a situation in which separate markets for the same

product become one single market, for example when an import tax in one
of the market is removed.”
7 MARKETING FUNCTIONS
1. PROMOTION
-When People map out their marketing goals, promotion is usually at or near the top of that
list. Getting your name in front of prospective customers, building brand awareness and raising
your company’s profile are major priorities for every marketing department.
2. SELLING
-We’ve often cautioned readers about the dangers of coming on too strong and salesy with
your marketing content.
3. PRODUCT MANAGEMENT
- Designing a new product that better meets customer needs and fills a gap in the
marketplace doesn’t happen by coincidence or sheer luck.
4. MARKETING INFORMATION MANAGEMENT
-Strategic marketing is driven by data. Every good marketer knows that the more information you
can gather about your target customer.
5. PRICING
- Marketing research can also inform how brands set the price of a product.
6. FINANCING
-Now we’re digging into some of the less-discussed functions of marketing, although they’re still
very important to overarching business objectives.
7. DISTRIBUTION
-Distribution?, you may be asking yourself, ‘isn’t that supply chain management’s problem?”
-Choosing the right distribution channels comes down to understanding who your target customer
is, how they view your brand and where they expect to find you – all marketing-centric issues.
Two issues to be considered before
integration:
• Costs - An organization should vertically integrate when costs of
making the product inside the company are lower than the costs of
buying that product in the market. 
• Scope of the firm - A firm should consider whether moving into new
industries would not dilute its current competencies. New activities in
a company are also harder to manage and control. The answers to
previous questions determine if a company will pursue none, partial
or full VI.
• Inefficiencies
Implementing backward integration can result in inefficiencies. By acquiring the supplier of raw
materials required in the production process, the company will limit competition, resulting in
sluggishness and lack of innovation. The company will be less motivated to spend money on
research and development. As a result, the quality of the company’s end product(s) may decline, and
the costs of managing customer complaints will increase.
• Substantial investment
Another disadvantage of backward integration is the substantial investment that will be needed to
finance the acquisition. The company may be forced to utilize all its cash reserves and even take up
more debts to finance the acquisition. If the company is unable to repay the debts or enjoy the
benefits of the acquisition, it will face the risk of default and even liquidation.
Importance of Market
Integration
• Globalization and Market Integration
• Contributions to Management Science. This lesson introduces the concept of stock market
integration. In theory, market integration should increase financial and economic efficiency,
and lead to a higher economic growth. However, market integration may increase asset
return volatility, and cause financial instability and contagion effects.
• Marketing Segments
• Technology has increased the avenues available for advertising and other marketing
campaigns. The most effective campaigns will incorporate as many forms of media as
possible to reach the widest possible audience. While the messages that make up a
marketing campaign will need to be delivered differently on each platform, it’s important
that it still be the same message.
Factors Affecting Market Integration
• Driving forces. converging market needs and wants, technology
advances, pressure to cut costs, pressure to improve quality.
• Regional Economic Agreements. under attack by developing countries in
Europe, the expanding membership of the European Union is lowering
barriers to trade within the region.
• Market Needs & Wants. The common elements in human nature provide
and underlying basis for the opportunity to create and serve global
markets.
• Market has driven this change in behavior. Multinational companies
pursuing strategies of product adaptation run the risk of being overtaken
by global competitors that have recognized opportunities to serve global
customers.
• Product Development Costs. The pressure for globalization is intense
when new products require major investments and long periods of
development time.
• Global competition has forced all companies to improve quality. For
truly global products, uniformity can drive down research, engineering,
design, and production costs across business functions.
Three reason why economic growth has been a driving force in the
expansion of the international economy and the growth of global marketing.
• First: Slow growth in a company’s domestic market can signal the need to
look abroad for opportunities in nations or regions with high rates of
growth.
• Second: Economic growth has reduced resistance that might otherwise
have developed in response to the entry of foreign firms into domestic
economies.
• Third: Domestic business are more likely to seek governmental
intervention to protect their local position if markets are not growing.
THANK YOU!

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Lesson 3

• Integration shows the relationship of firms in a market. The extent of

POSITIVE MARKET INTEGRATION

• Market Integration as “a situation in which separate markets for the same

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