Gydabelle Martin-
Celestino, PhD
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OUTLINE
I. Definition of Terms
[Link] of Market
Integration
[Link] of Market Integration
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[Link] Sectors of Economy 2
MARKET INTEGRATION
• “the integrated economy is one in
which various economic processes are
so functionally related to every other
process that the totality of separate
operation forms a single unit of
production with characteristics of its
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own” (McDonald, 1953). 3
MARKET INTEGRATION
• A state of affairs or a process involving
attempts to combine national economies
into larger economic region (Robson, 1998).
• It is COMBINING AND BRINGING
TOGETHER national or different countries
into one economy (Robson, 1998).
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MARKET INTEGRATION
• A process which refers to the
expansion of firms by
consolidating additional
marketing functions and activities
under a single management (Kohls
and Uhl, nd).
• Integrated markets are those where
prices are determined
interdependently (Faminow and
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Benson, 1990). GMCelestino
A situation in which
the prices of related
goods and services
sold in specific
geographical area
begin to move in a
similar pattern.
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Types of Market Integration
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GMOlaya
Vertical Integration
• A strategy whereby
a company owns or
controls its
suppliers,
distributors, or
retail locations to
control its value or
supply chain
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Vertical Integration
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Backward Vertical Integration
This involves acquiring a
business operating
earlier in the supply
chain
Examples:
A retailer buys a wholesaler,
a brewer buys a hop farm
McDonalds 10
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Forward Vertical
Integration
• This involves
acquiring a
business further
up in the supply
chain
E.g.:
A vehicle
manufacturer buys
a car parts 11
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distributor
Horizontal Integratio
• businesses in the same E.g: Jollibee,
industry and which operate at Chowking, Mang
the same stage of the Inasal under Jollibee
production process are Food Corp.
combined.
• 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 GMCelestino
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• This involves the Conglomerate Integration
combination of firms
that are involved in
unrelated business
activities.
Eg: Nestle, Henry Sy
conglomerates/ SM Corp or
Group of Companies
Lucio Tan (former of PNB, Univ
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of East (UE), Pal) GMCelestino
Horizontal Integration
Advantages Disadvantages
>Larger Market Share Increasing the size of the
>Bigger Base of company also increases the
Customers size of the problems, bigger
>Increased Revenue companies are harder to
>Reducing competition handle
>Increasing other
synergies such as Does not always yield the
marketing synergies and added value that
>Creating economies of was expected
scale and economies of GMCelestino
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scope Can even result in negative
Vertical Integration
Advantages Disadvantages
>Decrease transportation costs and Companies might get too big
reduce delivery turnaround times and mismanage the overall
>Reducing supply disruptions from process
suppliers that might fall into financial
hardship Outsourcing to suppliers and
>Increase competitiveness by vendors might be more
getting products to consumers efficient if their expertise is
directly and quickly superior
>Lower costs through economies of
scale, which is lowering the per-unit Costs of vertical integration
cost by buying large quantities of such as purchasing a
raw materials or streamlining the supplier can be quite
manufacturing process significant
>Improve sales and profitability by 15
creating and selling its own brand Increased amounts of debt if
Conglomerate Integration
Advantages Disadvantages
>Through diversification, Diversification can shift focus
the risk of loss lessens. and resources away from core
operations, contributing to poor
>An expanded customer- performance.
base If the acquiring firm is
inadequately experienced in the
>Cross-selling of new
industry of the acquired firm,
products, leading to
the new firm is likely to develop
increased revenues.
ineffective corporate
>The new firm benefits governance policies and an
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with increased efficiencies inexperienced, underperforming
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