Market Integration

What is market integration?

It is a situation where separate markets for the same product become one single market, with prices across locations or related goods following similar patterns over time.

Why is market integration important?

It indicates how related or connected different markets are, showing the degree of globalization and interdependence in economies.

What role did the World Bank (WB) and IMF play after WWII?

Launched at Bretton Woods, they helped rebuild economies, promoted globalization, and facilitated the rise of American corporations.

Why did many countries shift from statist models to market-based approaches?

Statist models performed poorly, leading to the rise of private sector and international finance as prime agents of economic development.

What are the three structural periods of globalization after WWII?

• Investment-based globalization (1950–1970)

• Trade-based globalization (1970–1995)

• Digital globalization (1995 onwards)

What innovations transformed global corporations in the 1970s–80s?

Digitalization, global communications, and a shift from producer-driven to consumer-driven commerce.

What are the main objectives of IFIs like the World Bank and IMF?

Poverty alleviation, economic growth, and environmental protection.

How has FDI (Foreign Direct Investment) influenced global development?

It has boosted growth, opened opportunities for investment, but also raised concerns about exploitation and reduced value-added in local industries.

What is horizontal integration?

The merger of two or more companies at the same level in the supply chain (e.g., two car manufacturers merging).

What are the advantages of horizontal integration?

Lower costs, stronger market power, reduced competition, and increased product differentiation.

What are the disadvantages of horizontal integration?

Transition challenges and risk of monopoly due to lack of competition.

What is vertical integration?

A strategy where a company controls multiple stages of production or distribution.

Forward vertical integration

Control moves closer to the consumer (e.g., manufacturer opening retail stores).

Backward vertical integration

Control moves towards raw materials and suppliers (e.g., coffee shop buying a coffee farm).

What are the two types of vertical integration?

• Forward vertical integration: Control moves closer to the consumer (e.g., manufacturer opening retail stores).

• Backward vertical integration: Control moves towards raw materials and suppliers (e.g., coffee shop buying a coffee farm).

What are the advantages of vertical integration?

Independence from suppliers, economies of scale, better sales insights, and lower costs.

What are the disadvantages of vertical integration?

High costs, reduced flexibility, possible loss of focus, and cultural challenges in diverse workplaces.

What is conglomeration?

The combination of businesses in unrelated industries under one corporate group, usually with a parent company and subsidiaries.

What is a business entity?

An organization that uses resources to produce goods or services in exchange for money or other goods/services.

Types of businesses: Service business

Provides intangible products (e.g., consultancy, salons).

Types of businesses: Merchandising business

Buys and sells finished goods (e.g., retail stores).

Types of businesses: Manufacturing business

Transforms raw materials into products (e.g., factories).

Types of businesses: Hybrid business

Combines different types (e.g., restaurants: service + merchandising + manufacturing).

What is a sole proprietorship?

A business owned by one person, simple to set up, with unlimited liability.

What are the pros and cons of sole proprietorship?

• ✅ Easy to start, full control, lower taxes, pride of ownership.

• ❌ Unlimited liability, limited capital, owner bears all losses, limited expertise.

What is a partnership?

A business owned by two or more people who share profits and responsibilities.

Pros and cons of partnership?

• ✅ Shared risk, better decisions, more capital, less government regulation.

• ❌ Unlimited liability (in general partnerships), limited life, conflicts, shared profits.

What is a corporation?

A business with a separate legal personality from owners, with ownership represented by shares of stock.

What is a limited liability company (LLC)?

A hybrid form combining features of partnerships and corporations; owners have limited liability but flexible management.

What is a cooperative?

A business owned and operated by a group of individuals for mutual benefit (members share ownership).