Market Integration Flashcards
- The poor performance of statist models of development—so popular in the past—led to a re-examination of the role of the state, which in turn motivated a strong shift towards private, market-based approaches.
- THUS, in these transformations, the private sector and private international finance have become prime agents of economic development
Rationale
*Is a situation in which separate markets for the same product become one single market.
- It occurs when prices among different locations or
related goods follow similar patterns over a long period of time. Groups of prices 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
- Kinds of things traded now are
different in earlier era - Market integration now go far beyond simple goods
OLD
- Location of natural resources used
in production of a good (ex: computer) does not determine where to produce - Value of physical materials in the final product is often trivial
- Technologies can be repeatedly reused once discovered
- Rare to find purely Japanese or Filipino product
New
Also known as lateral integration. The merger of two or more companies that occupy similar levels in the production supply chain
HORIZONTAL
INTEGRATION
- Is a competitive strategy by which
a company takes complete control
over one or more stages in the
production or distribution of a
product.
VERTICAL
INTEGRATION
Business activities are expanded
to include control of the direct
distribution or supply of a
company’s products.
FORWARD VERTICAL
INTEGRATION
Process in which a company purchases
or internally produces segments of its supply chain.
backward vertical integration
is the combination of two or more business entities engaged in entirely different businesses that
fall under one corporate group, usually involving
a parent company and many subsidiaries.
conglomerate
ADVANTAGES
* Lower Costs
* Higher power in the
market
* Reduced competition
*Increased
differentiation
HORIZONTAL INTEGRATION
DISADVANTAGES
*Tough transition
change
*Lack of competition
HORIZONTAL INTEGRATION
ADVANTAGES
* Doesn’t have to rely on
suppliers
* Gives a company
economies of scale
* Retailer can know, what is
selling well
* Low prices
VERTICAL INTEGRATION
DISADVANTAGES
*Expense
*Reduces flexibility
*Loss of focus
*Cultural diversity in
the workplace
INTEGRATION
It is an organization that uses
economic resources or inputs to
provide goods or services to
customers in exchange for
money or other goods and
services.
BUSINESS ENTITY
provides intangible products
(products with no physical form).
Service type firms offer
professional skills, expertise,
advice, and other similar products.
SERVICE BUSINESS
- this type of business buys product at wholesale price and sells the same at retail price. They are known as “buy and sell” business. They make profit by selling the products at prices higher than their purchase cost
- sells products without changing its form
MERCHANDISING BUSINESS
buys products with
the intention of using them as materials in
making a new product. Thus, there is a
transformation of the products purchased.
combines raw
materials, labor, and factory overhead in its
production process. The manufactured goods
will then be sold to customers
MANUFACTURING BUSINESS
are companies that may be
classified in more than one type of business. A
restaurant, for example, combines ingredients in
making a fine meal (manufacturing), sells a cold bottle
of wine (merchandising), and fills customer orders
(service).
* Nonetheless, these companies may be classified
according to their major business interest. In that
case, restaurants are more of the service type – they
provide dining services.
HYBRID BUSINESS
is a business owned by
only one person. It is easy to set-up and is the
least costly among all forms of ownership.
* The owner faces unlimited liability; meaning,
the creditors of the business may go after the
personal assets of the owner if the business
cannot pay them.
sole proprietorship
ADVANTAGES
* Ease of starting and going out
of business
* Control over profits and
business operations
* Pride of ownership
* Lower taxes (no corporate
income taxes
SOLE PROPRIETORSHIP
DISADVANTAGES
* Unlimited liability
* Difficulty in raising financial
capital
* Responsibility for all losses
* Management knowledge may
be limited
SOLE PROPRIETORSHIP
is a business owned by two or
more persons who contribute resources into
the entity. The partners divide the profits of
the business among themselves
partnership
is a business organization
that has a separate legal personality
from its owners. Ownership in a stock
corporation is represented by shares of
stock.
corporation
are hybrid forms of business that
have characteristics of both a corporation
and a partnership
LIMITED LIABILITY COMPANY
is a business organization
owned by a group of individuals and is
operated for their mutual benefit. The
persons making up the group are called
members.
cooperative
