Market Integration Presentation PDF

MARKET INTEGRATION Presented By : Group 3 September | 2024  LESSON OBJECTIVES When you finish reading this chapter, you should be able to: 1. explain the role of international financial institutions in the creation of global economy; 2. narrate short history of global marketi...

MARKET INTEGRATION Presented By : Group 3 September | 2024  LESSON OBJECTIVES When you finish reading this chapter, you should be able to: 1. explain the role of international financial institutions in the creation of global economy; 2. narrate short history of global marketing integration in the 20th century; and 3. identify the attributes of global corporations. 2  DEFINITION OF TERMS Market integration is a process by which economies are becoming more interdependent and interconnected in terms of commodity flows including externalities and spillover of impacts. International Financial Institutions or IFIs are institutions that provide support through loans or grants and technical advices to promote a country’s economic and social development. 2  DEFINITION OF TERMS Corporations are private institutions that produce or manufacture goods, products, and services for a more expanded market usually at the reach of regions or the world. 2  INTRODUCTION Market Integration refers to the process of merging and connecting previously separate or less connected markets into a unified system, enabling goods, services, capital, and labor to flow more freely across regions or countries. This results in the alignment of prices, products, and availability, making markets more efficient and competitive. 3 TYPES OF MARKET INTEGRATION These are three basic kinds of Market Integration 1. Horizontal Integration- refers to the process of a company acquiring, merging with, or taking over another company that operates at the same level in the supply chain within the same industry. The goal is often to increase market share, reduce competition, achieve economies of scale, or diversify products and services. This can result in more control over the market and greater bargaining power with suppliers and customers. 3 TYPES OF MARKET INTEGRATION These are three basic kinds of Market Integration 2. Vertical Integration- refers to a strategy where a company expands its operations either backward into its supply chain (acquiring or merging with suppliers) or forward into its distribution chain (acquiring or merging with distributors or retailers). The goal of vertical integration is to have more control over the production process, reduce costs, improve efficiency, and enhance the quality of products or services. 3 TYPES OF MARKET INTEGRATION These are three basic kinds of Market Integration 3. Conglomeration- refers to a business strategy where a company diversifies by acquiring or merging with companies from entirely unrelated industries. This leads to the creation of a conglomerate—an umbrella company that owns a range of distinct businesses across different sectors. The primary goal of conglomeration is to reduce risks by diversifying the business portfolio, stabilize income across industries, and capitalize on growth opportunities in different markets. 3 THE INTERNATIONAL FINANCIAL INSTITUTIONS AND THEIR ROLE IN THE GLOAL COMPANY International Financial Institutions or IFIs are institutions that provide support through loans or grants and technical advices to promote a country’s economic and social development. Global and regional IFIs include International Monetary Fund (IMF) and multilateral development banks (MDBs) like the World Bank Group, the African Development Bank (ADB), the Inter- American Development Bank, and the European Bank for Reconstruction and Development. 6 International Monetary Fund (IMF): The IMF focuses on global monetary cooperation, financial stability, and economic growth. It provides financial support and policy advice to member countries facing economic difficulties, aiming to stabilize economies and prevent financial crises. World Bank Group: This group consists of five institutions: International Bank for Reconstruction and Development (IBRD): Provides loans and financial products to middle-income and creditworthy low-income countries. International Development Association (IDA): Focuses on the world’s poorest countries by providing concessional loans and grants. 6 International Finance Corporation (IFC): Supports private sector development through investments and advisory services. Multilateral Investment Guarantee Agency (MIGA): Offers political risk insurance and credit enhancement to encourage foreign investment. International Centre for Settlement of Investment Disputes (ICSID): Facilitates the settlement of investment disputes between governments and foreign investors. African Development Bank (AfDB): This regional bank focuses on African development, providing loans, technical assistance, and policy advice to foster economic and social development across the continent. 6  Inter-American Development Bank (IDB): The IDB supports Latin American and Caribbean countries by providing financial and technical support to promote economic and social development. European Bank for Reconstruction and Development (EBRD): The EBRD promotes transition to market economies and encourages private and entrepreneurial initiatives in countries from central Europe to central Asia. These institutions aim to address various developmental challenges, foster economic stability, and enhance the quality of life in countries around the world. 6  A SUMMARIZE HISTORY OF THE GLOBAL ECONOMY The modern capitalist world economy flourished between the 16th to 18th centuries. The start of modern global trade leading to 1914 was considered the first period of globalization. It is when trade, capital, and immigration flows grew tremendously and in large volume, but the global institution architecture to manage these were quite limited. 6  A SUMMARIZE HISTORY OF THE GLOBAL ECONOMY International convention and treaties also served as drivers for these large-scale global movements such as the International Telegraph Union in 1865, Universal Postal Union in 1874, International Association of railway Congresses 1884, and International Sanitary Convention in 1892. Wallerstein argues that this was driven by the paradigm of capital accumulation that resulted to technological advances and expansion of places, knowledge, and discoveries. 6  GLOBAL CORPORATIONS Aside from IFIs and governments, one of the major players in the globalization and the modern capitalist market is the global corporations. The number of global corporations from emerging market economies listed in the Fortune Global 500 rose from 47 firms in 2005 to 95 in 2010. The modern global corporations are commonly referred to as multinational corporations and transnational corporations. More often they are used interchangeably. 6  GLOBAL CORPORATIONS Iwan (2007) offers categorized to distinguish an MNC from a TNC. He argues that both types of corporations are importers and exporters, and have investments in many countries. Nevertheless, he further contends that MNCs still provide central decisions compared to TNCs that provide individual foreign market investments to have their own operations and systems. 6 THERE ARE SEVERAL TYPES OF GLOBAL CORPORATIONS: 1. Multinational Corporations (MNCs)- These companies have a presence in multiple countries but often adapt their products and marketing strategies to local markets. 2. Transnational Corporations (TNCs)- Similar to MNCs, but with a more integrated approach, TNCs emphasize global efficiencies and interdependence among their subsidiaries. Decision-making is more decentralized. 6  3. International Companies- These companies primarily operate from their home country and sell their products internationally, but they might not have substantial operations in foreign markets. 4. Global Corporations- Global companies have a centralized headquarters and standardize their products and services worldwide, aiming for economies of scale by offering the same product in multiple countries. 6 5. Born Global- These are typically smaller companies that start their business operations with a global mindset from inception, focusing on international markets from the beginning rather than expanding over time. 6  “GUESS WHAT” The objective of the game is for you to correctly identify if a specific corporation is an Multinational Corporation or Transnational Corporation. 1. Procter & Gamble 6. Google 2. Nestle 7. Facebook 3. Sony Corporation 8. Ford Motor 4. Microsoft 9. Allianz 5. Apple, Inc. 10. General Electric 8  September | 2024 THANK YOU