Different Levels of Market Integration: definition and examples

Market integration is defined as the unification of different markets into one, allowing for the free movement of goods and services. This process is facilitated by reducing barriers, such as tariffs or quotas, between countries. There are several types of market integration, including:

Horizontal Integration: Horizontal integration happens when two or more companies having the same level of the supply chain merge to form a larger entity. One of the most definitive examples of horizontal integration was the acquisition of Instagram by Facebook (now Meta) in 2012 for a reported $1 billion.  Both companies operated in the same industry (social media) and shared similar production stages in their photo-sharing services.

Vertical Integration: Vertical integration happens when companies at different levels of the supply chain merge to form a larger entity. For example, a manufacturer acquires a supplier or distributor of a company’s products. By controlling its supply chain, the company is more able to control and deal with any supply problems itself.

Conglomerate Integration: Conglomerate integration occurs when companies that operate in unrelated business merge to form a larger entity. A conglomerate merger allows companies to cross-sell their products when the target market is similar. It inevitably results in higher profits. One conglomerate merger example is Amazon and Whole Foods. Amazon is an online retailer, while Whole Foods is a supermarket. The merger allowed Amazon to expand its grocery offerings and increased the benefits provided to its Prime members.

Market Access Integration: Market access integration occurs when companies from different countries come together to access each other’s markets. This can be done through joint ventures, strategic alliances, or mergers and acquisitions. One of the examples is a merger of P&G and Richardson Vicks in the 1980s. Richardson Vicks Company was already established in the Indian market. The firm was prominent in the manufacture of cold and cough medicaments. This resulted in the formation of the Procter and Gamble India.

Global Integration: Global integration refers to the integration of different economies and markets across the world.  The integrated company can use the same products and methods in other countries. This can be seen through the growth of international trade and the increasing globalization of businesses.

Benefits of market integration:

Companies can sell their products and services to a broader customer base, which can lead to increased revenue and customers have access to a wider array of goods and services which can improve their standard of living. Market integration can lead to increased production and efficiency as companies seek to compete in larger markets.

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