🍡 Market Integration

• Kohis and Uhl have defined “Market integration as process which refers to the expansion of firms by consolidating additional marketing functions and activities under a single management”.
• Eg:
  • Setting up of milk processing plant by animal husbandry farmer.
  • Establishment of wholesale facilities by retailers.
• Integration shows the relationship of firms in a market.
• Integration influences market conduct of firms and consequently their marketing efficiency.
• Markets differ in the extent of integration.

Types of market integration

1. Horizontal integration:

• When a firm gains control over other firms, performing similar marketing functions.
• Some marketing agencies (say, sellers) combine to form a union with a view to reducing their effective number and the extent of competition in the market.
• Horizontal integration is advantageous for the members who join the group.
• If farmers join hands and form cooperatives, they are able to sell their produce in bulk and reduce their cost of marketing.
• Horizontal integration of selling firms is not in the interests of consumers or buyers.

2. Vertical integration

• Occurs when a firm performs more than one activity in the sequence of the marketing process.
• It is linking together of two or more functions within a single firm or under a single ownership.
• Eg:
  • If a firm assumes the functions of the commission agent as well as retailing.
  • Floor mill which engages in retailing activity as well.
  • Vertical integration leads to some economies in the cost of marketing.
  • Enjoys greater market power while reducing the number of middlemen.
• There are two types of vertical integration:
  • a) Forward Integration: Eg: Wholesaler assuming the function of retailing i.e. assuming another function.
  • b) Backward Integration: Eg: Processing firm assumes the function of assembling / purchasing the produce from villages.
• Firms often expand both vertically and horizontally. Eg: Modern retail stocks.
• Horizontal: Expanding either retail stores or number of commodities they deal.
• Vertical: Operate their own wholesale, purchasing and processing establishment.

3. Conglomeration:

• A combination of agencies or activities not directly related to each other, may when it operates under a united management, be termed a conglomeration.
• Eg: Hindustan Lever Ltd. Delhi cloth and General mill (cloth & vanaspati).