The unification of the economies of many countries is a leading feature of the modern world. This is a process that happens objectively, and at the same time it is guided consciously. There is a tendency towards rapprochement, coalescence, adaptation to each other of the economic systems of several nations.
Integration in the economy in the modern world proceeds as if on two levels. On the one hand, economic life is becoming more international. On the other hand, there is a rapprochement of the economies of several countries at the regional level. On this basis, it is possible to determine the forms of international integration corresponding to these processes:
- global, generated by the ongoing processes of globalization;
- regional, traditional. In some countries, it began to develop in the second half of the 20th century.
In addition, it is customary to distinguish between integration occurring at the enterprise level and at the state level.
In the first case, it is a private-corporate type. It combines the assets and capitals of several organizations.
Institutional integration is the interpenetration of national processes of reproduction, their coalescence. In this case, the political and social institutions of those states that come together are drawing closer together. Often this type of integration is the result of decisions made by country leaders. Its forms depend on how freely factors of production can move within groups. This is a free trade zone, currency, customs and economic unions, as well as a single market.
Private-corporate integration also happens in two forms:
The first unites companies that are involved in various fields, but they are interconnected by successive stages of circulation or production.
Horizontal integration brings together organizations that operate in one area, in one market. Thus, they strive to defeat serious competitors.
Horizontal integration, combining several corporations into one huge, entails several consequences that are important for the welfare of the whole country.
1. The growth of power of large firms in the market. At the same time, the number of independent manufacturing enterprises is becoming less and less. A small number of traders can influence the level of prices for goods. This market can be called quasi-competitive, since the increased concentration of sellers still does not protect against potential rivals. This barrier is very low. Therefore, as if the united sellers themselves did not want to raise prices, they cannot do it. After the first tangible increase, competitors will fill the market.
2. Synergistic effects appear. Horizontal integration allows firms to reduce some costs. This occurs as a result of synergistic effects. They are expressed by an increase in the results of firms combined into one, in comparison with the results achieved by separate companies. These effects relate to investment, finance, and operations.
3. The occurrence of transaction costs. They take place in the case of partial integration, when property in the form of alliances or contracts is not fully combined. Respecting their interests, one of the partners does not completely trust the other.
4. Weakening the power of consumers and suppliers in the market. When the concentration of those who offer the goods is too high, firms involved in the same industry are forced to influence them so that they do not raise prices for the resources used. Horizontal integration can help solve this issue. To lower prices and produce a larger volume of products, suppliers must grow larger. Thus, their high concentration will be equal to the concentration of consumers in the market, which, in turn, will stabilize prices.