Gcworld L1: Market Integration

GCWORLD /2020-2021
GCWORLD L1: MARKET INTEGRATION
Introduction:
Integration shows the relationship of the firm in a market. The extent of

integration influences the conduct of the firms and consequently their marketing
efficiency. The behaviour of a highly integrated market is different from that of a
disintegrated market.
Markets differ in the extent of integration and therefore, there is a variation in
their degree of efficiency. Kohls and uhl have defined market integration as a process
which refers to the expansion of firms by consolidating additional marketing functions
and activities under a single management.
Economic systems vary from one society to another and by any given economy,
production splits into three sectors. The primary sector extracts raw materials from
natural environments. The secondary sector gains the raw materials and transforms them
into manufactured goods. Whereas the tertiary sector involves services rather than goods.
Thus, economic
This chapter will show the contributions of the different financial and economic
institutions that facilitated the growth of the global economy, the history of the global
market by looking at the different economic revolutions as well as the growth and
dynamics of multinational corporations that are emerging in today’s world economy.
Lesson 1: International Financial Institutions

I. Competencies:
At the end of the lesson, you should be able to:
1. Define market integration
2. Discuss and enumerate the financial institutions and economic
organizations
3. Explain the importance of the different sector
II. Notes:
International Financial Institutions
As globalization brought closer together the world economies, it reflected in the
phrase “When the American economy sneezes, the rest of the world catches the cold”.
1|
GCWORLD /2020-2021
This shows America’s dominant role in global economics since the start of the twentieth
century. But, it is important to remember that other economies in the world have greatly
affected the global market and finance as well.
FINANCIAL INSTITUTIONS AND ECONOMIC ORGANIZATIONS

Even though some countries are heavily affected by the gains and crises in the
world economy, the organizations that they consist also contribute to these events. These
organizations made countries even closer together, at least, when it comes to trade.
1. THE BRETTON WOODS SYSTEM

a. The purpose was to create a system which avoided:
i. World War III
ii. Great Depression II
After Word War II, the world needed a new financial system.
The gold standard was considered too rigid and at the same time, economists were
worried that countries would devalue their currency to boost exports. For this reason, 44
countries sent delegates to a conference held at Bretton woods New Hampshire as of the
1st of July 1944. The US which held two-thirds of the world’s gold reserves after the war
was obviously the most influential player and ultimately all currencies ended up linked to
the dollar which is linked to gold.
One important concern arose was if a country goes through economic crisis, how
can it get out of it without devaluing its currency? To address this issue, two institutions
were created: 1)The International Monetary Fund which was supposed to lend money to
countries that are in trouble and cannot attract financing from other sources; 2) The
International Bank for Reconstruction and Development which is now called the World
Bank and was supposed to help less developed country scrub.
In general, the Bretton Wood system has five key elements. First element is the
expression of currency in terms of gold or gold value to establish a par value (Boughton,
2007). Another element is that “the official monetary authority in each country (a central
bank or its equivalent) would agree to exchange its own currency for those of other
countries at the established exchange rate, plus or minus a one-percent margin”
(Boughton, 2007, pp.106-107). The third element of the Bretton Wood system is the
establishment of an overseer for these exchange rates; thus, the International Monetary
Fund (IMF) was founded. Eliminating restrictions on the currencies of member states in
the international trade is the fourth key element. The final element is that the U.S. dollar
became the global currency.
2|
GCWORLD /2020-2021
Unfortunately, as good as may have sound it on paper, the Bretton woods didn’t
survive because the United States kept running deficits to fund various projects and
therefore the amount of dollars in existence kept increasing while the gold reserves of the
U.S. kept shrinking as more countries demanded gold in exchange for their dollars as
such in the 15th of August 1971, Nixon officially announced the dollars would no longer
be convertible to gold, thereby putting the final nail in the coffin of the Bretton woods
system.
2. The General Agreement on Tariffs and Trade (GATT) and the World Trade
Organization (WTO)
According to Peet (2003), global trade and finance was greatly affected by the
Bretton Wood System. One of the systems born out of Bretton Woods was the General
Agreement on Tariffs and Trade (GATT) that was established in 1947 (Goldstein et. al.,
2007). GATT was an agreement among 23 countries known as the contracting parties. Its
goal was to reduce trade barriers and remove tariffs between countries. In the year 1945,
shortly after the end of World War II. After World War II, many countries were in
economic crisis and turned to raising trade barriers through the roof in order to protect
themselves while attempting to rebuild. GATT is known as the World Bank and
International Monetary Fund. The contracting parties came together wanting to give a
boost to trade liberalization and correct the legacies passed on by earlier protectionist
method.
International Trade Organization was

shutdown in 1947
Leaves GATT as the only

MULTILATERAL Institute
governing trade
(8 meetings around the world
which are called rounds)
Each round was designed to negotiate

different trade issues in international
economic disputes
3|
Rounds
Kennedy Round during 60's (an agreement among 117 countries to
(involved 102 countries. This is the first attempt at
(the anti-dumping agreement was reducing trade barriers that were not in the form of reduce trade barriers and create more world
made)
tariffs GCWORLD /2020-2021
trade rules was established
World Trade Organization

is a place to negotiate other
reductions of trade barriers
enforcing trade rules and setling
policies disputes
The World Trade
Organization is the entity which
regulates international trade since January the 1 st, 1995. The main goal of the WTO is
creating a level playing field by setting and enforcing rules so that the 164 countries
which are currently members can trade with one another smoothly. In theory, (1) rules
can be created or altered through a majority vote but in most cases, such decisions are
anonymously; (2) whenever disputes arise the WTO tries to resolve them through
negotiation; (3) if necessary, the organization can even impose sanctions on countries
which break the rules.
Like any other organization, WTO received criticism.
1. Some citizens believed letting WTO create rules that their country has to
follow is undemocratic.
2. In certain cases, the WTO risk hurting people to protect business interest.
3. In other cases, the WTO ends up being accused by businesses.
III. Exercises/Written Activities

A. Define the following terms as applied in the market integration:
1. Multilaternal
2. Kennedy Round
3. Tokyo Round
4. Uruguay Round
5. Currency
6. Gold
7. Dollar
8. Economics
9. Financial status
10. World Bank
4|
GCWORLD /2020-2021
IV. Learning Insights

Make a comprehensive summary of the important points learned in this lesson
using a chart. Write your answer on a short bondpaper.
References:
The Contemporary World First Edition, Prince Kennex Reguyal
Aldama, Rex Bookstore
Retrieved from:
https://www.slideshare.net/jpsivam/market-integration
https://www.slideshare.net/sakthivelRamar/market-integration-80094070
https://www.studocu.com/ph/document/polytechnic-university-of-the-philippines/the-
contemporary-world/lecture-notes/market-integration/3181223/view
___________________________ __________________________
Date accomplished Pre-service
Teacher’s Signature Over
Printed Name
______________________________
Date Received
5|
GCWORLD /2020-2021
“I can do all things through Christ who strengthens me.”

Philippians 4:13
6|

Gcworld L1: Market Integration

Uploaded by

Copyright:

Available Formats

Gcworld L1: Market Integration

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Gcworld L1: Market Integration

Uploaded by

Copyright:

Available Formats

GCWORLD /2020-2021

GCWORLD L1: MARKET INTEGRATION

Integration shows the relationship of the firm in a market. The extent of

Lesson 1: International Financial Institutions

FINANCIAL INSTITUTIONS AND ECONOMIC ORGANIZATIONS

1. THE BRETTON WOODS SYSTEM

International Trade Organization was

Leaves GATT as the only

Each round was designed to negotiate

World Trade Organization

III. Exercises/Written Activities

IV. Learning Insights

“I can do all things through Christ who strengthens me.”

You might also like