Land and factories become scarce and rents begin to rise. Local roads become congested and so transport costs begin to rise. This occurs when two firms join together to form one new company. The figure below shows the three main types of integration. Motives for Integration Integration increases the size of the firm.
Larger firms can achieve more internal economies of sale.
Large domestic firms are then more able to compete against large foreign multinationals. Diversified firms no longer have 'all their eggs in one basket'. Reduce competition by removing rivals. Some products have only a limited demand, eg horse shows. Some products require little capital, eg window cleaning.