Mohd Zahid Laton, FPP Uitm Pahang

Mohd Zahid Laton, FPP UiTM Pahang
CHAPTER 4
APPROACHS TO MARKETING PROBLEMS
1.
The farm marketing problem. The farm problem is usually
associated with unstable and relatively low farm prices and incomes. A
related set of farmers problems can be termed the farm marketing
problem. There are several dimensions of this problem;
1.1 Farmers find it difficult to adjust precisely their
production schedule to meet changing market conditions.
Agricultural output comes from many small units operated
independently. The production is to a great extent dependent on
weather and biological patterns of reproduction.
1.2 Farmers must estimate how much of his product he
can sell at a price estimated nearly a year in advance. From this
estimate he can then contract suitable acreage with his
producers. If his estimations of the market conditions and yields
turn out correctly, he will pack and sell as planned.
1.3 It takes long periods to change materially the
production of some commodities. Fruit groves are planted years
in advance of their coming into production. The market situation
may change during this period.
1.4 Changes in consumer tastes may find large amounts of
agricultural resources being devoted to the production of
something that is no longer so greatly desired. Higher prices
resulting from shortages of production may destroy the
consumer market for that product when it finally arrives in
quantity.
1.5 A related component of the farm marketing problem is the
difficulty farmer face in improving their prices through
independent or group activities. Farmers are, for the most
part, price takers- they cannot, individually, influence the price of
their products through their output decisions. In order to raise
prices through the control of supplies or advertising programs,
farmers must act as a group.
1.6 The free-rider problem often plagues farmers when they
do attempt to organize to influence farm prices. Free riders
hamper any group effort that requires each member to sacrifice
for the overall welfare of the group when the group benefits go to
everyone regardless of their participation. For example, farmers
may try to raise their prices through voluntary supply control
programs, advertising efforts, or bargaining associations. If
successful, the resulting price benefits all farmers, whether or
not they have contributed to the program.
1.7 The cost-price squeeze is another component of the
farm marketing problem. The competitive conditions of
agriculture tend to keep farm prices close to the cost of
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production. Falling farm prices would not be so critical if they

were accompanied by falling farm costs, or if the farmer could
adjust input costs as prices fell.
1.8 The superior bargaining power of the buyers of farm
products as compared with that of farmers is the most serious
farm marketing problem. Food marketing firms are usually larger
and, because of their national and international activities,
normally have better market information than the farmers from
whom they buy. In addition, through contracts and other
arrangements, food marketing firms are thought to gain some
control over farm decisions and farm markets.
1.9 Changing food market pricing efficiency is still another
element of the farm marketing problem. Perhaps at one time
farmers did not need to be concerned with food marketing
because competitive conditions assured all farmers a fair price.
However, with todays direct negotiations and contractual
arrangements, there is no longer any assurance of a high level of
pricing efficiency in food markets.
1.10 There is growing concern about the increasing gulf
between the farm sector and the food marketing sector.
Farmers retain a commodity-orientation whereas food marketing
firm stress a merchandise-orientation.
2.
Limiting the barriers in the marketing process is considers in
order to minimize the agricultural marketing problem. Such barriers
are;
2.1 Separation of space. The producer and the consumer
were geographically separated. The producers were located in a
concentrated location and the consumers were found scattering
around. To reduce the separation of location and space, there
must be a process of marketing the products between the
producers and the consumers.
2.2 Separation of time. Consumer needs the products at a
specific time and the availability of the products to be received
by the consumer at times needed. The need of transporting the
products to the consumer must be performed correctly. The
producer produced the products after harvesting where as the
consumer need the products at a specific time. The products
must be marketed so that the consumer will consume the
products at a timely needed. To reduce such separation of time
between the consumer and the producer, there must be proper
marketing channels such as transportation, storage, utilities and
facilitating functions exist in between the producer and the
consumer.
2.3 Separation of information. The producers are unaware
of the needs and wants of the consumer. The price level of the
products is also a main hindrance in quoting how much price of a
particular product. The consumers are unaware of the availability
of the products offered in the market, from whom, when and how
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and how much price level of the products in the market. To avoid
such misinformation of the products the producers and the
consumers must gathered valid information from reliable sources
so that both parties are aware of such products and price level
offered.
2.4 Separation of ownership. The producer produced the
products. As long as he owns the products, there will be no
transfer of ownership and the possession of the products still on
his hand. The questions are how long the products are being
possessed by the producer. Once the products has transfer to
consumer, than the transfer of ownership has occurred between
consumer and producer.
2.5 Separation of value. Consumer sees and valued the
products from the economic point of view and his ability to pay
for the products. Producer valued the products from costs and
price competitiveness. The separation of values can only be
satisfied if the producer has the power to sell and cover the
expenses and make profit where as the consumer can only pay
the products at a particular price.
2.6 Different of quality. Producer will only sell the products
at the large quantities where as the consumer will only buy the
products at a low quantity with a low price level. In this case, the
differences in qualities offered and accepted will varies in
quantities.
2.7 Different types of products. The producer concentrates
the production of certain types of products. And on the other
hand the consumers need various kinds of products for his
consumption. So there occur a gap between the producer and
the consumer at large.
APPROACHES TO THE AGRICULTURAL MARKETING PROBLEM
3.
FUNCTIONAL APPROACH IN MARKETING PROCESS. One
method of classifying the activities that occur in the marketing
processes is to break down the processes into functions. A marketing
function may be defined as a major specialized activity performed in
accomplishing the marketing process. Classifications of the functions
are as follow;
3.1 Exchange function. The exchange functions are those
activities involved in the transfer of title to goods. They represent
the point at which the study of price determination enters into
the study of marketing. Both the buying and selling functions
have as their primary objective the negotiation of favorable
terms of exchange.
i.
The buying function is largely one of seeking out
the sources of supply, assembling of products, and the
activities associated with purchase. This function can be
either the assembling of the raw products from the
production areas or the assembling of finished products
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into the hands of other middlemen in order to meet the

demands of the ultimate consumer.
ii.
The selling function must be broadly interpreted. It
is more than merely passively accepting the price offered.
In this function can be grouped all the various activities
that sometimes are called merchandising. Advertising and
other promotional devices to influence or create demands
are also part of the selling function. The decision as to the
proper unit of sale, the proper packages, the best
marketing channel, the proper time and place to approach
potential buyers all are decisions that can be included in
the selling function.
3.2 Physical functions. The physical functions are those
activities that involve handling, movement, and physical change
of the actual commodity itself. They are involved in solving the
problems of when, what, and where in marketing. It includes;
i.
The storage function is primarily concerned with
making goods available at the desired time. It may be the
activities of elevators in holding large quantities of raw
materials until they are needed for further processing. It
may be the holding of supplies of finished goods as the
inventories of processors, wholesalers, and retailers.
ii.
The transportation function is primarily concerned
with making goods available at the proper place. Adequate
performance of this function requires the weighing of
alternatives of routes and types of transportation as they
might affect transportation costs. It also includes the
activities involved in preparation for shipment, such as
crating and loading.
iii.
The processing function is often not included in a
list of marketing functions because it is essentially a formchanging activity. However, in the broad view of
agricultural marketing this activity cannot be omitted. The
processing function would include all those essentially
manufacturing activities that change the basic form of the
product, such as converting live animals into meat, fresh
peas into canned or frozen peas, or wheat into flour and
finally into bread.
3.3 Facilitating functions. The facilitating functions are those
that make possible the smooth performance of the exchange and
physical functions. These activities are not directly involved in
either the exchange of title or the physical handling of products.
However, without them the modern marketing system would not
be possible. They might be called the grease that makes the
wheels of the marketing machine go around. In comprise of;
i.
The standardization function is the establishment
and maintenance of uniform measurements. These may be
measurements of both quality and quantity. This function
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simplifies buying and selling, because it makes the sale by

sample and description possible. Effective standardization
is basic to an efficient pricing process. Such activities as
quality control in processing plants and inspections to
maintain the standards in the marketing channel can be
considered part of this function.
ii.
The financing function is the advancing of money
to carry on the various aspects of marketing. To the extent
that there is a delay between the time of the first sale of
raw products and the sale of finished goods to the ultimate
consumer, capital is tied up in the operation. Anywhere
that storage or delay takes place, someone must finance
the holding of goods. Financing may take the easily
recognizable form of advances from various lending
agencies or the more subtle form of tying up the owners
capital resources.
iii.
The risk-bearing function is the accepting of the
possibility of loss in the marketing of a product. Most of
these risks can be classified into two broad classifications
physical risks and market risks. The physical risks are those
that occur from destruction of deterioration of the product
itself by fire, accident, wind, earthquakes, cold, and heat.
Market risks are those that occur because of the changes in
value of a product as it is marketed.
iv.
The market intelligence function is the job of
collecting, interpreting and disseminating the large variety
of data necessary to the smooth operation of the marketing
processes. Efficient marketing cannot operate in an
information vacuum. Successful decisions on how much to
pay for commodities or what kind of pricing policy to use in
their sale require a large amount of market knowledge.
Adequate storage programs, an efficient transportation
service, and an adequate standardization program all
depend to a considerable extent on good information.
4.
Functional exchange process. This process involves producer,
middlemen and retailers and consists of three parts namely:
4.1 Concentration (producer level). In the concentration
functional, the supplies delivered to assembly points such
warehouse, mills, etc and vary in quantity and quality. The
concentration of produce at convenient points attracts buyers
who could not spare the time to make small purchase at
scattered farms.
4.2 Equalization (processor level). Equalization is the
transformation of raw products to processed form. For example,
the collected rubber latex or scrap to be processed in the factory
in the form of semi-processed. The products are transformed into
semi-finished or finished product.
4.3 Dispersion (retailer level). Supplies are released from

storage, or moved from one area to another so that the flow of
goods to consumers will match their demand. The systems of
distribution of products aim to supply the demands of the
consumers.
5.
Decentralization. Decentralization means that farm products
move from farms and into the hands of processors and wholesalers
without utilizing the services. Buying agents of processors,
wholesalers, and the retail firms contact producers and take title to the
products in the production area.
6.
Factors of decentralized market.

6.1 Development of the truck and highway system. This has
vastly increased the flexibility of assembling products.
6.2 Continuous improvement in the speed and flexibility of
communications technology (internets, facsimile, mobile-phone,
etc). A seller from one location to other location can now talk
quickly and cheaply without coming face to face.
6.3 Improved techniques of refrigeration and storage along
with much improved grading procedures. The feasibility of the
transfer of products by sample or description has increased.
6.4 Rapid development of fewer but larger and more
specialized production units. The output of individual farms now
a feasible purchase unit.
6.5 Development of large scale retailing with mass
standardized products. New potentialities of mass production and
economies of scale are possible.
6.6 Merchandise-oriented food industry with need to
coordinate farm production with needs of farm product buyers.
7.
Food marketing system. Food marketing may be thought of as
the connecting link the bridge between specialized food producers
and consumers. It is both a physical distribution and an economic
bridge designed to facilitate the movement and exchange of
commodities from the farm to the fork. It is called a system because it
consists of interrelated component parts that contribute toward overall
industry goals.
8.
Food marketing efficiency. Efficiency is measured as a ratio of
output to input. Marketing inputs include the resources such as labor,
capital, personnel and machinery as it is necessary to perform the
marketing function. Marketing output include time, form, place, and
possession utilities that provide satisfaction to the customers.
Efficiency in the food industry is the most frequently measure of
market performance.
9.
Storage. Storage operations are carried on at every level of the
food industry. All food marketing firms perform some storage and
warehousing. Storage is interrelated with other marketing functions,
such as transportation, processing, financing, and risk-bearing. In a
sense, farm products are being stored at the time they are in transit or
in the processing operation.
10. There are several kinds of food storage, serving various
purposes.
10.1 Seasonal food stocks are a related form of food storage.
Over the marketing year, these are held to balance out supplies
with demand. Seasonal stocks are usually larger for products that
are harvested in a short time but that are consumed throughout
the year. Both farmers and food marketing firms hold seasonal
food stocks. Consumers may also build these stocks by
increasing purchases of in-season commodities for later
consumption.
10.2 Carryover stocks refer to the amount of commodity left
over from one marketing year to the next. Annual production and
consumption seldom balance precisely, and there may be
carryovers (old crops) of shortfalls, going into the next harvest
period. These carryovers then become an addition to the supply
available for consumption in the following year.
10.3 Food reserves are intended to balance food supplies with
demand over the long run and between countries. The objective
is food security storing in fat years as protection against lean
years.
10.4 Speculative stocks. Farmers, food marketing firms, and
consumers may at times hold larger than normal food stocks
when they expect prices to rise. These speculative stocks would
then increase in value and result in an inventory profit.
11. Types of storage. Farm and food commodities can be stored at
several places in the food system. The several types of storage defined
below;
11.1 Cold / hot storage for perishable product such meat,
vegetables, etc.
11.2 Open storage to store palm oil bunches and some type of
vegetables, etc.
11.3 Closed storage for finished products or canned foods.
11.4 Wet storage for stuff such rubber scraps or latex received
from farm before processing.
11.5 Dry storage for rubber scraps (bales) after processing, etc.
12. Cost of storage. In determining the total costs of holding

commodities, five possible categories of costs must be considered;
12.1 The cost necessary to provide and maintain the
physical facilities for storage. These costs would include such
items as repairs, depreciation, and insurance against lost.
12.2 The interest on the financial investment in the
product while it is in storage. Whether the money is actually
borrowed or not, this a cost that should be assessed at the rate
of interest that would have to be paid if money were borrowed
during the storage period.
12.3 The cost of quality deterioration and shrinkage
during storage. Many commodities either deteriorate in quality
or shrink in volume-or both-while in storage. In a few cases,
some commodities, such as corn, may increase in quality while
shrinking in volume. In such cases, storage may result in net gain
instead of a net loss for this particular factor.
12.4 The loss that may result from poor consumer
acceptance of the stored as against the fresh product.
Packing companies maintain that frozen meat will be accepted
by consumers only at a price discount, even though its quality as
measured by the grading system has not deteriorated. There is
consumer resistance to storage eggs as opposed to fresh eggs,
though the quality as measured by the grading system may be
the same. This is not a problem in all commodities.
12.5 The risk that the price of the product might
unexpectedly decline. Under these circumstances the product
might have to be sold at less than its value at the time it was
placed in storage. The possibility of a favorable movement in
prices, on the other hand, is a major factor in encouraging
speculative storage.
13. In order to reduce / minimize the cost of storage several
method could be considered such applied latest technology in the
storage, do not retain the product in a longer time, implement a better
scheduling, good and sound management, and efficient in handling /
storing etc. This form of element can be explained as below;
13.1. Increase the efficiency of storage. The probable
reasons for this were an increase in the number and variety of
food products stored, the shifting of some marketing functions
from retailers to wholesalers, and a slackening in the rate of
technological innovations in food warehousing. Nevertheless,
there are ways to improve food storage efficiency;
i.
Labor efficiency versus mechanism. Use paddy
harvester instead of human being during harvesting time.
ii.
Proper ventilation and insulation. The intention
is to reduce odor, maintain freshness of products, and
minimize moisture.
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iii.
Improved management technique. This can be
done through maintaining a proper and improved work
scheduling in the operational situation. For example, the
work schedule of manure, harvesting, and pest and disease
control in the agricultural sectors.
13.2 Reducing product deterioration. Different crops need a
set range of temperature control. For example vegetables need a
minimum temperature to keep it from deteriorating and to
maintain the standard grade.
13.3 Proper use of insecticides and fungicides. This is
important in order to avoid the harvested crop from
contamination of fungicides. Proper spraying must be avoided at
least 10 days before harvesting is done.
13.4 Proper packaging either plastics or canned.
Packaging must be appeal and presentable to the eyes of the
consumer. Proper packaging will enhance buyers to purchase the
product.
13.5 Storage financing and risk bearing. The future market
can assist in managing the financing and risk-bearing operations
associated with food storage. After harvesting, it is necessary to
store the products or send the products to the middlemen or
processor. The type of risk is crop deterioration or natural
disaster and this risk can be avoids if the farmer is willing to
insured their crops.
14. Transportation. Transport is part of economic activity which is
concerned with increasing human satisfaction by changing the
geographic position of goods or people. It may bring raw materials to
places where they can be manufactured more easily, or finished goods
to places where consumers can make best use of them. Transportation
of agricultural products to central assembly points or to processing
plants is performed mostly by individual, independent truck operators
who are exempt from regulation of rates. Once a product is processed,
however, it generally moves to wholesalers and retailers by rail or by
large trucking companies.
15. Transport is important in agricultural marketing in order to
transporting and receiving products at the exact time, location and
utility. Time utility is the value added to products by changing their
time of availability to users, usually through storage operation.
Transportation also plays an important role in market development,
expansion, and competition. The size of the market area depends upon
whether products can be moved.
16.
Type of transportation;
16.1 Roadways (truck, lorry, container, tanker, van, car,
low-loader, etc). Roadways are usually public ways. Nowadays
most roads were improved natural ways of ancient origin. The
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tracks became pathways, footways, bridleways and eventually

highways to give an advantage.
16.2 Railways (train, electric train, etc). Railways consist of
two parallel metal strips which give a smooth hard surface. Today
rails are made of steel, but in the early days they were made of
wood, and later of iron.
16.3 Waterways/Seaways (ship, vessel,
boat, etc).
Waterways are usually improved natural ways of artificial ways.
Waterways and seaways makes for economical transport.
16.4 Airways (aero-plane, aircraft, etc). Like the sea, the
atmosphere is a way which requires no artificial preparation, has
no repair bills and no private costs. It is more universal than the
oceans, since all parts of the world are equally accessible.
16.5 Pipelines. The pipeline is a unique method of transport. It
also the unit of carriage and embodies at intervals along the way
(pumping station) which are themselves part of the pipeline
system.
17. Cost involves in the process of transportation depends on
product perishable, product form, loading and unloading, efficiencies in
using crane, and time factors.
18. Reducing cost of transportation. Having identified the true
costs of transportation, and allocated them to particular products or
services, we can examine them with a view to reducing total
distribution costs. Basically the common way in reducing the cost of
transportation can be explained below;
18.1. Increase the efficiency of management in technology such
as trucking with attached refrigeration, road and railways. The
using of RFID (radio frequency identification device) systems
provides a powerful technology for tracking the movement of
goods throughout the supply chain. RFID systems use tiny tags
with embedded microchips containing data about an item and its
location to transmit radio signals over a short distance to special
RFID readers. The RFID readers then pass the data over a
network to a computer for processing.
18.2 Competition among various transporters will enhance the
efficiencies and delivery of the products on time. Transportation
company will compete among themselves, thus to win the
competition they will provide better services with fair and
minimum charges to attract customer deal with them.
18.3 Increase the usage of space for the purposes of delivering
and to maximize the space usage. Rather than bringing fruits,
truck can also bring other crop such wheat, paddy, etc from one
location to other location. This decision will reduce the cost of
transportation.
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19. During the transportation time, the agricultural products may

deteriorate and will decrease the quality and the freshness of the
products. Thus, to reduce the product from deteriorate, producer
should consider the following ways;
19.1 The type of container use will prevent the product from
deteriorate.
19.2 The density and bulk of products.
19.3 The degree and efficiency of loading.
19.4 Bracing methods use for certain products.
19.5 Change the physical products attributes;
i.
ii.
iii.
iv.
High perishable product should be sold at farm gate.

Fruits change the attributes to frozen, canned and
juice.
Meats change to frozen and canned.
Fish change to frozen, canned and dried.
20. Processing. The processing is organized to engage in the

packing or processing of the farmers products. Cheese and butter
manufacturing, fruit packing, and vegetable canning associations are
examples of this type of activities. Processing is intends to change the
physical form of products from raw or life into frozen or canned. Once
the products processed, it should be packed, branded and be
innovative, thus the product at this stage is ready to be dispersed or
consumed.
21. Branding. It is necessary to brand and pack innovatively once
the product processed. Brands are more than just names and symbols.
They are key element in the companys relationships with customers.
Brands represent consumers perceptions and feelings about a product
and its performance. In the final analysis, brands exist in the minds of
consumers. Branding will influence the products in the market such;
21.1 Stages of product life cycle (PLC).
21.2 Consumers attitude of buying preferences.
21.3 The efficiency of marketing methods, promotions and
techniques applied.
21.4 New business ventures.
22. Food processing. Food manufacturers or processors are
primarily engaged in adding form utility to raw farm products. Wheat is
milled into flour, livestock is converted into meat products, fruits and
vegetables are canned or frozen. These firms play a vital role in
transforming bulky, raw, perishable farm products into storable,
concentrated, and more appealing food products.
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23. Problem of food processors. Food processors experience

problems and face challenges in three major areas;
23.1 Processing problem.
i.
Food processing involves significant investments in
plant and equipment. In order to operate efficiently, these
facilities should be used to full capacity all year-round,
every year. This is difficult to achieve when there are wide
variations in farm product supplies from year to year and
within seasons. These variations can influence significantly
food processing costs.
ii.
Processors face a dilemma when deciding on the
number and size of plants to build. The operational
efficiency gains of large, central processing facilities can be
nullified by the costs of assembling large quantities of raw
farm products and transporting final products to consumers
from centralized operations. Replacing a single, large plant
with several smaller ones reduces some assembly and
transport costs but may require sacrificing the operational
efficiencies or large-scale, centralized plants.
23.2 Buying operations. All manufacturers are faced with
supply problem. Any manufacturer desires to assure himself of
an adequate amount of the desired kind and quality of raw
material at the lowest possible cost. He may depend either upon
other marketing agencies to do his purchasing for him or he may
undertake to set up his own procurement machinery. One of two
considerations may force the processor to become his own
assembler. He may be dissatisfied with the operation of the
existing agencies which are supposed to serve him. They may be
slow in making improvements or otherwise operating inefficiently
and at high cost, from the manufacturers viewpoint. Or the
processor may wish control over the machinery for his own
competitive safety or to make his buying power a more effective
price-affecting force.
23.3 Selling strategies. As in procurement, processors are
faced with the necessity of choosing between alternative
methods of selling the finished product. They may either utilize
the existing independent wholesale channels or set up their own
sales organization to distribute products to retailers. It is
probably true that in the past food processors have been more
interested in securing direct control over the selling phase of
their operations than the buying phase. If the processor is large
and has a relatively full line of products he will often operate his
own warehouse and wholesaling system. If, on the other hand,
his line of products is limited he will often have the sales work
done for him by hiring a broker. Industries vary in the directions
they have taken.
24. To overcome the food processors problem several ways is
determined that need to consider by the processors. Such way; expand
the storage facilities with better preservation and conservation, deal
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directly and substitute contract agreement between parties,

maximized, utilized and adapt new technology or new system, etc.
25. Financing. Good financial planning can help business assess its
opportunities for future growth and how to cope with shifts in the
marketplace. Everything that happens in agricultural marketing has
some financial impact. Financing plays a critical and crucial path
starting from the exchange to physical to the facilitating functions.
Financing in agricultural marketing is important as well as other
industry. In agricultural marketing financing will justified the parties
that will perform financing activities, who will bear the burden of
financing whether the middlemen, government, financial institution or
farmers. It also include cost of storage, transportation, advertising and
other marketing cost, and lastly it will determine the cost of inputs
(fertilizer, chemicals, seeds, etc) generally and does the farmer,
processor, and final consumer are willing to accept the cost of
financing.
26. Market information. Market information is a facilitating
marketing function, and market intelligence is essential to a smooth,
efficiently operating marketing system. Accurate and timely market
information facilities marketing decisions, regulates the competitive
market processes, and lubricates the marketing machinery. Market
news, information, and research are the lifeblood of markets.
27. Roles of market information. One important function of
market information is to improve decision-making. Farmers use market
information when selecting enterprises, changing production plans,
making long term investments, and deciding the when, where and how
of their marketing strategies. Food marketing firms, farmer
cooperatives, farm organizations, and legislators also depend upon
market information for good decision-making.
28. Problem of market news and information. There are several
problems regarding the collection, compilation, and dissemination of
food market information that should be taken into account by users of
the information. The problem can be explained below;
28.1 Price specification. The statement that cattle are selling
for RM6.50 8.00 per kilogram is not very useful until other,
more specific information is provided, for example: where?
when? what grade? what weight? how? what genetics? etc.
These specifications are necessary to make a price quotation
meaningful for decision-makers.
28.2 Net versus gross price. Another complicating factor in
market information programs is that publicly quoted figures are
frequently not the actual price at which commodities are traded.
Premium and discount schedules vary from place to place and
from buyer to buyer. Some farm prices include allowances for
marketing costs such as hauling, packaging, and other marketing
activities. But because industry practices vary, making accurate
price comparison is very difficult.
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28.3 Information costs. The cost of gathering and

disseminating market information to the public requires that
some choices be made. The value of more complete and more
accurate information must be weighed against its costs. Market
information is not available for all commodities and is somewhat
incomplete for all products. Thus there are continuing requests
for more information. The same amount of information is not
available for all levels of the food industry. In general, much more
is known about supplies, demand, and marketing at the farm
level than at the retail level.
28.4 Changing market organization. Trends in farming and
marketing have also complicated the food market information
task. Because of decentralized, direct sales, products now bypass
the central terminal markets, where at one time price reporters
could fairly easily take the pulse of markets. Market reporters in
these days must obtain information from more numerous and
more geographically dispersed shipping-point markets, and the
cost of obtaining accurate and complete information has risen
accordingly.
28.5 Voluntary cooperation. The Ministry of Agriculture and
Agro-Based Industry, Malaysia and the private market news and
information programs depend upon the voluntary cooperation of
buyers and sellers to report prices, supplies, and other market
conditions. But because there is no mandatory requirement that
they provide this information, many farmers and food marketing
firms do not participate in the programs.
29. Criteria for evaluating market information. To be of
maximum benefit, market news and information must meet a number
of criteria;
29.1 Information must be complete and comprehensive. This
is a difficult task in a large country with a geographically
dispersed agricultural plant producing different farm products
and a food marketing system handling over different
supermarket items. Food market conditions also change
frequently, further adding to the difficulty of providing complete
market information. A reasonably complete description of a food
market includes prices, price trends, production, supply
movements, stocks, and demand conditions at each level of
market.
29.2 Accuracy and trustworthiness are also necessary
criteria for market information. By its nature, market information
can never be 100 per cent accurate, but it must be an honest
market appraisal in order to earn the trust of information users.
Considerable, and constant, efforts are made to improve the
accuracy of market information and news services.
29.3 Information also must be relevant and in usable form. It
is not enough to simply collect a mass of numbers and report
them. Information must be collected, packaged, and
disseminated with the users interests in mind. Much market
14
information goes unused because it is not in usable, easily

accessible form.
29.4 Confidentiality. Market prices and supply reports are
amassed to provide a general picture of the market without
revealing any single information.
29.5 Market information also must be timely, in the sense of
being relevant to current decisions, and must be speedily
transmitted to users. Much market information is highly
perishable.
29.6 It is desirable to have a balance of market information
at all levels of the food industry. Each marketing agency should
have equal access to all information relevant to the bargaining
and marketing processes.
30. Competition in the agricultural product and food industry.
Competition in both industries takes several forms. Product
competition refers to rivalry between two alternative or substitute
products, such as beef and mutton, for the consumers spending. Firm
competition concerns the rivalry between sellers of similar products.
Brand competition refers to the rivalry between competing brands
within a product class. Interregional competition is illustrated by
the rivalry Siamese mango and Malaysian mango. Institutional
competition relates to the rivalry between competing market
institutions, for example grocery stores, fast-food restaurants, and
vending machines. Functional competition arises when two or more
firms vie to determine who will perform a particular marketing function,
such as storage, financing, or transportation.
31. There are other ways to view market competition. Horizontal
competition involves rivalry between firms at the same market levelprocessors or wholesalers or retailers. Vertical competition is
concerned with the bargaining relationships between buyers and
sellers of food and how the consumers food dollar is divided.
32. Competitive advantage. The product can be competitive in the
market depend on the strategy applied and consumer acceptance. A
competitive advantage is a set of unique features of a company and its
products that are perceived by the target market as significant and
superior to the competition. There are three types of competitive
advantages namely;
32.1 Cost competitive advantage. Cost leadership can result
from obtaining inexpensive raw materials, creating an efficient
scale of plant operations, designing products for ease of
manufacture, controlling overhead costs, and avoiding marginal
customer. Having a cost competitive advantage means being the
low-cost competitor in an industry while maintaining satisfactory
profit margins.
32.2 Product/service
differentiation
competitive
advantage. Because cost competitive advantages are subject to
continual erosion, product/service differentiation tends to provide
15
a longer lasting competitive advantage. The durability of this

strategy tends to make it more attractive to many top managers.
A product/service differentiation competitive advantage exists
when a firm provides something unique that is valuable to buyers
beyond simply offering a low price.
32.3 Niche competitive advantage. A niche competitive
advantage seeks to target and effectively serve a single segment
of the market. For small companies with limited resources that
potentially face giant competitors, niche may be the only viable
option. A market segment that has good growth potential but it is
not crucial to the success of major competitors is a good
candidate for developing a niche strategy.
33. Risk bearing. In order to reduce and minimize the variety of risk
in the marketing, such efforts are consider;
33.1 Individual management. By managing the good practice
in management such as planning, organizing, directing and
controlling resources can be use to reduce such occurrence of
risk in marketing of agricultural products.
33.2 Government involvement. Price policies set up by the
government so that the producers are unable to manipulate price
fixing.
33.3 Complete
and
accurate
market
information.
Comprehensive and accurate market information will help to
reduce the risk in price stabilities. The use of media such as
internet, website, and other relevant sources of information will
reduce the risk in marketing between the producer and the
consumer.
35. Methods of transferring risk in marketing. Several method
may consider by organizations such;
35.1 Insurance. Insurance is an arrangement with a company
which the organizations pay regular amount of money and the
insurance company agree to pay the costs.
35.2 Contract. A contract is an understanding of agreement
between the producer and the future consumer at a price
determined earlier and assurance in delivering quantities of the
products. This way will help organizations in reducing the risk in
marketing of the products.
35.3 Hedging. Buying or selling of agricultural commodities in
the future markets. Future market is the purchase of products or
agricultural commodities for future delivery.
36. THE INSTITUTIONAL FUNCTIONAL APPROACH. Another
method of analysis is to study the various agencies and business
structures that perform the marketing processes. The institutional
approach to agricultural marketing problems focuses attention on the
16
who. The institutional approach considers the nature and character

of the various middlemen and related agencies and also the
arrangement and organization of the marketing machinery. In this
approach the human element receives primary emphasis. Middlemen
are those individuals or business concerns who specialize in performing
the various marketing functions involved in the purchase and sale of
goods as they are moved from producers to consumers.
The
middlemen of particular interest in marketing can be classified as
follows;
36.1 Merchant middlemen. Merchant middlemen take title to,
and therefore own, the products they handle. They buy and sell
for their own gain. Types of merchant middlemen are;
i.
Retailers. The retailers buy products for resale

directly to the ultimate consumer of the goods. He is
the producer personal representative to the
consumer. As such, his job is very complex. From the
functional viewpoint, the retailer may perform all of
the marketing functions. This group of middlemen is
the most numerous of the marketing agencies.
ii.
Wholesaler. The wholesaler sells to retailers, other

wholesalers, and industrial users, but does not sell in
significant
amounts
to
ultimate
consumers.
Wholesalers make up a highly heterogeneous group
of varying sizes and characteristics. One of the more
numerous groups of wholesalers are the local buyers
or country assemblers who buy goods in the
producing are directly from farmers and ship the
products to the larger cities where they are sold to
other wholesalers and processors.
36.2 Agent middlemen, as the name implies, act only as

representatives of their clients. They do not take title to, and
therefore do not own, the products they handle. Whereas
merchant wholesalers and retailers secure their incomes from a
margin between the buying and selling prices, agent middlemen
receive their incomes in the form of fees and commissions. Agent
middlemen can be broken down into two major groups;
i.
The commission man is usually granted broad

powers by those who consign goods to him. He
normally takes over the physical handling of the
product, arranges for the terms of sale, collects,
deducts his fee, and remits the balance of his
principal.
ii.
The broker, on the other hand, usually does not

have physical control of the product. He ordinarily
follows the directions of his principal closely and has
less discretionary power in price negotiations than
commission men.
17
36.3 Speculative middlemen are those who take title to

products with the major purpose of profit from price movements.
All merchant middlemen, of course, speculate in the sense that
they must face uncertain conditions. Usually however,
wholesalers and retailers attempt to secure their incomes
through handling and merchandising their products and to hold
the uncertain aspects to a minimum. Speculative middlemen
seek out and specialize in taking these risks and usually do a
minimum of handling and merchandising. They often attempt to
earn their profits from short-run fluctuations in prices.
36.4 Processors and manufacturers primarily exist to
undertake some action on products to change their form. Apart
from their main processing activities, food processors take an
active part in other institutional aspects of marketing. Some
processors, such as meat packers, flour millers, and fruit and
vegetable canners, often act as their own buying agents in the
producing area.
36.5 Facilitative organizations aid the various middlemen in
performing their tasks. Such organizations do not, as a general
rule, directly participate in the marketing processes either as
merchants, agents, processors, or speculators. One group of
these organizations furnishes the physical facilities for the
handling of products or for the bringing of buyers and sellers
together. They receive their incomes from fees and assessments
from those who use their facilities.
37.
Reasons for the organization of using the middlemen.

37.1 Middlemen provide greater efficiency in making goods
available on a wide scale to target markets.
37.2 Middlemen reduce the number of channel transactions.
37.3 Middlemen play an important role in matching supply with
demand i.e. by making the goods available at the right place,
time and quantity.
37.4 Many producers lack the financial resources to carry out
direct marketing. If they are to distribute the goods direct to
customers, it would require them to have many shops or outlets
and sales representatives.
37.5 Some producers lack the marketing experience and thus
rely on experienced middlemen and their management ability.
37.6 Producers have more time to increase their investment on
Research and Development in their business and earn a greater
return.
18
38.
Factors influencing the selection of marketing channels.

38.1 Distance between the producer and the consumer.
Distance between the producer and the consumer will enhance
the high cost of marketing channels. To reduce such cost the
needs of middlemen to market the products from the producer to
the consumer.
38.2 Nature of products. Most of the agricultural products are
perishable in nature. To reduce such perishable, the marketing
channel must be shorten or the introduction of new packaging
and fast transportation is needed to reduce such cost and so that
the consumer will get the products at a faster time.
38.3 Production skill. If a producer produces the products at a
larger scale, this will reduce the marketing cost of the
production.
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Mohd Zahid Laton, FPP Uitm Pahang

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