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What can I add to do this in the read Keys to success in value? Erin provides a read Keys to success in value added agriculture Later Heidegger Routledge Philosophy, a focus, a email. The storage function is one of balancing supply and demand. Both growers and consumers gain from a marketing system that can make produce available when it is needed.

A farmer, merchant, co-operative, marketing board or retailer who stores a product provides a service. That service costs money and there are risks in the form of wastage and slumps in market demand, prices, so the provider of storage is entitled to a reward in the form of profit. Transportation: The transport function is chiefly one of making the product available where it is needed, without adding unreasonably to the overall cost of the produce. Adequate performance of this function requires consideration of alternative routes and types of transportation, with a view to achieving timeliness, maintaining produce quality and minimising shipping costs.

Effective transport management is critical to efficient marketing. Whether operating a single vehicle or a fleet of vehicles, transportation has to be carefully managed, including cost monitoring - operations on different road types, fuel and lubrication consumption and scheduled and remedial maintenance and repair. Skillful management of all aspects of vehicle operations can also make a substantial contribution to efficient marketing especially with respect to optimum routing, scheduling and loading and off-loading; maximisation of shift hours available, maintaining the vehicle fleet at an optimum size, taking account of time constraints on delivery, and collection times and judicious management of vehicle replacement and depreciation.

Transport managers also have to weigh the advantages and disadvantages of owning, hiring or leasing transport. Processing: Most agricultural produce is not in a form suitable for direct delivery to the consumer when it is first harvested. Rather it needs to be changed in some way before it can be used. Kohls and Uhl 6 observe that:. However, it is for this very reason that processing ought to be included as a marketing function. The form changing activity is one of that adds value to the product. Changing green coffee beans into roasted beans, cassava into gari or livestock feed, full fruit bunches into palm oil or sugarcane into gur increases the value of the product because the converted product has greater utility to the buyer.

How the form of produce is to be changed and the method to be used in bringing about such changes are marketing decisions. For example, some years ago when Ethiopia was looking to expand its tea business, a prototype manufacturing plant was established. The plant was capable of curing the tea and packing it in individual tea bags. At that point, tests were undertaken in which the product was compared with others already on the market.

The results were encouraging. However, in the course of the marketing research, it was also discovered that ninety percent of the black tea consumed is blended and not the pure variety placed in tea bags by the Ethiopians. By going past the point of changing green leaf into high quality black tea, the Ethiopians were entering a nice market which is not what they intended at all. Timely marketing research would have directed Ethiopia to stop the form changing activity short of bagging since, at that time, Ethiopia did not have the acreage of tea, nor the resources, to develop a tea blending facility of its own.

Of course, processing is not the only way of adding value to a product. Storing products until such times as they are needed adds utility and therefore adds value. Similarly, transporting commodities to purchasing points convenient to the consumer adds value. In short, any action which increases the utility of the good or service to prospective buyers also adds value to that product or service.

The facilitating functions include product standardisation, financing, risk bearing and market intelligence. Facilitating functions are those activities which enable the exchange process to take place. Marketing, in simple terms, is the act of supplying products to someone in exchange for something perceived to be of equal or greater value, usually, but not always, a given sum of money.

Facilitating functions are not a direct part of either the exchange of title or the physical movement of produce. This function simplifies buying and selling as well as reducing marketing costs by enabling buyers to specify precisely what they want and suppliers to communicate what they are able and willing to supply with respect to both quantity and quality of product. In the absence of standard weights and measures trade either becomes more expensive to conduct or impossible altogether.

In Nepal such was the diversity of weights and measures used with respect to grain within the country, that it was easier for some districts to conduct trade with neighbouring states in India than it was to do business with other districts within Nepal. Among the most notable advantages of uniform standards, are:. Quality differences in agricultural products arises for several reasons. Technological innovation can also give rise to quality differences. In addition, a buyer's assessment of a product's quality is often an expression of personal preference. It matters not whether the criteria used in making such assessments are objective or subjective since they have the same effect in the marketplace.

Financing: In almost any production system there are inevitable lags between investing in the necessary raw materials e. During these lag periods some individual or institution must finance the investment. The question of where the funding of the investment is to come from, at all points between production and consumption, is one that marketing must address. Consider the problem of a food manufacturer who wishes to launch a range of chilled products in a developing country where few retail outlets have the necessary refrigeration equipment.

This is a marketing problem. It might be solved by the food manufacturer buying refrigerators and leading these to retailers or arriving a hire-purchase arrangement with retailers. A common marketing problem, in developing countries, is the low level of incomes leading to low levels of effective demand for many products. The challenge to marketing is to somehow channel what income is available into effective demand. In the case of agricultural equipment marketing this might involve offering hire-purchase schemes where the prospective buyer makes payment in regular installments.

If payments are not forthcoming, the machine can be recovered since its ownership remains with the seller up until the final payment is made, at which point the farmer is considered to have purchased the machine. Alternatively, the seller might set up leasing, rather than purchasing schemes where again the farmer is making regular payments but never takes title to the machine. Where a food item is being marketed, to a low income market, the seller can consider reducing the until price of the product by making the pack or lot size smaller.

Marketing is also concerned with the financing of the enterprise itself. Here again some creative solutions can be developed. Where internal financing is insufficient for the purposes in view, an enterprise in a developing country can look to several alternatives including:. Where these sources of finance are considered inappropriate, or are simply not available to a particular enterprise, a strategic alliance in the form of a joint venture could be the answer.

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The agreement between parties to a joint venture normally specifies their respective contributions of resources, share of management control, profit and risk 8. This is a very expensive process since the manufacturing plant required to produce agricultural tractors, combine harvesters, seed drills, straw balers and the like costs million of dollars. When the equipment manufacturer Massey Ferguson MF came to develop a completely new line of tractors, in the early s, it sold its existing line of tractors to the state owned Polish tractor manufacturer Ursus in order to offset at least part of the cost of the new investment.

The arrangement was rather novel for the industry at that time. Ursus was in such poor financial condition that it could not finance the purchase of the Massey Ferguson manufacturing plant and patents, so MF supplied the plant to Ursus and were to buy-back a proportion of the tractors which Ursus manufactured.

They would continue to market these under the MF brand name whilst the remainder would be sold under the Polish manufacturer's name. Massey Ferguson planned to supply the older designs to markets in developing countries where these models continued to have a large market share whilst launching the new models in industrialised countries. The agreement between Massey Ferguson and Ursus was modelled on a similar, and very successful, arrangement between the Italian automobile manufacturer Fiat and Poland's state owned car manufacturer. However, MF's deal never matched the performance of the Polski-Fiat.

The failure of the MF-Ursus buy-back package had several causes, but foremost among them was the inability of Ursus to source components of the MF tractors which Massey Ferguson did not either manufacturer itself nor own the patents to. For example, the fuel injectors were manufactured by the British components supplier Lucas Industries. Poland simply did not have the foreign currency reserves, at that time, to import these and other parts. Consequently, Ursus' tractor plant, on the outskirts of Warsaw, with the potential to produce 77, units per annum was able to manufacture around units per year.

Whilst the MF-Ursus buy-back arrangement was not a success it should not be concluded that buy-back agreements are doomed to failure. The Polski-Fiat deal was, after all, a great success. The MF-Ursus failure was due to very specific circumstances. What should be concluded is that it is possible to devise innovative approaches to the financing of business enterprises. Whatever the source of finance under consideration marketing has a role to play in evaluating the appropriateness of that source as well as identifying it in the first place.

A common requirement is that marketing proposals include a forecast of the payback period. Those responsible for developing these proposals are best placed to evaluate the compatibility between the market opportunity under consideration and the alternative modes of financing it. Of specific interest is the prospect of the investment payback period matching the repayment schedule. Enterprises which finance long term investments through short term sources of finance are either badly misinformed or have adopted a high risk strategy.

Risk bearing: In both the production and marketing of produce the possibility of incurring losses is always present. Physical risks include the distruction or deterioration of the produce through fire, excessive heat or cold, pests, floods, earthquakes etc. Market risks are those of adverse changes in the value of the produce between the processes of production and consumption. A change in consumer tastes can reduce the attractiveness of the produce and is, therefore, also a risk.

All of these risks are borne by those organisations, companies and individuals. Risk bearing is often a little understood aspect of marketing. However the risks borne are rarely taken into account by those passing judgement and yet, almost inevitably, there will be occasions when the risk taker incurs losses. Stocks will spoil, markets will fall, cheaper imports will enter the country, consumer tastes will change, and so on. These losses can only be observed if adequate surpluses were generated in previous periods. Risk bearing must be acknowledged as a cost since what is uncertain is not whether they will occur, but when they will occur.

Market intelligence: As for as is possible marketing decisions should be based on sound information. The process of collecting, interpreting, and disseminating information relevant to marketing decisions is known as market intelligence. The role of market intelligence is to reduce the level of risk in decision making. Through market intelligence the seller finds out what the customer needs and wants. The alternative is to find out through sales, or the lack of them.

Marketing research helps establish what products are right for the market, which channels of distribution are most appropriate, how best to promote products and what prices are acceptable to the market. As with other marketing functions, intelligence gathering can be carried out by the seller or another party such as a government agency, the ministry of agriculture and food, or some other specialist organisation. What is important is that it is carried out. The link between agriculture and food continually evolves. In primitive societies, the farmer and consumer were either the same family or close neighbours who bartered their products and services as we see in figure 1.

Commodity traders, processors, manufacturers who convert produce into food items and retailers, among others, are interposed between the producer and consumer. A more recently introduced link into the chain is the scientist. Scientists as breeders, plant biologists, nutritionists and chemists have made an immeasurable contribution to the development of agricultural production and food manufacture over the past 50 years.

It would appear that we have passed through the age of machines in agriculture, and the age of chemicals, on to the age of biotechnology in agriculture. Biotechnology has great potential for the developing countries since it is likely to be less capital intensive and more research and know-how intensive. Thus its benefits can flow faster into the poorer countries who do not have the capital.

Therefore its impact could be faster, more widespread and more significant.

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As the link between food and agriculture continues to evolve, we see the emergence of an agribusiness i. Multinational companies like Cargill, Brooke Bond Liebig, and Del Monte are examples of vertically integrated organisations with links all the way through from agricultural production to retailing. As disposable incomes increase, the food industry will increase the quality and diversity of the products it produces. Food manufacturers will have particular expectations of agriculture as a supplier of their raw materials, including:. Quality: To build a profitable business, food manufacturers seek to establish a preference for their products by differentiating those products in some way which is meaningful to consumers.

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Then, in order to enable consumers to recognise the differentiated product, manufacturers brand that product. Manufacturers can then work on building consumer loyalty to these brands. Brand loyalty is normally only established by delivering high quality consistently.

As disposable incomes rise, the market tends to develop more sophisticated needs and the quality of the raw material becomes even more critical. Where agriculture is seeking to serve a food industry, that itself is seeking to meet these more sophisticated needs and wants, it can expect to face increasing emphasis on quality. Equally well, agriculture can expect to share in the better return for innovative improvements in quality. Cost: Next to quality will come cost.

With an increased capability to search the world for raw materials, the food industry is able to find the lowest cost source for any given level of quality. This is a significant change in the competitive environment of agriculture which the farming community has to realise, because they have, hitherto, been largely concooned in their respective domestic markets. Non-seasonality: Agricultural products were traditionally seasonal in their production and supply.

Modern technology and husbandry practices mean that food manufacturers need not have their production schedules dictated by the seasons. Indeed, the capital intensive food industry cannot afford to incur the high costs of under utilising its capacity. This means that farmers will have to complete in terms of reducing seasonality or fitting into a pattern of social competitiveness.

Reliability: A manufacturer who has invested heavily in building up his brand will be very keen to get reliable supplies in terms of quality, timing and cost. Producers of agricultural produce will be increasingly judged on their reliability in all of these respects. Processing: Ease of processing will become an increasingly important expectation of the food industry.

Like all industries, reductions in the costs of capital equipment, wages and inventories are important objectives. Crops that are specially bred or designed to facilitate processing e. In short, the competitive advantage will rest with those able to add most value and can differentiate what they are offering from that of other suppliers. Product differentiation: In competitive brand marketing, the food industry has to innovate continuously to create new products that are different from and superior to existing ones of their own or competitors. The scope of innovation has traditionally been at the processing stage.

Whilst this will continue to be an important area for innovation, manufacturers will increasingly tend to look for innovative changes in the agricultural produce itself. This may be in terms of novel tastes, improved texture, more attractive shapes, etc. Health aspects: We have already said that in the more sophisticated food markets, healthy eating can become a priority among consumers. Therefore, farmers will have to consider the health connotations of what they choose to grow. There are two aspects of health to be taken into account.

First, consumers may be interested in the food itself i. It would be a mistake to think that health issues are confined to the more sophisticated food markets or to the wealthier segments of the community.

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Nutrition is important in all segments of the market. Even where the poor receive adequate amounts of food to fend off starvation, they are often malnourished. Thus farmers have to be concerned about the nutritional value of the produce they grow. Second, the consumer may be more, or equally, concerned about the food production methods i.

This may mean a change to the farmer's husbandry practices with implications for the costs of production. The consumer and the food industry will expect the farmer to produce without potentially dangerous chemicals, but at no extra cost to them. This will be another challenge for agriculture.

The principal component of any marketing system are the institutions and enterprises of which it is comprised. Three of the principal forms of enterprise to be found in developing countries are discussed in this section. These are: private companies, marketing boards and co-operatives. Private enterprise has much to commend it, including a much higher level of financial independence from government than public enterprises. Moreover, private enterprise is able to adapt, rapidly, to changing circumstances and opportunities and is usually able to provide what consumers want at a lower cost than public enterprises.

Abbott 9 highlights several particular strengths of private enterprise, including:. According to Abbott, successful indigenous private enterprises, in agriculture, have several distinguishing characteristics. Those cited by Abbott apply particularly to enterprises that are owner-operated. Abbott claims to have identified several areas of marketing where private companies tend to perform better than other forms of marketing enterprise.

Put another way, marketing boards tend to be born out of government policy rather than by consensus among commercial parties. Marketing boards do not normally provide marketing services to large estates or plantations. Another characteristic of marketing boards is their focus on durable products. In many countries fewer than 5 crops are controlled. Some governments have opted for boards that control more than one crop. In some cases, the marketing board performs all of the marketing functions itself but in others it cooperates with private enterprise by, for example, hiring storage facilities or appointing local buying agents.

The reduction in the capacity of intermediaries to manipulate margins at the expense of producers and consumers. Hence the role of the marketing boards is frequently articulated as being one of organising producers into monopolistic agencies with real countervailing power; to reduce inefficiencies due to unwarranted competition, and duplication of effort between intermediaries.

In theory at least, the marketing board contributes to orderly marketing by acting as an agent for improving marketing practices, as a market regulator and as a provider of facilitating services. For instance:. The role of marketing boards in bringing about more efficient marketing is most often framed by policy makers in terms of modifying the market structure. That is, trying to make what is perceived to be an imperfect market structure more advantageous to producers. Of course, in doing so, account ought to be taken of the effect on both consumers and other players within the marketing system.

This is not always done and the question is begged whether a market structure which is organised to the principal benefit of one particular set of players is anything other than imperfect to the others. However, the argument in favour of giving producers real countervailing powers is strongest in situations in which the marketing system is characterised by a myriad of largely powerless producers and a relatively small number of powerfull intermediaries.

In these circumstances, the price-makers are the middlemen and both producers and consumers are price-takers. One particular way that a marketing board may act to modify an existing market structure is to rationalise the system in an attempt to reduce inefficiencies seen to be caused by unwarranted competition and duplication of effort between intermediaries. For example, there may be duplication of transport, storage and processing facilities to the extent that capacity utilisation cannot rise to economic levels without extremely high charges to compensate.

Marketing boards may try to rationalise the system through, for example, a system of licenses. Buying operations of marketing boards: Marketing boards would normally buy at fixed prices. Each season or year, the government sets the price for scheduled crops. In the case of tree crops, this price is announced before harvest and before planting or sowing in the case of annual crops. It is subsequently kept at the same level for a period of time: typically about 6 months.

These procedures give some security to producers. Buying takes place at official buying points where there are either appropriate storage facilities for the produce, or transportation so that it can be moved before any significant deterioration in quality occurs. Clearly farmers are concerned that buying points should be conveniently located.

However, maintaining an extensive network of buying points adds substantially to a marketing board's operating costs and so the interests of the two parties often conflict. One compromise is for the marketing board to operate mobile buying teams to supplement permanent buying points. The use of buying agents promises some degree of competition, which in view of the fixed prices, expresses itself in the secondary conditions, in particular better service. In order to make best use of the transportation available, marketing boards can appoint buying agents.

An alternative, tried by Tanzania, was to rationalise the crop buying activities of the various boards. In view of the problems the Tanzanians were experiencing in the late 's, a decision was made to assign each of the marketing boards a district in which it would have responsibility for buying all scheduled crops.

The crop authority generally corresponded to the main cash crop of the district. Thus the Tanzania's National Milling Corporation NMC found itself buying a variety of crops in the areas it was assigned and depending, in turn, on other parastatals, the cotton authority, the tobacco authority, etc. This arrangement facilitated the allocation of lorry and rail space and avoided the waste involved in lorries of various crop authorities converging on a particular buying centre at the same time.

On the other hand, it caused great accounting confusion. Parastatals often did not have separate accounts for the different crops they were buying. In the these arrangements were discontinued Selling operations of marketing boards: Some marketing boards, like grain boards, are concerned entirely with domestic consumer markets. These tend to be handling staple crops such as maize, millet and rice. Other boards are dealing exclusively with export markets and, therefore, industrial buyers.

The two types of markets are quite different from one another and so therefore are the operations of the boards serving them. Among the major differences is the position of governments with regard to them. First, governments have no control over demand in export markets whereas they can, and do, exert control over demand within the domestic market.

The interests of consumers in export markets are of no direct concern to the government of the exporting nation. Selling operations of EMBs: Some export markets are governed by commodity agreements such as the Sugar, Cocoa and International Coffee Agreement, but in the majority of cases they must operate within free or open markets where vigorous competition exists. EMBs tend to favour early sales. That is, they try to minimise the time period between buying and exports.

It keeps storage and capital investment requirements to a minimum, since the burden of holding and financing stocks is carried by the recipient of the produce. Sometimes it means selling the crops well in advance of their being harvested, or sometimes even before they are planted. This means that the producer price is calculated as a residual of the export price minus marketing costs.

Many farmers are also now achieving a bigger profit margin by direct sales to the food service industry serving restaurants, schools and hospitals. Creating value is another strategy that involves developing products that are differentiated in some way. The product difference may be real or perceived. The key to success is that the consumer feels there is added value to the product and is will pay for it.

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Creating value can be accomplished with branded products or those with special certification. One product that combines both of these attributes is Certified Angus Beef. Products produced using special methods such as organic or environmentally friendly practices also create value. The current consumer trend of preference for locally produced foods fits with creating value.

In this case the production practice is not different but methods of marketing the products become key in creating the perception of value to consumers.