Chapter-4

Agribusiness Marketing Management

4.1Agricultural Marketing & Agribusiness Firms

4.1.1 Marketing Concept: Generally, marketing is understood to mean the

sale and purchase of goods and services but it is narrow thinking to
understand it so. The term’ marketing’ is very wide. It does not mean
only the sale and purchase of goods and services. It means entire
process of satisfying the needs of consumers. It starts with discovery of
needs and wants of the consumers, and it continues, till these needs
and wants are satisfied. To understand the meaning of marketing
clearly; it becomes necessary that different concepts of marketing must
be understood. The process by which products flow through the system from
producer to final consumer is called marketing. Specifically, marketing may be
defined as the study of the physical and economic flow of products from
the producer through intermediaries to the consumer. Marketing
involves the many different activities that add value to a given product as it moves
through the system.
Marketing concept is the means by which the managerial approach to agricultural
marketing is put into action.
 The marketing concept has three basic characteristics and these are
1. Customer-Orientation: The firm exists to serve customers.
2. Coordinated effort: All the departments in the agribusiness including
production, finance, research and development, etc., make a coordinated effort
to implement it.
3. Profit-Orientation: The firm recognizes that profits are necessary and important. If
the firm has to stay in business and continue to serve its customer s then it
has to make profit.

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MARKETING FLOW OF AGRICULTURAL PRODUCTS FROM PRODUCER TO CONSUMER:

FARMERS
MARKETING FIRMS

PROCESSORS AND MANUFACTURERS

WHOLESALERS AND BROKERS

RESTAURANTS SUPERMARKETS
STORES

CONSUMERS

4.1.2 Managerial approach to Agricultural Marketing:

The managerial approach to agricultural marketing is a process whereby

management systematically identifies the needs of customers and then creates a
marketing program that will satisfy those needs. As the managerial approach to
agribusiness marketing focuses on the needs of consumers or industrial users, these
persons and organizations benefit as well as the firm.

The managerial approach focuses on the direct relationship between the individual firm
and its customers. Government and competitors are treated as external influences. The
managerial approach is decision oriented. The managerial operates within a shorter time
span. For example, implementation of current year’s marketing plan.

4.1.3 Importance of Marketing in Agribusiness Firms :

1. Marketing enables exchange functionfor agriproducts. That is, the product must be
sold and bought at least once during the marketing process.
2. Marketing enables certain physical functions for agriproducts, such as transporting,
storing and processing the product.
3. Marketing enables various facilitating functions for agri products, i.e., somehow there
must be at least a minimal amount of market information available; someone must

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 accept the risk of losses that might occur; often the product must be standardized or
graded to facilitate the sale of the product; and finally, someone must own the
product and provide the financing during the marketing process.

4.2 COMMODITY MARKETING:

The term ‘commodity’ is commonly used in reference to basic agricultural products that
are either in their original form or have undergone only primary processing. Examples
include cereals, coffee beans, sugar, palm oil, eggs, milk, fruits, vegetables, beef, cotton
and rubber. A related characteristic is that the production methods, postharvest
treatments and/or primary processing to which they have been subjected, have not
imparted any distinguishing characteristics or attributes. Thus, within a particular
grade, and with respect to a given variety, commodities coming from different suppliers,
and even different countries or continents, are ready substitutes for one another. For
example whilst two varieties of coffee bean, such as Robusta and Arabica, do have
differing characteristics but two Robusta, even if from different continents, will, within
the same grade band, have identical characteristics in all important respects.
Agricultural commodities are generic, undifferentiated products that, since they have no
other distinguishing and marketable characteristics, compete with one another on the
basis of price. Commodities contrast sharply with those products which have been given
a trademark or branded in order to communicate their marketable differences.

4.2.1 The Commodity Marketing System:

A commodity marketing system include all the participants in the production, processing
and marketing of an undifferentiated or unbranded farm product, including farm input
suppliers, farmers, storage operators, processors, wholesalers and retailers involved in
the flow of the commodity from initial inputs to the final consumer.
The commodity marketing system also includes all the institutions and arrangements
that effect and coordinate the successive stages of a commodity flow such as the
government, trade associations, cooperatives, financial partners, transport groups and
educational organizations related to the commodity.
The commodity system framework includes the major linkages that hold the system
together such as transportation, contractual coordination, vertical integration, joint
ventures, tripartite marketing arrangements, and financial arrangements. The systems
approach emphasises the interdependence and inter relatedness of all aspects of
agribusiness, namely: from farm input supply to the growing, assembling, storage,
processing, distribution and ultimate consumption of the product.

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 The marketing systems differ widely according to the commodity, the systems of
production, the culture and traditions of the producers and the level of development of
both the particular country and the particular sector within that country. This being the
case, the overview of the structure of the selected major commodities marketed, which
follows, is both broad and general.

4.2.2 Stages in a commodity marketing system

The stages of commodity marketing are: assembly, transportation, storage, grading and
classification, processing, packaging and distribution and retailing.
Stages Marketing activity Examples
buyers specialising in specific agricultural products, such
Stage 1 Assembly Commodity commodities as grain, cattle, beef, oil palm, cotton, poultry
and eggs, milk

Stage 2 Transportation Independent truckers, trucking companies, railroads,

airlines etc.
Stage 3 Storage Grain elevators, public refrigerated warehouses, controlled-
atmosphere warehouses, heated warehouses, freezer
warehouses
Stage 4 Grading and classification Commodity merchants or government grading official

Stage 5 Processing Food and fibre processing plants such as flour mills, oil
mills, rice mills, cotton mills, wool mills, and fruit and
vegetable canning or freezing plants

Stage 6 Packaging Makers of tin cans, cardboard boxes, film bags, and bottles
for food packaging or fibre products
Stage 7 Distribution and retailing Independent wholesalers marketing products for various
processing plants to retailers (chain retail stores sometimes
have their own separate warehouse distribution centres)

The Table identifies the main stages of agricultural marketing and this provides a loose
framework around which to structure the discussion of the marketing of the
commodities.
The physical marketing system begins with the assembling and collecting points located
in the rural areas close to the producers. The next stage involves the storage areas at the
national grains marketing facilities owned and operated by an appointed private grain

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 elevator; the local assembling and collection points usually have grains brought to them
either directly by the farmer-producers themselves or by rural entrepreneurs.
It is important to have a grading system which accurately describes products in a
uniform and meaningful manner. Grades and standards contribute to operational and
pricing efficiency by providing buyers and sellers with a system of communicating price
and product information. By definition, commodities are indistinguishable from one
another. However, there are differences between grades and this has to be communicated
to the market. By the same measure, buyers require a mechanism to signal which grades
they are willing to purchase and at what premium or discount. Prices vary among the
grades depending upon the relative supply of and demand for each grade. Since the value
of a commodity is directly, affected by its grade, disputes can and do arise. In fact, the
government may establish grading services to serve as a disinterested third party.
Processing is about the most important activity from the final consumer's stand point
within the marketing chain of the crop. Grain, for human consumption, is usually milled
into flour or meal. Usually two types of maize flour are processed in each country,
namely: the refined, white and sifted (powdery) flour produced by industrial roller mills
and the unrefined and coloured maize meal produced by hammer-mills. Finally, the
commodity is packed and distributed to the retailers through independent wholesalers.
For example we can observe the grain marketing system through the diagram. As discussed
early in this chapter different commodities have different system of marketing, but
follows the same stages.
Diagram: A typical grain marketing system

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 4.3The Marketing Mix Program of Agribusiness
The marketing mix is a concept first introduced by McCarthy and comprises the product,
price, place (distribution) and promotion decisions and is often called the “4 P's”. The mix
is the right combination of marketing activities to ensure customer satisfaction.

Product: The product part of the agribusiness marketing mix has several
dimensions. The first dimension is the physical aspects of the product. The
second dimension is about the decisions to be taken in changing the existing
products and keeping them up to date. The third dimension is about new
products development. The last dimension is about the decision related to
the product mix. The product part of the marketing mix includes also
decisions about branding, packaging, labeling, etc.
Price: Prices should be set in relation to specific pricing objectives. Pricing
decisions include payments, terms, discounts, contract and pricing structures.
Prices have to reflect the costs of production and marketing and target profit
margins. A variety of approaches may be taken to pricing including cost based,
demand based, competitor based and market based.

Promotion: Promotion includes advertising, public relations, selling, exhibitions,

brochures, datasheets and free gifts. Possibly the most important decision about
promotion is the message to be communicated. Advertising is a form of
communication which a sponsor pays to have transmitted via mass media such as
television, radio, cinema screens, newspapers, magazines and/or direct mail. It is
intended to both inform and persuade.
Place: The final part of the agribusiness marketing program and is also
known as the ‘Channels of Distribution’. The distribution represents the
bridge between the producers and the consumers. A channel of distribution
includes all the intermediaries involved in the movement of the goods to
the consumer from the producer. The agribusiness manager job is to see
that the consumers get the needed products and services when and where
they want them and at a reasonable cost. So accordingly he or she has to select
channels which ensure that the consumer gets the products and/ or services at
the right place, right time, and at the right price.
Action plan
Implementing a marketing programme involves deciding on long, medium and short term activities for all
marketing functions. Decisions have to be made on budgets, staffing levels, how-to communicate the
elements of the plan, coordination of activities and motivating people to carry out the plan. All of this has
to ensure marketing efficiency. Whilst too much planning can suppress flexibility and creativity, no

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planning is a step for disaster. It leads to ill-conceived product and marketing strategies, enhancing the
possibility of waste and inefficiency in a vital industry: the production and marketing of food.

 Basic stages in managerial marketing in action

Once the agribusiness firm makes a decision to enter a marketing program, then it
must put that marketing program into action. There are three basic stages in this action
process and these are Planning, Implementation, and Control.

1. Planning: This is the first stage and in this stage it is decided what has to
be done and the time frame for the things to be done.

2. Implementation This stage is about putting the plans into action.

3. Control: In this stage, the actual sales results are measured and evaluated
with the planned results and if any deviations are found they are corrected.
All the decisions in the three stages are affected to some extent by the environment in
which the agribusiness operates.

4.4 Marketing Environment of Agribusiness firms

Marketing environment is a component of business environment that influences the
company's capacity to promote and perform efficient operations on the market.
Agribusiness firms interact with two types of marketing environment:

 The marketing microenvironment

 The marketing macro environment.
The marketing microenvironment comprises the company’s suppliers, customers,
marketing intermediaries and competitors.
The marketing macro environment is made up of wider forces that affect demand for
company’s goods. These forces include demographics, economics, nature, technology,
politics and culture.

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 Figure: Macro- and microenvironment
Figure shows the different elements of the macro- and microenvironments. It also

shows that the marketing organisation (represented by the marketing mix) is directly

influenced by the microenvironment, and that both are influenced by the macro

environment.

 The Marketing Micro Environment: The marketing microenvironment can be separated into
the internal environment and the external environment.

 The internal microenvironment consists of the firm’s own management structure, the
organization’s strategies and objectives, and the departments within the company.
The characteristics of the firm’s internal environment affect its ability to serve its
customers
Internal marketing microenvironment factors are:

 The general vision of the company. This is developed by the management and leads the
company's activities to operations focused on production, technology, sales or
market. It's very important that the focus is on marketing, trying to settle both
company's and market's objectives.

 Marketing integration. Related to the general vision of the company. The marketing
function must be an integrator function for all other functions, so that the
marketing concept can be promoted.

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  Organizational culture. It represents a series of values and beliefs promoted
company-wide, being a result of cultural elements that characterize the people
that run the business or support it: employees, managers, shareholders, union.
Development of organizational culture is crucial.

 Employees. This is the main internal micro-environmental factor that influences

the company, considering that the employees are involved in all company's
operations. Employees' satisfaction is important because it results in customer
satisfaction.

 The external marketing microenvironment comprises suppliers, marketing intermediaries,

customers, competitors and publics. As well as obvious groups such as shareholders,
publics can also include local interest groups who may have concerns about the
marketer’s impact on the environment or on local employment.
External micro-environment factors are:

 Marketing intermediates: Commissioners, brokers, transporters, logistics, and

consultants need also to be in strategic, long term partnerships with the
company.
 Customers: Individuals or companies that buy our products. They are the main
micro-environment element because they assure operation continuity by
purchasing the company's products for consumption or use. Company's
operations focus need to be on customer satisfaction and relational marketing
implementation.
 Competitors: They are the micro-environment factor that causes most of the treats,
being focused on reaching to more and more market segments, also by drawing
customers from competitors over the market. The main concern relating to
competitors in gaining competitive advantages.
 The Public: Mass-media, public administration, politic groups, shareholders, all
these factors can create both opportunities and threats for the company.
 Financial and material suppliers. Can create opportunities and threats related to
supplier's disappearance or disconnection of usual supply. This sort of situations
can lead to operation blockage caused by lack of resources. Therefore, the relation
between supplier and company need to be long term, strategic partnerships.

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 The marketing macro environment: can also be classified in national macro-environment and
international macro-environment.
 National macro environment comprises factors that affect the entire society and
have also an influence on the company but long term and wide spread.
National macro-environment factors are:
 Demographic factors & Social factors: related to the population structure in age,
household, education, employment, geographical location.
 Cultural factors: related to values, beliefs, religion, and customs. People’s opinions
and tastes are shaped by the society in which they live. It should be noted that
societies are not made up of homogeneous populations. They contain sub-
cultures, which are beliefs and values shared by smaller groups of people. Sub-
cultures are important to marketers insofar as they may have different
consumption habits from the rest of the population.
 Technological factors: Technological developments offer marketers both
opportunities and threats. Although firms can offer customers a wider array of
advanced products, changes in technology also mean that there may be more
than one technical solution to a customer’s needs.
 Economic factors: includes economic policy, economy development, and
purchasing power. The economic environment is important to marketers because
it affects the amount of money people have to spend on products and services.
One of the components of the economic environment is the distribution of
income.
 Ecological or nature factors: This is important to marketers in so far as it is the
source of many raw materials and fluctuation in supply can affect the prices
paid for purchases. There is increasing pressure from public opinion as to where
raw materials are sourced from, and their effect on the natural environment.
Example Paper manufacturers have had to pay attention to sourcing pulp from
renewable forests, where trees are replanted to make up for those which have
been cut down.
 Political and legal factors: Marketers are influenced by the regulatory environment.
This has implications for their obligations to customers and the wider public.
Customers are increasingly able to seek redress for faulty products, and those
who live near manufacturing plants are able to claim compensation for pollution.
The political environment around the world has recently favoured the
privatisation of public companies.

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 International microenvironment is a result of economic globalization, externalized in
economic integration.
The factors that influence the international macro-environment are:
 Commercial policies (regarding customs, import, export)

 International investment flux (instability or unrest)

 Financial and monetary international processes

 International markets

 Treaties between countries.

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