Approaches to Agricultural Marketing

1. Approaches to the Study of
Agricultural Marketing
JUDIFE N. MAGALLANES, MSc.
Instructor I
Chapter 2

2. Major Approaches to the analysis of marketing
problems:
1. Commodity approach
2. Institutional approach
3. Functional approach
4. Market Structure-Conduct-performance
approach
5. Behavioral system approach

3. 1. COMMODITY APPROACH
 The study relates to the flow of a certain
commodity and its movement from the original
producer right up to the ultimate customer
 Product-oriented than marketing function-oriented
 Study and analyses the problems relating to a
commodity i.e., sources and conditions of supply, nature and extent of
demand, mode of transporting, storage, standardization, packing etc.

4. What is the product flow?

5. 2. INSTITUTIONAL APPROACH
 studies the various agencies and business
structures involved in the marketing
processes.
 attempts to answer the question “Who”.
 considers the nature and character of
various middlemen and related agencies,
and also the arrangement and organization
of the marketing machinery.

7. A. MIDDLEMEN
Those individual or business concerns
that specialized in performing various
marketing functions involved in the
purchase and sell of goods as they are
moved from producers to consumers.

8. TYPES OF MIDDLEMEN
1. Merchant middlemen – take title to and therefore
own products they handle. They buy and sell for
their own gain.
Examples:
a. Contract buyers
b. Grain millers
(1)Assembly wholesalers or
viajeros,
(2)Financier or bodegeros
(3)Shippers
(4)wholesalers
(5)wholesaler-retailer
(6)(6) retailers

9. 2. Agent Middlemen – act as representative of
their clients. They do not take the title to and
therefore do not own the product they handle.
Examples:
a.Commission agent – normally takes over the
physical handling of the product, arrange the
terms of sale, collection, deducts his fees and
remits the balance to the principal.
b.Broker – usually does not have physical control
of the product.

11. B. PROCESSORS AND MANUFACTURERS
 Undertake some action of production to
change their form.
C. FACILITATIVE ORGANIZATIONS
 Aid the various middlemen in performing their
task. e.g. auction market
D. MARKET ASSOCIATION
 They are active in buying and selling of goods.

12. 3. FUNCTIONAL APPROACH
 Attempts to answer the “What” in the question.
 A method of classifying the activities that occur in
the marketing process by breaking these processes
into functions.
Uses of the functional approach:
 Considers the job that must be done
 Helpful in evaluating marketing costs of various middlemen
 Useful in understanding the difference in marketing machinery by
breaking down a complex marketing task into its component
function.

13. MARKETING FUNCTION
 It is a task performed by an intermediary in the
channel of distribution to create form, time,
place and possession utility.
TYPES OF MARKETING FUNCTION:
a. Exchange Function
b. Physical Function
c. Facilitating function

14. a. EXCHANGE FUNCTION
 It is an activities involved in the transfer of title of
goods.
 Represents the point at which price determination
enters the study of agricultural marketing
• Buying Function – seeking out sources of supply
• Selling function – merchandising activities

15. b. PHYSICAL FUNCTION
 Are those activities that involve handling,
movement and physical change of the actual
commodity.
• Storage Function – concerned with marketing goods available
at the desired time.
• Transportation function – concerned with making goods
available at the proper place.
• Processing function – includes all essentially manufacturing
activities that change the form of product.

16. c. FACILITATING FUNCTION
 Make possible the smooth performance of the
exchange and physical function.
 Acts as the grease of the agricultural marketing
machinery
• Grading – classify the product according to size,
color, etc.
• Standardization function – the establishment and
maintenance of uniform measurements.

17. c. FACILITATING FUNCTION
a. Financing function – the advancing of money to carry on
the various marketing function.
b. Risk-bearing function – the acceptance of the possibility
of loss in the marketing of product.
c. Market intelligence – is the type of collecting,
interpreting and disseminating the large variety of data.
d. Market research – done to evaluate the possible
alternative marketing channels that may be used.
e. Demand creation – is usually achieved through effective
advertising of product.

18. Transportation – Space dimension
 Major purpose is to make food products useful by
transporting them from farm to the consumer.
 It is the key link in the food system marketing
chain connecting different production points and
consumer center.
 Objective of storage: to balance supply and
demand.
Storage – Time dimension

19. 4. MARKET STRUCTURE-CONDUCT-
PERFORMANCE APPROACH
 Refers to how a market is organized based
on the characteristics that determine the
relationship among various sellers and
between the various buyers in the market.

20. – refers to competitive
relationship between established firms and potential
entrants.
Forms of Barriers to Entry
1. Economies of scale
2. High capital requirement
3. Rules and regulations set by government
4. Inherent technical relationship in the
industry

21. Classification of market structure
1. Purely Competitive Market
2. Absolute monopoly
3. Monopolistic competition
4. Oligopoly
5. Monopsony

22.  Numbers of buyers and sellers is sufficiently
large.
 The product is sufficiently homogeneous
 No artificial restriction such as government
intervention
 distinguishing a characteristic of single seller.

23.  refers to a market in which a large number of
sellers offer differentiated products which are
close substitute.
 refers to a market with a single buyer.
 refers to a market with a few seller.

24. 5. BEHAVIORAL SYSTEM APPROACH
 It includes the input-output system, power
system, communication system and internal
and external change system.

25. The end …

26. ¼ lengthwise: Quiz

27. READ: Marketing Margin