Summary Class notes - Ag Marketing

Course
- Ag Marketing
- Dr. Yu
- 2017 - 2018
- Tarleton State University
- Ag Communication
218 Flashcards & Notes
2 Students
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Summary - Class notes - Ag Marketing

  • 1503871200 Ch 1-3

  • Marketing System includes:
    1. firms (middlemen)
    2. product flows (marketing channels)
    3. business activities (marketing functions)
  • 2 Major Food Marketing Systems
    1. Physical (handling, processing, storage transportation)
    2. Economic (the valuation or price-settling process
  • Key Points of Marketing System Definition:
    1. it begins with production decision on the farm
    2. interdependence between farmer & middleman
    3. it consists largely of decision making; ex: buying/selling prices, sell or store, ad expenses
    4. farm supply industries are also part of system
    5. marketing system involves series of conflicts
  • Primary function of marketing systems
    bring about equilibrium
  • Largest sector in U.S.
    food and fiber
  • Expenses in Marketing System:
    Where does the money go?
    -79% goes to middleman
    -21% goes to farmer
  • Utilities in Marketing Process
    -form (change in physical characteristics)
    -place (change in location)
    -time (storage)
    -possession (change in ownership)
  • The farmer provides _____ to the system, and the system provides _____ to the farmer.
    products, information
  • -the "big picture" view
    -looks at issues of organization, performance, and how system is changing over time
    Macro-marketing
  • -the viewpoint of individual decision maker
    -issues include: buying/selling decisions; marketing strategies; market research
    Micro-marketing
  • -no marketing system needed
    -products used by those who produce them
    Primitive (self-sufficient) Society
  • -producers began to specialize and trade with producers of other goods
    Barter Society
  • -more advanced societies
    -not just in areas of production, but in urban areas as well
    Specialization
  • a major specialized and necessary activity performed in marketing; "what" is done
    Marketing Function-Functional Approach
  • three major groups of functions
    1. Exchange
    2. Physical
    3. Facilitating
  • ___ are activities involved in the transfer of title to goods
    Exchange Functions
  • Exchange=buying and selling
  • ___are those activities that involve handling, movement, and physical change of the actual commodity itself.
    Physical Functions
  • these solve the problems of when, what and where in marketing
    Physical Functions
  • Physical=storage, processing and transportation
  • ___are those that make possible the smooth performance of the exchange and physical functions.
    Facilitating Functions
  • Facilitating=standardization, financing, risk bearing, marketing intelligence
  • the accepting of the possibility loss in the marketing of a product
    Risk Bearing
  • ___ risk-those that occur from destruction or deterioration of the product itself by fire, accident, wind, earthquake, or other means
    Physical
  • ___ risk-those that occur because of changes in value of a product as it is marketed.
    Marketing
  • the job of collecting, interpreting, and disseminating the large variety data necessary o the operation of the marketing process
    Marketing Intelligence
  • Uses of the Functional Approach:
    1. to analyze marketing costs
    2. to understand the difference in marketing costs of various commodities
    3. to improve performance of marketing machinery
  • agencies/businesses that are involved in the marketing process
    Institutions
  • "who does things"
    Institutional Approach
  • 5 Major Categories of Institutional Approach
    1. Merchant Middleman
    2. Agent Middleman
    3. Speculative Middleman
    4. Processors & Manufacturers
    5. Facilitative Organizations
  • -own the products they handle
    -buy and sell products for their own gain
    -includes retailers and wholesalers
    Merchant Middlemen
  • -act only as the representative of their clients
    -do not own the products they handle
    -receive income from fees and commissions
    -provide services to buyers and sellers
    Agent Middlemen
  • Two Major Groups of Agent Middlemen
    1. Commission Men
    2. Brokers
  • -take over the physical handling of the product
    -arrange for the terms of sale, collect, deduct their fee, remit the balance to seller
    -ex: Livestock commission firm
    Commission Men
  • -do not have physical control of the product
    -follow the direction of buyers and sellers
    -have less influence in price negotiations than commission men
    Brokers
  • those who buy and sell products with the purpose of profiting from price movement
    Speculative Middlemen
  • specialize in adding time, place and possession utility to raw farm products
    Food Processors & Manufacturers
  • aid the various middlemen in performing tasks; NOT directly participate in the marketing processes
    Facilitative Organizations
  • Characteristics of Facilitative Organizations:
    1. furnish the physical features for the handling of products or for bringing buyers and sellers together
    2. establish the "rules of the game"
    3. aid in grading and in arranging and transmitting payment
    4. receive their income from those who use their facilities
    (ex: stockyard companies, Ebay, etc.)
  • Uses of the Institutional Approach:
    -to help understand why specialized middlemen are such a large part of the marketing system
  • why use middlemen in food marketing system?
    -specialization; they are able to perform functions more efficiently and lower the marketing cost
  • institutional and functional approaches study system "as is"
    The Behavioral Systems Approach
  • One of the major changes taking place: the industrialization of ______.
    the food sector
  • how well the food marketing system performs what society and the market participants expect of it
    Market Performance
  • Specific Measures of Evaluation of Market Performance:
    1. trends in Consumer Price Index (CPI) and Producer Price Index (PPI)
    2. % of income spent on food
    3. farmers share (about 20% goes to farmer)
    4. farm-retail price spread
         but, no one measure tells the whole story
             -"good" performance to one may be "bad" to another
  • Theory of Industrial Organization:
    --structure: number of firms, domination by largest firms, degree of product differentiation, and conditions for entry into the industry
    --Conduct: how firms sets prices, offer products, and promote themselves and their products
    --Performance: how well society's expectations are met
    (one decides the other decides the other)
  • A structure of high concentration is assumed to allow firms in the industry to conduct themselves in such a way that results in poor performance, and vice versa
  • Two types of efficiency in Marketing System
    1. Operational (or technical) Efficiency
    2. Pricing (or economic) Efficiency
  • -measured as ratio of output to input
    -physical changes that reduce input relative to output, or is concerned with maximizing output/input ratios
    Operational Efficiency
  • is concerned with the success of the price system in efficiently allocating resources
    Pricing Efficiency
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based on the belief that unrestricted trade among all nations will result in more efficient use of the world's resources and a higher standard of living for all
Free Trade
directly benefit producers and encourage exports
Subsidies
tariffs, quotas, licenses, or other restrictions
Import Restrictions
refers to market policies and devices that prevent free trade among nations
Trade Protectionism
these imported products are directly competitive with domestic production
Supplementary/Competitive Imports
these imported products are not directly competitive with domestic production
Complementary/Non-Competitive Imports
_____ have a smaller share of nature resource costs and a larger share of marketing costs in their final value than traditional crops
High Value Export Products
U.S. Disadvantage
labor cost
U.S. Advantage
technology
A nation's comparative advantage:
can change at any time because of climatic changes, new technology, etc.