An appraisal of the role of Marketing on Agricultural Development in a Developing Country.
CHAPTER 1- INTRODUCTION
1.1 BACKGROUND OF THE STUDY
As individuals within a society become more specialised in their economic activities, they come to rely upon others to supply at least some of the products and services which they need. Thus begins a process of exchange between buyers and sellers. For a while buyers and sellers remain in immediate contact and each party is able to determine what the other needs and values and, therefore, will be willing to exchange. As the economy develops the number and types of exchanges expand, there is a concomitant need for increasingly specialised marketing services such as physical distribution, storage, grading, market information gathering and so. The number of participants also increases with many of the specialised services being provided by intermediaries between the seller and ultimate buyer. Few buyers and sellers are in direct contact with one another and communication between them is channelled through a complex marketing system.
1.2 OBJECTIVES OF THE STUDY
This chapter is intended to help the reader understand:
The relevance of marketing to the agricultural and food sectors in developing countries
The meaning of the marketing concept
Why it is necessary to implement the marketing concept throughout food and agricultural marketing systems
The functions of marketing, and
The modes of operation of some of the major types of agricultural and food marketing enterprises
CHAPTER 2- LITERATURE REVIEW
Structure Of The Chapter
The opening section pursues and argument as to why marketing is of increasing importance to the food and agricultural sectors in developing countries. This leads into an explanation of the concept of marketing. The nature of marketing systems is also discussed. This is followed by a description of the principal functions of marketing and suggestions as to how these can be conducted in a customer orientated fashion. Consideration is then given to the changes that development will bring to the food industries of developing countries and the implications for agriculture as the supplier of raw materials to these industries. The remainder of the chapter is devoted to an overview of the operations of the principal forms of agricultural and food marketing enterprise to be found in developing countries. In addition to private enterprise, the operations of marketing boards and co-operatives are discussed.
The importance of agricultural and food marketing to developing countries
In many countries, and virtually every less developed country (LDC), agriculture is the biggest single industry. Agriculture typically employs over fifty percent of the labour force in LDCs with industry and commerce dependent upon it as a source of raw materials and as a market for manufactured goods. Hence many argue that the development of agriculture and the marketing systems which impinge upon it are at the heart of the economic growth process in LDCs. Moreover as Kriesberg1 points out; in LDCs the consumer frequently spends in excess of fifty percent of the household’s income on basic foodstuffs – much of which is inadequate both in quality and nutritional content. By contrast Americans spend approximately twelve percent of their total disposable income on food. In Western Europe the figure ranges from about sixteen to nineteen percent of disposable income. Furthermore, whereas in developed countries the poor are relatively few in number, and therefore it is economically possible to establish special food distribution programmes to meet their needs, the scale of poverty in most LDCs is such that the commercial marketing system must be relied upon to perform the task of food distribution to poor and not-so-poor alike. This being so, it is imperative that the marketing system performs efficiently.
Economic development itself provides the impulse towards more sophisticated and more efficient marketing systems. Dixie2 suggests that as countries experience economic growth, their rate of urbanisation tends to increase substantially. Whereas the rate of population growth, in developing countries, averages around three percent per annum, their cities and towns are increasing their populations at about four percent per annum. In essence, this means that the number of people, in urban areas, needing to be fed by rural people, will double within sixteen years. This has clear implications for agricultural production and the marketing systems that direct that production and distribute the output to the points of its consumption. Subsistence farming is likely to diminish in importance as farmers respond to the increased opportunities that development and urbanisation create; farms are likely to decrease in number whilst increasing in size; and agriculture will probably become less labour intensive and more capital intensive.
Dixie also highlights the potential contribution of agricultural and food marketing, towards attempts to improve rural incomes in developing countries. The inequality of incomes between the rural and urban areas draws people away from agricultural production and places great stress upon the infrastructure and social services of a country’s towns and cities. Nowhere was this more dramatically demonstrated than in Nigeria when petroleum oil was discovered and then exploited in the 1970s. A large number of jobs were created in the urban areas and people abandoned agricultural production in large numbers. Nigeria became a net importer of many agricultural products of which it had formerly been a net exporter. For as long as the world price for petroleum remained high the economy thrived and could well afford the food import bill. However, as soon as the world price for oil fell, the food import bill became a serious burden. Nigeria would only have avoided this scenario if it had been able to motivate people to continue in agriculture and this would only have been possible if the disparity between urban and rural incomes had been reduced. Rurally based enterprises, including small-holdings, can greatly improve their earning potential by adopting a market orientation. They can be encouraged to add value to commodities by adding to their utility. Value added products normally carry a higher margin than raw commodities.
Another development which has in recent times increased interest in marketing practies is the trend, in many developing countries, towards market liberalisation as part of economic structural adjustment programmes (ESAPs). The view that direct and indirect government participation in production and distribution had brought about structural distortions in economies has become widely accepted. Measures intended to correct these distortions include a return to market prices for all products and resources, the encouragement of a competitive private sector and the commercialisation, and sometimes privatisation, of all or some of the functions of marketing parastatals. All of this requires a better understanding of marketing practices and processes within the country implementing ESAPs, in general, and within the agricultural marketing parastatals affected, in particular.
So far this discussion has been set in the context of commercial marketing but social marketing should also be acknowledged. Social marketing identifies human needs in non-competitive economies and/or sectors of society and defines the means of delivering products and services to meet these needs. The marketing mix of social marketing strategies is evaluated using quite different criteria from those employed in assessing purely commercial marketing strategies. Criteria such as the percentage of the target population reached with the technology, products, processes or services, quantities produced and distributed and uptake of the product, service or technology are more often employed. Benefits are measured in terms of development goals, such as improved nutritional status or increased rural incomes. The use of economic criteria is usually limited to the latter and to selecting the least-cost strategy to achieve a quantitative goal. However, the criteria used to evaluate commercial marketing strategies should not automatically be eliminated, because these improve the efficiency of some aspects of social marketing strategy without preventing the attainment of social objectives.
The marketing concept and marketing systems
Marketing is not simply an extension of the production process but its only purpose as Adam Smith emphasised when, in his text The Wealth of Nations (1776), he said that:
“Consumption is the sole end purpose of all production: and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.”
Dixie2 relates what he describes as a definition of marketing which is:
“The series of services involved in moving a product (or commodity) from the point of production to the point of consumption.”
This is a definition which many organisations, and governments, would recognise as describing their own activities in commodity marketing. Indeed in many developing countries it aptly describes, or in some cases, did in the past describe, the functions carried out by marketing parastatals with respect to staple foods. However, as Dixie himself points out, the definition omits two key elements of any definition of marketing production to effuse the marketing concept, i.e. a customer orientation and inbuilt sustainability. Gaedeke and Tootelian3 offer an alternative definition which overcomes the problems caused by these two omissions:
“… a management orientation focusing all the activities of the organization on satisfying customer needs and wants, thereby helping achieve the organization’s long-range objectives.”
This definition promotes a customer orientation and since the organisation’s long-term objectives will include it’s own continued existence it takes account of the need for sustainability. Moreover, this definition of the marketing concept does not preclude non-profit making organisations. Marketing is just as relevant to development projects, aid agencies, extension service organisations, and the like, as it is to commercial enterprises. Thus the marketing concept is that an organisation achieves its goals through the provision of customer satisfaction. Put another way, marketing is the integrative force that matches production to customer needs and satisfaction. Marketing is not an activity to which an organisation turns its attention at the end of the production phase of operations. Rather marketing needs to be directing production in accordance with clear signals from the marketplace as what is needed by customers.
The marketing concept must be adopted throughout not only the entire organisation, but the entire marketing system. A system is a complex of interrelated component parts or sub-systems which have a defined common goal. Thus, an agricultural and food marketing system comprises all of the functions, and agencies who perform those activities, that are necessary in order to profitably exploit opportunities in the marketplace. Each of the components, or sub-systems, are independent of one another but a change in any one of them impacts on the others as well as upon the system as a whole.
There is a danger that the marketing concept will be adopted by some parts of the system but not others. Thus, for example, a food manufacturer may be trying hard to implement the marketing concept and offer products that meet the precise needs of a target market. If, however, the manufacturer has to rely upon a farming community that is still very much production oriented, for raw material supplies, then the overall marketing objectives may be frustrated. In the same way, if only some functions are performed according to the marketing concept then the system as a whole may not achieve a market orientation. For instance, the marketing department may set out to serve the market for a high quality fruits and vegetables, for which it can obtain premium prices, but if transportation is performed using the same open-topped bulk carrying wagons used to ship grain and other aggregates then it is unlikely that the enterprise will deliver the product in the right condition for the target market.
