AGRICULTURAL MARKETING - brettonwoodhighschool.co.zabrettonwoodhighschool.co.za/wp-content/uploads/2020/04/ASC_MA… · AGRICULTURAL MARKETING: Market: is the public place of sale

MY NOTES COMPILED BY MR BB BIYELA FROM HHOYE SECONDARY SCHOOL YEAR 2019

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AGRICULTURAL MARKETING:

Market: is the public place of sale.

MARKETING

Definitions of marketing

Marketing: is the process of moving people closer to a decision/ purchasing a

product

Marketing: is the human activity directed at satisfying needs and wants through

exchange process

Marketing: is the management process of anticipating, identifying and satisfying

customer requirements profitably.

Marketing: is any arrangement which brings together the supply (seller/ product) and

demand (buyer/ consumer) so that exchange occurs

Marketing: is the process of planning production, pricing, promotion, and offering

goods and services to customers.

Selling: is the exchange of good for cash

THE DIFFERENCE BETWEEN MARKETING AND SELLING

Marketing Selling

Profit orientated Product orientated

Focuses on the wants of buyer Focuses on the needs of seller

Emphasis is on customers wants

/emphasis is on customers’ needs and satisfaction

Emphasis is on the agricultural product

/need and satisfaction of the consumer are neglected

Long term plans are made Short term objective is to sell the product

Different departments work together

Sales department does not work with other department

Technical innovation is important Cost are reduced to achieve maximum sales and profit

THE MAIN FUNCTIONS OF AGRICULTURAL MARKETINGS:

(Transport, storage, packaging of products)

Distribution/ transportation/ delivery

Processing/ value adding

Packaging

Storage

GUIDELINES FOR PACKAGING FRESH PRODUCE

Identify and produce useful information about the produce

Enclose the produce in convenient units for handling

Ensure that the produce is protected from mechanical damage

Packaging should not contain chemicals that could be toxic to the produce

Packaging must be recyclable


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PROCESSING/ VALUE ADDING: is the conversion and/ or modification of a product

in order to add value to it.

ADVANTANGES OF PROCESSING/ VALUE ADDING IN AGRICULTURAL

PRODUCTS

Prevents spoilage/ perishability/ increase shelf-life of products

The product is available throughout the year/ enhances food security

Improves food safety by heating to sufficient temperatures

Easy to transport

Easy storage

Adds value to farm products/ increases the value of products/ higher income

for the farmer/ improve the quality of a product (value adding)

Its provides job opportunities

Reduces wastage of excess produce

Its allows for easier packing and handling of products/ simplification of

products

Creates job opportunities for low-income groups

PRICE DETERMINATION AND DEMAND/ SUPPLY

Price determination: is the form of prices of goods and services, by the

spontaneous operation of demand and supply

-OR is the process involved in finding the price consumers are willing to pay

for a particular product at a particular time.

-This involves the supply of and demand for the product.

DEMAND: is the quantity of goods bought at a particular time and at a

particular moment

SUPPLY: Is the quantity of goods offered for sale at a particular time and at a

particular moment

Quantity demanded/ Quantity of goods bought


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Quantity supplied/ Quantity of goods sold

PRICE ELASTICITY: Refers to the response of price change.

-OR Refers to flexibility or the ability to change

-for example: grow and shrink

Price elasticity of demand: the relationship between a change in

price and a change in demand (change in price causes a big

change in demand)

Price inelasticity of demand: A change in price causes very little

change in demand

Example A1: if the cost of one type of chocolate bar rose 20%, many

people would stop buying it and buy another similar, cheaper chocolate

bar. We can say the chocolate bar is price elastic (price elasticity of

demand). OR Example A2: if a bag of “up to date” potatoes rose by

20%, many people would stop buying this variety of potatoes and opt

for a cheaper variety. It is then said that the “Up to Date” potato is price

elastic (price elasticity of demand)

………………………………………………………………………………………….

Example B1: If the price of petrol rose by 20%, however, some people

may buy less petrol, but most people would have no choice but to pay

the higher price. This makes the petrol price inelastic (price inelasticity

of demand)

Price elasticity of supply: is a measure of how the supply or

production of goods responds to a change in price (change in price

causes a big change in supply)

Price inelasticity of supply: A change in price causes very little

change in supply


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THE LAW OF DEMAND AND SUPPLY (the interpretation of the demand and supply

curve / graph)

THE LAW OF DEMAND

The higher the price, the lesser the demand (or quantity demanded)

Price is inversely proportional to the quantity demanded/ (to the demand)

The lesser the price, the higher the demand

THE LAW OF SUPPLY

The higher the price, the higher the supply (quantity supplied)

Price is directly proportional to the quantity supplied

The lesser the price, the lesser the supply

THE FACTORS INFLUENCING THE DEMAND OF A PRODUCT/ FACTORS

DETERMINING DEMAND

Price/ low price/ price of the product (a fall in price leads to an increase in

demand OR a rise in price leads to a decline/decease in demand)

Quality of the product

Number of consumers

The preferences of consumers

The buying (purchasing) power of consumers

The price of competitive goods/ price of competing

Price expectations

Taste and preference of consumers

Range / use of the products/ Usefulness of product

.

Perishability (milk is perishable and requires special storage facilities. This

adds to the marketing costs)

Seasonal fluctuation in production (some products are abundant at certain

times and these products have to be stored or preserved which adds to the

marketing costs)

Standardisation ()

Transportation ()

Lack of control over production ()

THE FACTORS INFLUENCING THE SUPPLY OF A PRODUCT/ FACTORS

DETERMINING SUPPLY:

Cost of production/ Production cost

Knowledge to produce the product

Environmental conditions/ weather (rain/ hail/ drought/ floods)

Period of production

Possibilities of increasing the supply of goods/ time

Technology

Expectations of the future price

Subsidies


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THE FACTORS INFLUENCING THE PRICE

Supply

Demand

Market Equilibrium: point where demand is equal to supply/ is a situation

in which supply and demand are equal

A HYPOTHETICAL DEMAND AND SUPPLY CURVE TOGETHER TO INDICATE

MARKET EQUILIBRIUM

Price one and two (P1& 2) represents a low price

The lesser the price, the higher the demand, and the lesser the supply

This will result in a shortage of the product

OR

The quantity demanded is high and the quantity supplied is low

Quantity supplied is low and quantity demanded is high

Price three (P3) represents an equilibrium price

Demand is equal to supply

The price is balanced between the high price and the low price

The products supplied are able to meet the demand in the market

Price four and five (P4 & 5) represents a high price

The higher the price, the lesser the demand, and the higher the supply

This will results in an oversupply (surplus) of the product


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A SHIFT IN SUPPLY

FACTORS CAUSING A SHIFT IN SUPPLY

Changes in production cost

Improved technology, which makes production more efficient

Industry growth and shrinkage

A SHIFT IN DEMAND

FACTORS CAUSING A SHIFT IN DEMAND INCLUDE

Consumer income

Consumer preference (taste)

Population size and composition

Changes in the prices of related goods (substitutes and complements)


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THE DEVELOPMENT OF A MARKET:

-Marketing a product involves much more than just selling the product

-Factors to consider when developing a marketing strategy.

The demand for that product

The quality of the product

The price of the product

Methods used to promote products

THE IMPORTANCE OF A MARKET WITH REGARDS TO FIXED PRICES

.

.

ASPECTS TO CONSIDER WHEN DECIDING ON PRICING

Cost/ marketing cost

Demand

Competition

.METHODS USED TO PROMOTE PRODUCTS

1. Advertising

2. Personal selling

3. Sales promotion

4. Publicity/ public relations

5. Direct marketing


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APPROACHES TO MARKETING

1. Niche Marketing

2. Green Marketing/ Green Marketing

3. Mass Marketing

4. Eco-labelling

5. Multi-Segment marketing

6. Controlled Marketing

1) Niche Marketing: Involves selling to a small segment of the market.

For example: The owner of a local shop closer to the school sells fruit to the

learners during break.

2) Green Marketing/ Green Marketing: Is the marketing of environmentally friendly

products and services. OR A green markets distributes used, refurbished,

reconditioned, repaired and recycled products that are in working condition through

brokers and resellers

For example:

3) Mass Marketing: Is selling a produce in different segments of the market.

For example:

4) Eco-labelling: is the practice of putting labels onto products to promote them as

environmentally friendly. OR is the method of labelling that communicates

information, educates and increases consumer awareness on the impact of a product

on the environment.

-it encourages consumers to buy products with a low environmental impact.

For example:

5) Multi-Segment marketing: Involves choosing a few segments of the market and

developing a marketing strategy that suits that segment of the market. OR Is when

the same product is offered to different groups or segments in a market.

For example: A farmer sells fresh potatoes and potato chips in

pockets with different sizes to cater for consumers with different

income levels.

6) Controlled Marketing: It is a system of marketing which is controlled by the

government especially prices and marketing of products.

For example:

Advantages of Controlled Marketing

There is orderly marketing of products

All the products are standardized

Price are stable

Farmers focus on farming activities rather the marketing of their products

Larger enterprises acquire international contracts.


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The market outlets are secure (market outlets: business that buy goods

directly from the manufactures or wholesale suppliers at a volume discount)

.THE IMPORTANCE OF MARKETING RESEARCH

It informs the marketing strategy

It helps a business to provide an excellent product to be well received by

potential customers

.INFORMATION ON COMPETITORS THAT A PRODUCER WILL HAVE TO GET

(when doing market research)

Who are the competitors

What do competitors produce

What are their strengths

What are their business strategies

SUSTAINABLE AGRICULTURAL MARKETING

-This involves the application of an environmental educative approach to marketing.

Two types of sustainable agricultural

Green Markets

Eco-labelling

ADVANTAGES OF SUSTAINABLE AGRICULTURAL MARKETING

Create better businesses

Better relationships

Reduce carbon footprint

Better world

AGRICULTURAL MARKETING SYSTEMS:

Free-market: Is a form of marketing in which producers market their products as

they please.

Problems that may hamper free marketing

.

ADVANTAGES OF FREE MARKETING SYSTEM

Sales are cash

Immediate payment

Quality product produced

Limited intermediaries (Middlemen)

Initiative to work harder

The farmer can sell the product at any market/ any place

The price at which produce is sold is determined by the farmer

The farmer decides which consumer/ market outlet he or she prefers to sell

his or her produce to

Creativity/ entrepreneurship is promoted/ farmer can sell in unique ways


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Quality products are promoted

Producers are free to produce what they want and consumers are free to buy

what they want

DISADVANTAGES OF FREE MARKET SYSTEM

Prices fluctuate/ the prices of product vary considerably

Market costs are high/ takes place on a small scale

Producer is responsible for marketing and producing

Limited bargaining power/ Bargaining power is small

High risk as many things can go wrong/ wrong decision lead to great financial

losses

Consumers exploited by cartels/ cartels formed and consumers are exploited

A gents leads to smaller profits

Great risk from fresh product that can go bad/ perishability

Only small quantities of goods are sold at a time


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THE MAIN CHANNELS/ OPTIONS OF A FREE-MARKET SYSTEM (their

advantages and disadvantages):

1. Farm gate market

2. Fresh produce markets

3. Stock sales

4. Direct/contract marketing

5. Internet marketing

6. Co-operative marketing

a) Farm gate market: is a farm stall or farmer’s market where producers can sell their

produce directly to consumers. OR selling directly from the farm.

-The farmer generally sets up a stall at the entrance (or gate) of his/her farm.

-The items sold at such a stall are generally the produce available from the farm.

-A farm gate market/stall may sell fruit; vegetables; eggs; biltong; etc.

-these sales are often made to traders and hawkers, although they can include sales

directly to consumers

Advantages Disadvantages

Farm gate marketing saves on transport costs

Prices are lower

Produce is generally very fresh.

Farms do not have marketing chain costs

There is less expense in terms of labour and transport

No middlemen

There is less competition

The farmer will get cash immediately

Consumers may have to travel a long distance to such a market

Volumes demanded may be limited

To farmers: sales volumes may be low

Buyers have come to the farm

There might be few buyers

Marketing is restricted

Products may spoil if they take long time to sell

b) Fresh produce markets: producers sell their fresh produce through marketing

agencies at large, central locations.

-Goods are delivered to agents at municipal fresh produce markets.

-The graded produce is weighed.


Large volumes can be sold

The farmer makes use of an agent to market on their behalf

The farmer is able to get higher prices for his produce

Prices fluctuate

Any financial difficulties of the municipal councils would have a negative effect on the functioning of the markets

Transport costs may be high-especially over long distances.

The farmer has to pay commission to his agents

Produce may be damaged if not packaged and/or transported carefully


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Prices may drop as a result of competition

c) Stock sales (livestock auction sales): Livestock are sold on auction at a sale yard

to the highest bidder./ OR refer to the sale of livestock.

-the auction is usually run by a private company that specialises in livestock auctions.


The auctioneer advertises

Payment is guaranteed/ the farmer is guaranteed of payment after sales

A large number of customers are attracted to such auctions by the auctioneers

The seller may not be offered the price expected

Transport costs may be high

Livestock may be injured while being transported

d) Direct/ contract marketing: takes place when the farmer or producer markets

products directly to the consumer using online marketing, social networks, text

messaging or email. OR is telesales in which agents make calls to potential

customers

Farmers sell directly to:

-retailers (e.g to supermarkets) or

-factories that process farm produce (e.g. a canning factory) or to

-other end users/ consumers e.g. government departments (hospitals)

-Direct marketing to factories, retailers or to government departments is

generally done according to a contract.


No middle man/ Middlemen (agents; retailers; wholesalers) are eliminated.

Volume and price is guaranteed for the farmer

The farmer gets a higher price for his produce

Volume of sales is guaranteed by contracts

The farmer must always have sufficient produce

Products may reach the expiry date before delivery especially when transported by ship

Transport and packaging costs may be high

Customers may return goods if the quality is poor or inconsistent or if damaged through transport.

e) Internet marketing: goods are advertised and sold on the internet via a computer.

OR is the use of electronic device to buy and sell. -uses of e-commerce to advertise and conduct a transaction -E-commerce: is the activity of buying or selling of products on online services or over the internet


You can reach wide audiences with a small budget

Results are obtained quickly

It is convenient and can be done

There are many dishonest schemes

Customers do not know what they are buying


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from home

Ability to collect payment online

Payment is received before goods are sent to the customer

Ability to market globally

This type of marketing is largely limited to customers who have access to computers and internet banking facilities

Co-operative marketing: is a marketing system where two or more independent

organisations (companies or farms) or groups of people work together to meet their

common economic, social and cultural needs. OR This is when producers pool their

products and market them through a co-operative society.

-Their aim is not profit but to benefit their members in production, processing and/ or

marketing.

THE AGRICULTURAL CO-OPERATIVE PRINCIPLES/ PRINCIPLES OF CO-

OPERATIVE MARKETING

Voluntary membership

Democratic member control

Member’s economic participation

Autonomy and independency

Concern for the community

Co-operation among co-operatives

THE TYPES OF AGRICULTURAL CO-OPERATIVES

1. Marketing cooperatives: Negotiate with markets on behalf of members

2. Purchasing cooperatives: Purchase inputs on behalf of members

3. Processing cooperatives: Process products on behalf of members

4. Production cooperatives: Produce collectively

5. Service cooperatives: Provide service to members

6. Consumer cooperatives: Buy goods in bulk and sell them to their

members at a discount and to the public

THE BENEFITS/ ADVANTAGES OF AGRI-CO-OPERATIVES

Farmers (producers) will have a better chance to negotiate a good price for

their produce

They will have an access to professional expertise

They can afford better infrastructure as a group than as individuals

They can buy fertiliser or packaging material cheaper

They can develop a brand for their produce which makes them more visible to

the potential buyers

They can access funding from the government as a cooperative.


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AGRICULTURAL MARKETING CHAIN OR SUPPLY CHAIN.

The agri-business chain has two parts: the production chain

: the marketing chain

Before being harvested, the product goes through the production chain.

OR

The marketing chain/ Agricultural marketing chain/ supply chain:

Involves all the activities from harvesting until the product reaches the

consumer. /OR its involves all the stages that a product passes through after

being produced and harvested on a farm until it reaches the consumer:

1. Harvesting

2. Cleaning

3. Sorting

4. Packaging

5. Processing

6. Storage

7. Transporting

8. Drying

9. Grading

10. Labelling and branding

THE FACTORS THAT HAMPER THE MARKETING CHAIN OF AGRICULTURAL

PRODUCTS

Perishability

Accidents

Poor transport and communication

Distance to better markets and added cost

Wide product distribution

Lack of capital

Seasonal fluctuation/ seasonal character of production


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Standardisation

Crime/ risk

Export regulations

Competition

Diversity in production

Safety/ security of the producer

Ineffective control over production/ lack of control over production

Long-term production

Locality-restricted production

Intermediaries (middlemen) are required for marketing

Bulkiness in relation to the value

LEGISLATION IS IMPORTANT IN THE MARKETING OF AGRICULTURAL

PRODUCTS

1. Agricultural Product Standards Act-1990

-it ensures the quality of meat and regulates the levels of chemicals in fruit

2. Meat Safety Act-2000

-examines meat that is prepared and sold in local butcheries and abattoirs for

irregularities

3. Consumer Protection Act-2008

-protects consumers against exploitation and allows for clear information

about the product

4. Perishable Products Export control Act

-controls the export of perishable products from South Africa

THE ROLE OF LEGISLATION IN THE EFFECTIVE MARKETING OF

AGRICULTURAL PRODUCTS

Enabling functions:

-they provide the legal framework for agreements, sale of goods, liability and

legal tender.

Economic regulatory functions:

-they promote, guide and discipline the operation of the markets e.g. using

uniform weights; prohibiting price fixing by cartels (manufacturer’s union to

keep up prices).

Constraining functions: they place restrictions on the:

-use of hazardous chemicals

-import and export of plants and animals to restrict the spread of pests.

Agri-business chain: involves all the activities involved in farming, from

production to the marketing of agricultural products

PROCESSES INVOLVED IN THE AGRI-BUSINESS CHAIN (PLANNING FOR

AGRICULTURAL ACTIVITIES TO THE FINAL PRODUCT IN THE HANDS OF THE

CONSUMER)

Agrichemicals/ application of chemicals

Breeding


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Crop production

Farm machinery

Seed supply

ploughing

Processing

Distribution

THE CHARACTERISTICS OF THE AGRI-BUSINESS CHAIN OF DIFFERENT

ENTERPRISE.

..

..

.

.

.

WAYS TO STREAMLINE AND IMPROVE THE AGRI-BUSINESS CHAIN

Improve transport and communication/ Improving road infrastructure in rural

areas to facilitate marketing

Proper training of workers who handle and transport goods

Improved methods of packaging and transport/ using cold storage and

refrigerated transport to prevent spoilage losses

Marketing closer to production areas/ Improving access to market information

Processing products close to where they are produced to reduce the

transportation costs

Providing storage facilities for agricultural produce to prevent oversupply


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AGRICULTURAL ENTREPRENEURSHIP:

Entrepreneur: is a person who is able to convert a new idea into a successful

innovation.

Entrepreneurship: is the process of converting a new idea into a profitable venture.

OR

Entrepreneur: is a person who identifies an opportunity, gathers resources and sets

up a business, talking on the risks involved in the hope of making a profit.

Entrepreneurship: is the process of bringing together resources and assets to make

use of an opportunity to create a business venture and create a profit.

THE IMPORTANT ASPECTS OF THE ENTREPRENEUR AND

ENTREPRENEURSHIP

The Important Aspects Of Entrepreneur

Creative and innovative

Independent thinkers

Well educated, technically knowledgeable and experienced in their fields

Risk takers

Good at working with people

Good leaders who are team builders

Committed and have perseverance

Achievement-orientated

The Important Aspect Of Entrepreneurship

Skilled strategic and general management

Skilled financial management

Knowledge of the target market and of competitors

Willingness to take risks

Good client service

Good product or service quality

Sufficient start-up capital

THE ENTREPRENEURIAL SUCCESS FACTORS OR PERSONAL

CHARACTERISTICS

Creative and innovative (He/ she is able to create a new idea or invention and

make a success of it)

Risk taking (He/she is prepared to take calculated risks in order to succeed)

People skills (he/ she is able to work successfully with other people that results

in a successful venture)

Hard working

Perseverance

Technical/ operational knowledge

Organisational/ coordination abilities

vision/insight (he/she can identify opportunities in the market and use it to

advantage)

Leadership


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Highly motivated

Reward driven

Positive attitude

THE MAIN DISTINCT PHASES OF THE ENTREPRENEURIAL PROCESS.

Idea generation and identification of a business opportunity

Evaluation of the opportunity

Planning

Resource mobilisation

Business formation

Growth of the business

OR

Identification of opportunity

Business plan

Analysis of business plan

Action phase

Analysis of results and adjustments

AGRI-BUSINESS PLAN/ BUSINESS PLAN

Agri-business plan/ Business plan: it is a document that describes a business the

entrepreneur wants or intending to start. /OR it is a document that describes a plan of

how the business will operate.

THE REASONS FOR DRAWING UP A BUSINESS PLAN IN THE AGRICULTURAL

SECTOR/ BENEFITS / ADVANTAGES FOR DRAWING BUSINES PLAN

Would be able to get funding

Test the feasibility and economic viability/ Tested the feasibility of the

business

Determine financial needs/ determination of the financial needs/ budgeting

Guide daily operations/ guiding daily operations

Could foresee problems/ to foresee problems/ mistakes

Outlines the roles and responsibilities of people involved

Provides guideline for decision making

Identify opportunities

Provide information on internal/ external business environment/ competitors

It is a plan for capital requirements/ secure funding

Provides analysis of the business and its activities

Also outlines time frames for completion of the tasks

.THE STANDARD FORMAT AND LAYOUT (COMPONENTTS) OF AN

AGRICULTURAL BUSINESS PLAN

.

.

.


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THE TYPES OF BUSINESS PLAN IN AGRICULTURE AND THEIR FUNCTIONS

,

.

.

PROBLEMS ENCOUNTERED WHEN DRAWING UP AN AGRIC-BUSINESS PLAN/

PLOBLEMS THAT CAN BE ENCOUNTERED WITH THE PHASE OF PLANNING

Too generic

Not authentic

Budget/ cash flow errors/ calculation errors/ incomplete financial data

Using the incorrect format

Hiding weaknesses and risks

Not highlighting potential competition

Unrealistic assumptions and projections

Insufficient research/ lack of knowledge

Leaving gaps/ being vague/ providing too much information

Insufficient technical details

.

.USING ELECTRIC RESOURCES AS A TOOL FOR DRAWING UP A BUSINESS

PLAN

E-commerce or agric-commerce can be utilised as marketing channels

The internet is an important source of information on developments in the

agricultural sector

Information on competitors can be obtained

Information can be obtained by joining online groups

SWOT analysis

S- Strengths

W-Weaknesses

O-Opportunities

T-Threats

.

External environment: Opportunities

: Threats

Internal environment: Strengths

: Weaknesses

Documents

AGRICULTURAL MARKETING - brettonwoodhighschool.co.zabrettonwoodhighschool.co.za/wp-content/uploads/2020/04/ASC_MA… · AGRICULTURAL MARKETING: Market: is the public place of sale