Introduction To Agricultural Product or food System Flashcards
What is an Agriproduct or Food System?
Encompass all the people,
institutions and processes
production; through processing, marketing and retailing, to consumption) agricultural products are produced, processed and brought to consumers.
What are the three broad categories of the food system ?
- Production “up to the farm gate”
- Post-harvest supply chain “from the farm gate to retailer”
- Consumers
Name the 3 dimensions of the Agriproduct food system?
- Vertical dimension (height): From input supplier to end consumer (across various stages of
production & marketing) - Horizontal dimension (breadth): Across all food products (dairy, cereals, vegetable & fruits, meat …)
- Depth: International that is across and within markets of various countries (geographical)
What are the three main Interconnections in the food system?
- Biological: the living process used to produce food and their ecological sustainability
- Economic and political: the power and control which different groups exert over the different parts of the system
- Social and cultural: the personal relations, community values and cultural traditions which affect people’s use of food
What are the three key stakeholders in any given industry?
1.Government that regulates the industry
2.Firms at various stages of the value chain:
•input suppliers
•farm production •processors
•retailers & food service
3.Society at large or the final consumer that utilizes the final output
What are the three broad forces that are at work in the food system?
- Technology
- Globilization
- Consumerism
What are Undifferentiated Products?
- Undifferentiated products i.e. commodities or standardized agricultural products with little or no processing & often raw materials
What are Differentiated Products?
- Differentiated products
a) Industrial products that are partly processed &and for specific customer(s) / quality varies e.g. dairy proteins for ice cream manufacturer
b) Consumer products that are fully processed differing by brand names
What are the Pre-Conditions of Market Economy?
- Recognize private sector and provide income and profit
incentives - Decentralized price system & price determined by supply and demand
- Encourage competition as a way of efficiency
- High level of freedom of choice for producers and consumers
- High value on satisfying consumers through a wide variety of marketing activities
- Limited role of government
What are the Functions of Markets in food economy?
- Exchange products money between buyers & sellers
- Value creation by encouraging competing firms to improve prices, services, products and value for consumers
- Contribution to efficiency through competition as well as economize on the efforts of buyers & sellers
- Value on economic activities by reward & penalty
- Assist in efficient allocation of scarce resources that in turn improve living standards of a society
What is Food marketing?
Business activities involved in the flow of goods and services from the point of initial agricultural production until they are in the hands of final consumers.
Getting the right things, to the right people at the right time and price
What does Market Performance Analysis mean?
How well the food marketing system performs what society and market participants expect of it?
What are the measures of performance?
Trends in food price; consumer food costs
Level of stability of farm prices & income. Farmer’s share of consumer’s food $
Share of consumer $ spent on food as industry’s contribution to the standard of living
Farm-retail price spread (or margin)
What is Efficiency in the food system?
Food system is measured as a ratio of output to input.
Efficient marketing is the maximization of input- output ratio
• Input includes resources (costs) to perform marketing functions.
• Output includes time, form, place and possession utilities (benefits) to satisfy consumers
What does operational / technical efficiency mean?
Cost reduction by a firm without affecting output side of the efficiency ratio (lowest cost possible) OR enhancing utility without increasing cost
What does Price Efficiency mean?
The ability of
whole system to supply at a lower cost and competition plays a key role in achieving it
What is Marketing?
A philosophy of the company to satisfy consumer need at a profit.
• At the core of marketing is exchange: giving something of value in return for something of value. Food marketing system starts with farm at one end & consumer at the other end.
• Marketing is activities at all stages of food system to exchange food products and services that satisfy the needs and wants of consumers and organizations
What does concept of value main?
• Value = utility or usefulness
Based on satisfaction derived from consumption or use
• Products provide utility through their characteristics, form, place, time and possession utilities
• Value is perceived by individuals
• Organizations also set a value on products & services
What is Consumer & Consumer sovereignty mean?
- Final consumer is most important in the food system as the ultimate goal is to satisfy the end consumer
- Consumer sovereignty: The doctrine that business and marketing activity is directed towards the satisfaction of consumers is called the doctrine of consumer sovereignty.
- Consumers exercise their sovereignty by their $ vote, rewarding firms & activities that please them while abstaining from others
What is Consumer & food marketing?
- Consumer’s preference and behaviour dictate to a major extent the production and marketing activities
- Marketing firms expend a great deal of effort in trying to influence and change consumers’ behaviour and wants to the marketers’ advantage
What are the three basic conditions for consumer sovereignty?
- Consumer must be provided with real alternatives from which to choose
- Consumer must have reliable and accurate information in order to accurately match available product choices with preferences
- Price should reflect all private and social costs of producing and marketing products
Name four business concepts?
- Product concept is quality/quantity orientated and assumes that consumers will pay fair price for a good product & little marketing is required e.g. commodity farmer
- Selling concept focuses on selling whatever is produced assuming that consumers will not buy enough.
- Marketing concept focuses on the needs, wants & and preferences of the targeted market to deliver desired satisfaction more effectively & efficiently than potential competitors e.g. McDonalds in Japan or India
- Societal concept gives more importance to welfare of public by production of products that are beneficial in the long run e.g. junk food & health issues , food system issues
What are two alternative food marketing perspectives?
- Macro marketing or big picture i.e. how food system is organized, its economic performance, social tasks & changes over time
- Micro marketing in contrast is about an individual decision maker in the food industry
What approaches are there to the study of the food system?
- Marketing management approach (Micro approach)
Study of development and implementation of profitable strategies to satisfy consumer
(Macro approaches) - The functional approach
Break down of processes into functions to answer “what” of marketing - The institutional approach
Study of various institutions to analyse the structure i.e. “who” - The behavioural systems approach
Study and prediction of behavioural change of a firm or an organization of firms
What is the marketing approach?
Process by which firms and organizations develop and implement competitive marketing strategies
Three principles
1. Consumer satisfaction & to make profit
2. Product differentiation
3. Market segmentation
Name the 4 P’s of strategy in marketing?
– Product – Price – Promotion –Place or distribution Firm’s choice of mix of the above four is termed as marketing strategy
What is the functional approach?
The functional approach attempts to answer ‘what’ in
the question ‘who does what’?
• Exchange function (transfer of title, price determination, buying & selling)
• Physical function (manufacturing, processing, packaging, transportation, storage)
• Facilitating function (standardization i.e. quality & quantity, grading, financing, risk bearing i.e. physical risk & market price risk, market intelligence / information)
What are the uses of functional approach?
- Understanding the costs versus benefits of these functions
- Helping understand the importance of various functions that are not possible to be eliminated
- That functions are indispensible but flexible
What is the institutional approach?
The institutional approach focuses on the ‘who’ in marketing
• The Merchant middlemen take title to the product (Retailers, Wholesalers)
• Agent middlemen do not take title and act as client’s representative (further divided into Brokers & Commission men)
• Speculative middlemen buy and sell & make profit from price movements
• Processors and manufacturers are marketing firms that specialize in time, form, place & possession utility
companies, grain exchanges, and fruit auction)
• Facilitative organizations aid middlemen tasks and establish rules of game (Wagga Wagga sale yard ,stockyard
What are the uses of institutional approach?
- Free farmers to specialize in production and consumers for other activities
- Specialization marked by economies of scale, which means lower average cost by handling large product volumes
- Reduced market search and transaction costs
What is the behavioural systems approach?
The behavioural system approach helps in understanding and predicting continuous changes occurring in the markets
• Input-output system
Decisions to reduce costs and enhance output by developing /
adopting new technologies, new products etc.
• Power system
Maintain current status or enhance present role (monopoly,
imperfect competition)
• Communications system
Establishment of effective channel to transmit / receive
information that leads to the action required
• Adaptive behaviour
Techniques for adopting to changes in the marketing system i.e. important changes identified and adoptive solutions
What are the uses of Behavioural systems approach?
• Understanding of major change currently underway in the food system
•
Understanding adjustment of behaviour of food firms and organizations to market forces while also attempting to influence these forces
