A Framework for Stimulating Marketing System Development

Figure 2 presents an example of what can be perceived to be appropriate steps in formulating a government programme of food marketing system development.

Formulation of general development goals, Preparation of specific food production-dis­

tribution system development objectives;

Articulation of food production-distribution actions to development strategies;

Specification of programme projects and pol­

icy instruments to support food production-distribution system development.

Figure 2 will be used to illustrate the kinds of objectives, strategies, programmes projects and le­

gal measures that governments can use to improve food production-distribution system performance.

For illustration, three levels in the system at which development must take place are identified:

(a) the farm level;

(b) the distribution channel level;

(c) food production-distribution system level;

and

(d) the government level

At farm level, we are concerned with the eco­

nomic efficiency and effectiveness of individual farm in using appropriate technologies available to them. Their individual performance in terms of both cost effectiveness in using factors of production and meeting consumer needs is a major determinant of economic development.

The distribution channel will consist of a set of institutions and structures that handle a product or group of products from production to consumption level. The distribution channel is concerned with moving a "package" of goods that are meaningful in terms of the buying patterns of intermediate and final customer.

The food production-distribution system is a na­

tion wide system where of all institutions must be involved and related in market activities. Individual farms, commodity sub-systems (product-line such as vegetable group, cereal group, etc.) and distribu­

tion channels are major elements of this aggrega­

tion. In addition, the important elements of government policies and programmes are added to the previous levels of aggregation to provide the environment umbrella under which private and pub­

lic firms should operate. Within that framework, governments can then effectively stimulate im­

provements in market performance and generate production incentives, productivity improvements in the food production-distribution consumption system.

Chapter VI will offer more detail on the applica­

tion of this framework for stimulating food produc­

tion-distribution system development.

Some mix of public actions directed at each of the levels described above is required. Also, some optimum sequencing of actions and some optimum level of intensity and frequency for each govern­

ment action are probably required. At this point, sets of objectives, strategies and public instruments that should be used at each level in the system must be identified. The use of this framework requires an extensive level knowledge (referring to an accumu­

lation of scientific knowledge about the structure, behaviour and performance of the production-distri­

bution system) about the inter-working of the food marketing system. It would also be helpful if that group included individuals with basic training in managerial marketing as well as economic analysis.

(a) Farm Level

Four specific farm level development objectives, we believe to be important in stimulating develop­

ment, have been identified. Objective A and B deal with the issue of stimulating managerial and tech­

nological innovations capacity, more and in the future, through continued investment of profits. It is important to set different strategies that may be needed to keep the innovations coming in and to induce farm to reinvest profits in future innovation.

ÄA. S £ E

Information on consumers tendencies and prices of new products is a basic tool to induce farmers to reinvest profit in their respective areas of incompe­

tence.

The emphasis in objectives C and D is on reducing physical losses and improving product quality. In both cases, improvements in packaging and han­

dling are important factors. But these improve­

ments are not easy for individual farm to introduce without cooperation from other farms in the mar­

keting channel.

The suggested strategies (or instruments) for accomplishing these specific farms level objectives will focus on economic efficiency aspect such as market information systems, and improving storage distribution among others.

Moving on to consider specific governmental projects and programmes that can be used to stimu­

late farms to achieve greater economic efficiency, the existing programmes can be given a different emphasis. Again, in keeping with our view of food marketing system development, tools of formal education, extension, education, credit and techni­

cal assistance should be offered to production and marketing farms. Adult formal education also has an important place in development. In fact, every market participant becomes a potential agent for someone else in the system.

Market participants should be stimulated to help each other and this is the only effective way to get widespread diffusion of important managerial/tech­

nological innovation.

(b) Distribution Level

We specified two development objectives for the distribution channel level, dealing basically with the important issues of market related uncertainties and externalities. The two objectives are closely inter-correlated. Objective A deals with a reduction of channel risks and uncertainties, including: (i) vari­

ability in volume of supply or effective demand;

(ii) price level variation; (iii) variable terms of trade and conditions of payment; and (iv) uncertain prod­

uct quality and assortment.

Most of these uncertainties are a consequence of poorly coordinated market channels, both in space and time which are the result of limited information, imperfect analysis and insufficient purchasing and planning (Objective B).

The suggested instruments (strategies) for achieving these objectives are to provide incentives through government action by: (i) encouraging farmers to adopt channel coordination improvement in function of their specific needs; and (ii) encour­

aging organizations of effective food distribution chains at the wholesale-retail improvements which, if successfully adopted by farms, will improve their profits and immediately produce incitation. One of

the specific kinds of channel coordination improve­

ments are to routinized order processing (Strategy A). In Strategy B, actions such as construction physical facilities such as roads and storage facili­

ties can be used to stimulate management improve­

ments, lower marketing costs and encourage a chain of management innovations that will continue to reduce marketing cost. Strategy C is to encour­

age organization and coordination between whole­

sales and retailers which can reduce distribution costs significantly and help stabilize agricultural market.

In planning of projects programmes implementa­

tion, transport, storage, processing or other com­

mercial facilities can be used to help accomplish channel development strategies. Direct govern­

ment encouragement of appropriate wholesale-re­

tail chains might be accomplished in several ways, depending on the local situations. Supervised credit and technical assistance to individuals must be provided as well.

(c) Food Production-distribution System Level The specific development objectives at the food system level relate to the more global and dynamic issues of resources use efficiency, and progressive-ness. The first and second objective deals with achieving mobility of resources within the food system and between the food system and other parts of the economy. The third deals with the food system capacity to continuously adapt itself to changing economic and social environment. We suggested three strategies for achieving these ob­

jectives. The first deals with effective information gathering analysis and dissemination.

Accurate supply, demand, price evolution, pros­

pects information and analysis can contribute sig­

nificantly to achieving food system development objectives. Strategy A is related to the evaluation of a combination of economic institutions that will ideally produce effective competition at all level actions.

Government actions associated with the above strategies are essentially proposed public project programme. Items A to D deal with importation accumulation and dissemination. Item E specifies the types of regulatory and facilitative programme that governments can provide to protect consumers and traders and also to help smooth the way for adoption of system improving innovations.

(d) Government Level

The framework for stimulating marketing system development through government action is depend­

ent on enabling laws like those described above.

The performance with respect to these kind of issues gives us some response to the following questions: How serious is the country about pro­

moting food production-distribution system devel­

opment? And how far is the political system willing to go towards changing the present structures? The

answer to these questions depend very much on policies in a given country and the government's willingness to modify those that do not bring about development.