Facilitating function performed by intermediaries in international trade
A concise review of the concepts presented in the chapter; the Chapter Summary is the perfect place to begin your study of the material. Explain what a marketing channel is and why intermediaries are needed. A marketing channel is a business structure of interdependent organizations that reach from the point of facilitating function performed by intermediaries in international trade origin to the consumer with the purpose of physically moving products to their final consumption destination, representing "place" in the marketing mix and encompassing the facilitating function performed by intermediaries in international trade involved in getting the right product to the right place at the right time.
Members of a marketing channel create a continuous and seamless supply chain that performs or supports the marketing channel functions. Channel members provide economies to the distribution process in the form of specialization and division of labor, overcoming discrepancies in quantity, assortment, time, and space, and providing contact efficiency.
Define the types of channel intermediaries and describe their functions and activities. The most prominent difference separating intermediaries is whether or not they take title to the product, such as retailers and merchant wholesalers. Retailers are firms that sell mainly to consumers. Merchant wholesalers are those organizations that facilitate the movement of products and services from the manufacturer to producers, resellers, governments, institutions, and retailers.
Agents and brokers, on the other hand, do not take title to goods and services they market but do facilitate the exchange of ownership between sellers and buyers. Channel intermediaries perform three basic types of functions. Transactional functions include contacting and promoting, negotiating, and risk taking. Logistical functions performed by channel members include physical distribution, storing, and sorting functions.
Finally, channel members may perform facilitating functions, such as researching and financing. Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements. Marketing channels for consumer and business-to-business products vary in degree of complexity.
The simplest consumer product channel involves direct selling from producers to consumers. Businesses may sell directly to business or government buyers. Facilitating function performed by intermediaries in international trade channels grow more complex as intermediaries become involved.
Consumer product channel intermediaries include agents, brokers, wholesalers, and retailers. Business product channel intermediaries include agents, brokers, and industrial distributors. Marketers often use alternative channel arrangements to move their products to the consumer. With dual distribution or multiple distribution, they choose two or more different channels to distribute the same product.
Nontraditional channels help differentiate a firm's product from the competitor's or provide a manufacturer with another avenue facilitating function performed by intermediaries in international trade sales. Finally, strategic channel alliances are arrangements that use another manufacturer's already established channel. Define supply chain management and discuss its benefits.
Supply chain management coordinates and integrates all of the activities performed by supply chain members into a seamless process from the source to the point of consumption. The responsibilities of a supply chain manager include developing channel design strategies, managing the relationships of supply chain members, sourcing and procurement of raw materials, scheduling production, processing orders, managing inventory and storing product, and selecting transportation modes.
The supply chain manager is also responsible for managing customer service and the information that flows through the supply chain. The benefits of supply chain management include reduced costs in inventory management, transportation, warehousing, and packaging; improved service through techniques like time-based delivery and make-to-order; and enhanced revenues, which result from such supply chain-related achievements as higher product availability and more customized products.
Discuss the issues that influence channel strategy. When determining marketing channel strategy, the supply chain manager must determine what market, product, and producer factors will influence the choice of channel.
The manager must also determine the appropriate level of distribution intensity. Intensive distribution is distribution aimed at maximum market coverage. Selective distribution is achieved by screening dealers to eliminate all facilitating function performed by intermediaries in international trade a few in any single area.
The most restrictive form of market coverage is exclusive distribution, which entails only one or a few dealers within a given area.
Explain channel leadership, conflict, and partnering. Power, control, leadership, conflict, and partnering are the main social dimensions of marketing channel relationships.
Channel power refers to the capacity of one channel member to control or influence other channel members. Channel control occurs when one channel member intentionally affects another member's behavior. Channel leadership is the exercise of authority and power. Channel conflict occurs when there is a clash of goals and methods among the members of a distribution channel. Channel conflict can be either horizontal, among channel members at the same level, or vertical, among channel members at different levels of the channel.
Channel partnering is the joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage. Collaborating channel partners meet the needs of consumers more effectively by ensuring the right products reach shelves at the right time and at a lower cost, boosting sales and profits. Describe the logistical components of the supply chain. The logistics supply chain consists of facilitating function performed by intermediaries in international trade interrelated and integrated logistical components: Integrating and linking all of the logistics functions of facilitating function performed by intermediaries in international trade supply chain is the logistics information system.
Information technology connects the various components and partners of the supply chain into an integrated whole. The supply chain team, in concert with the logistics information system, orchestrates the movement of goods, services, and information from the source to the consumer. Supply chain teams typically cut across organizational boundaries, embracing all parties who participate in moving product to market. Procurement deals with the purchase of raw materials, supplies, and components according to production scheduling.
Order processing monitors the flow of goods and information order entry and order handling. Inventory control systems regulate when and how much to buy order timing and order quantity Warehousing provides storage of goods until needed by the customer while the materials-handling system moves inventory into, within, and out of the warehouse.
Finally, the major modes of transportation include railroads, motor carriers, pipelines, waterways, and airways. Discuss the concept of balancing logistics service and cost. Today, logistics service is recognized as an area in which a firm can distinguish itself from the competition.
Many supply chain managers strive to achieve an optimal balance of customer service and total distribution cost. Important aspects of service are availability of product, timeliness of deliveries, and quality accuracy and condition of shipments. In evaluating costs, supply chain managers examine all parts of the supply chain using the total cost approach.
Many supply chain managers are decreasing their emphasis on reducing logistics costs to the lowest possible level in favor of exploiting logistics capabilities to increase customer satisfaction and maintain customer demand.
Discuss new technology and emerging trends in supply chain management. Several trends are emerging that affect the job of today's supply chain manager. Technology and automation are bringing up-to-date distribution information to the decision maker's desk. Technology is also linking suppliers, buyers, and carriers for joint decision making, and it has created a new electronic distribution channel.
Many companies are saving money and time by outsourcing third-party carriers to handle some or all aspects of the distribution process. Discuss channels and distribution decisions in global markets. Global marketing channels are becoming more important to U. Manufacturers introducing products in foreign countries must decide what type of channel structure to use-in particular, whether the product should be marketed through direct channels or through foreign intermediaries.
Marketers should be aware that channel structures in foreign markets may be very different from those they are accustomed to in the United States. Global distribution expertise is also emerging as an important skill for supply chain managers as many countries are removing trade barriers. Identify the special problems and opportunities associated with distribution in service organizations.
Managers in service industries use the same skills, techniques, and strategies to manage logistics functions as managers in goods-producing industries. The distribution of services focuses on three main areas: Go back to Dr. Williams's Academic Home Page.
Functions, agents, enterprises and channels 5. The type of facilitating function performed by intermediaries in international trade, the number, size and density of producers, the infrastructure and the policy and institutional environments all determine the type of marketing system and the effectiveness with which it operates. This leads to enhanced resource-use efficiency and economic growth. With economic development, the tasks and activities of marketing further increase, creating employment and other avenues for development.
A marketing system is comprised of a number of elements: When we talk of describing, quantifying or analysing a particular marketing system, there is an implicit assumption that we can distinguish the elements of that system from other economic activities.
Analyses of marketing systems usually include a quantification of the flows and of the value added, costs and profit margins at each stage in the system. Its facilitating function performed by intermediaries in international trade are much more extensive than this simple description. For a marketing system to be operative and effective, there are three general types of functions which it must provide.
Exchange functions are what is commonly thought of as marketing. They involve finding a buyer or a seller, negotiating price and transferring ownership but facilitating function performed by intermediaries in international trade necessarily physical transfer.
These functions take place at the "market" - that is, the physical meeting point for buyers and sellers at the point of production or via some other means of communication. At this point, formal or informal property rights are important to ensure the reliable transfer of ownership and to guarantee legality e. Physical functions enable the actual flow of commodities through space and time from producer to consumer and their transformation to a form desirable to the consumer.
Assemblying or concentrating the product at convenient points allows its economical transport i. This is a valuable function which is often overlooked in the public perception of traders. Storage allows the commodity to be held until peak season demand, thereby stabilising supply.
Processing transforms the commodity into the products desired by the consumers. Grading and standardisation allow the consumer to be more confident of the characteristics of the good being purchased. Financing and risk-bearing are two important facilitating functions. The owner of goods at any marketing stage must sacrifice the opportunity to use the working capital needed to buy those goods elsewhere.
Or the owner must borrow that capital. In either case, capital must be provided by the trader or by some lending source. Regardless, cost is involved. Further, there is an implicit cost in the risk of losing all or part of that capital through theft, spoilage, mortality or changing market conditions.
Without the willingness to provide the capital and to bear these costs, no stage of the market chain could function. Other facilitating functions enable producers to respond to consumer needs and thus provide goods in the locations, quantity and form desired. These functions create the marketing environment, whose elements are: Actors in the market can choose between specialising in one activity or integrating a number of activities into one enterprise in a vertical or horizontal manner. A specialised enterprise can offer its customers more individual attention and provide the exact quality and form of goods desired e.
Thus, the roles of actors are often difficult to separate. The roles of vertically-integrated actors are likely to overlap with those of more specialised agents in the market.
The varying roles of market agents. Adapted from Timmer et al Country buyers often carry out the initial task of assembling goods from dispersed farms or local rural markets. These buyers facilitating function performed by intermediaries in international trade be farmers, shopkeepers, itinerant traders or some co-operative or government-buying agency. The role of wholesalers is to transfer goods from producers or country buyers to retailers or other wholesalers.
Thus, their role may overlap with that of country buyers, in that they may deal directly with producers. They often finance the movement of goods themselves and consequently bear the cost of marketing risks. In the African livestock trade, there is a tendency for there to be a number of stages in the wholesale trade, as animals are assembled into larger and larger herds for subsequent trekking to urban centres.
To operate profitably, wholesalers must be especially well-informed about current market prices and conditions, since the costs of market risks increase with the number of stock being handled. Commission agents may sometimes operate on behalf of wholesalers for a percentage of the price paid. Although they act in the same way as wholesalers, the risk remains with the owner of the goods. Brokers offering an intimate knowledge of the market act to bring buyers and sellers together.
In West Africa, livestock brokers also serve to enforce informal market rules by monitoring transactions, assuring the integrity of each party in the transaction and guaranteeing the negotiated price will be paid. Thus, they contribute in several facilitating function performed by intermediaries in international trade to the exchange functions by facilitating buying and selling, and facilitating function performed by intermediaries in international trade the informal system which enforces contracts.
Processors transform the good either partially or completely into the form to be consumed. In the African livestock trade, processing is often carried out on a large scale by government agencies who also operate as wholesalers. They may also sell their processing services to smaller traders. Retailers present the good to the consumer in the manner, location and form desired. In the case of livestock, they may also carry out processing activities e. Independent, locally-based private enterprises operate with capital owned directly by the operators and their partners, or in some cases by shareholders.
Although not always large in scale of operation, these make up the greatest number of agriculture and livestock enterprises. Great variety exists in their level and degree of sophistication. Sometimes foreign-owned operations may' occupy important roles in this niche, particularly in foreign trade of livestock products. Co-operatives have the potential to improve marketing efficiency. They can reduce marketing costs. For example, a village livestock marketing co-operative could co-ordinate the production schedules of small farmers, so that sufficient animals would reach market age at the same time, allowing truck transport to markets facilitating function performed by intermediaries in international trade lowering per unit transport costs.
Typically they are used to distribute credit or subsidised inputs. In Africa they have been more successful when they have confined themselves at first to one' simple function which is important to all members, attempting only later to expand their role. In order to be successful in the long run, a co-operative must be able to carry out marketing functions with lower cost or effort than available alternatives.
If this ability is not perceived by members, co-operatives are likely to break down. Since the ownership of co-operatives, by definition, lies in the hands of those who use its services and who are thus entitled to any profitsa distinction must be made between farmer-owned and -controlled co-operatives and parastatals.
Parastatals are co-operatives in name only, since they are government controlled. They may serve as taxation mechanisms or to promote government support.
Private co-operatives are likely to be more efficient than parastatals, because of ownership incentives. Although nominally a private cooperative, the KCC acts as a parastatal because of government-sanctioned monopoly and regulatory powers.
Marketing boards and other state enterprises, although popular with many African governments, have been much criticised. They are set up by government direction with government capital. Major operating decisions are subject to approval by the responsible minister. Facilitating function performed by intermediaries in international trade are slightly more independent.
Although government financed, they are autonomous in terms of handling facilitating function performed by intermediaries in international trade, recruiting staff and making operational decisions. The objectives of establishing such public intermediaries are: They often fail to achieve these objectives because of inappropriate policies, poor management and lack of knowledge. Attempts to replace private markets usually fail because the detailed information necessary to operate may be too dispersed to gather.
Managers succumb to patronage and corruption, and incentives for efficient operation are usually lacking. The Kenya Meat Commission KMC was, until recently, a parastatal set up to buy and process cattle and to market the products. Although potential economies of scale existed, these were not achieved because capacity was under-utilised and per unit costs were higher. Slaughterhouses built to handle peak seasonal supply are usually under-utilised during other seasons.
Parastatals with a mandate to buy at fixed prices from all producers also suffer from high costs of cattle purchases in pastoral areas, where such sales are widely dispersed. Transnational companies often succeed because of their access to processing technology and external markets. By definition, they operate in countries other than that of their headquarters.
They can assist market development by facilitating the movement of skills and capital to areas where they are in short supply, potentially contributing to the levelling of commercial expertise. When considering the relative advantages of each of these enterprises, attention must be given to the particular environment of livestock marketing in Africa.
Its marketing structures are more complicated and differentiated than those in a developed country where production is much more specialised. Further, issues of equity and income distribution between producers are more acute and must be considered in the policy decision to promote certain types of enterprise. All of the goods facilitating function performed by intermediaries in international trade a particular market are unlikely to pass through the same set of agents.
Usually goods pass through a variety of market channels as a result of varying degrees of vertical integration existing in the same market.
At times, some intermediaries are bypassed, while in others, goods pass through a large number of hands. Mote that at any one level of the market, such as at level A, the sum of the percentage flows in the diagram is always This type of diagram can be helpful in facilitating function performed by intermediaries in international trade planning for new investment in marketing, by identifying both the channels where volume is highest and other channels which could be further developed.
Marketing chain for milk and dairy products. Adapted from Ansell Livestock marketing channels estimated time required: Using personal knowledge of a livestock marketing system in one's home country, draw a market channel diagram similar to Figure 5.
Identify all stages, actors, enterprise types and flows in the system and identify the percentage flows through each channel. Discuss the reasons, in terms of price policy, institutional environment and infrastructure, for the existing facilitating function performed by intermediaries in international trade of market channels.