🧺 Market

• The word market comes from the latin word “marcatus” which means merchandise or trade or a place where business is conducted.
• The word market in the economic sense carries a broad meaning. Some of the definitions of market are given as follows:
  • A market is the sphere within which price determining forces operate.
  • A market is the area within which the forces of demand and supply converge to establish a single price.
  • The term market means not a particular market place in which things are bought and sold but the whole of any region in which buyers and sellers are in such a free intercourse with one another that the prices of the same goods tend to equality, easily and quickly.
  • Market means a social institution which performs activities and provides facilities for exchanging commodities between buyers and sellers.
  • Economically interpreted, the term market refers, not to a place but to a commodity or commodities and buyers and sellers who are in free intercourse with one another.

Components of a Market

• For a market to exist, certain conditions must be satisfied. These conditions should be both necessary and sufficient. They may also be termed as the components of a market.
  • The existence of a good or commodity for transactions (physical existence is, however, not necessary);
  • The existence of buyers and sellers;
  • Business relationship or intercourse between buyers and sellers; and
  • Demarcation of area such as place, region, country or the whole world. The existence of perfect competition or a uniform price is not necessary.

Market Structure - Meaning

• The term structure refers to something that has organization and dimension - shape, size and design; and which is evolved for the purpose of performing a function.
• A function modifies the structure, and the nature of the existing structure limits the performance of functions.
• By the term market structure, we refer to the size and design of the market. It also includes the manner of the operation of the market.
• Some of the expressions describing the market structure are:
  • Market structure refers to those organizational characteristics of a market which influence the nature of competition and pricing, and affect the conduct of business firms.
  • Market structure refers to those characteristics of the market which affect the traders’ behaviour and their performances.
  • Market structure is the formal organization of the functional activity of a marketing institution.
• An understanding and knowledge of the market structure is essential for identifying the imperfections in the performance of a market.

Components of Market Structure

• The components of the market structure, which together determine the conduct and performance of the market, are:

1. Concentration of Market Power

• The concentration of market power is an important element determining the nature of competition and consequently of market conduct and performance.
• This is measured by the number and size of firms existing in the market.
• The extent of concentration represents the control of an individual firm or a group of firms over the buying and selling of the produce.
• A high degree of market concentration restricts the movement of goods between buyers and sellers at fair and competitive prices and creates an oligopoly or oligopsony situation in the market.

2. Degree of Product Differentiation

• Homogeneous or other nature of the product affects the market structure. If products are homogeneous, the price variations in the market will not be wide.
• When products are heterogeneous, firms have the tendency to charge different prices for their products. Everyone tries to prove that his product is superior to the products of others.

3. Conditions for entry of Firms in the Market

• Another dimension of the market structure is the restriction, if any, on the entry of firms in the market. Sometimes, a few big firms do not allow new firms to enter the market or make their entry difficult by their dominance in the market. There may also be some government restrictions on the entry of firms.

4. Flow of Market Information

• A well-organized market intelligence information system helps all the buyers and sellers to freely interact with one another in arriving at prices and striking deals.

5. Degree of Integration

• The behaviour of an integrated market will be different from that of a market where there is no or less integration either among the firms or of their activities.
• Firms plan their strategies in respect of the methods to be employed in determining prices, increasing sales, coordinating with competing firms and adopting predatory practices against rivals or potential entrants.
• The structural characteristics of the market govern the behaviour of the firms in planning strategies for their selling and buying operations.

Dynamics of Market Structure – Conduct and performance

• The market structure determines the market conduct and performance. The term market conduct refers to the patterns of behavior of firms, especially in relation to pricing and their practices in adapting and adjusting to the market in which they function. Specifically, market conduct includes:
  • Market sharing and price setting policies
  • Policies aimed at coercing rivals and
  • Policies towards setting the quality of products.
• The term market performance refers to the economic results that flow from the industry as each firm pursues its particular line of conduct.
• Society has to decide the criteria for satisfactory market performance.
• Some of the criteria for measuring market performance and of the efficiency of the market structure are:
  • Efficiency in the use of resources, including real cost of performing various functions
  • The existence of monopoly or monopoly profits, including the relationship of margins with the average cost of performing various functions
  • Dynamic progressiveness of the system in adjusting the size and number of firms in relation to the volume of business, in adopting technological innovations and in finding and/or inventing new forms of products so as to maximize general social welfare.
  • Whether or not the system aggravates the problem of inequalities in interpersonal, inter-regional or inter-group incomes. For example, inequalities increase under the following situations:
    • A market intermediary may pocket a return greater than its real contribution to the national product
    • Small farmers are discriminated against when they are offered a lower return because of the low quantum of surplus
    • Inter-product price parity is substantially disturbed by new uses for some products and wide variations and rigidities in the production pattern between regions.
• The market structure, therefore, has always to keep on adjusting to changing environment if it has to satisfy the social goals. A static market structure soon becomes obsolete because of the changes in the physical, economic, institutional and technological factors. For a satisfactory market performance, the market structure should keep pace with the following changes:
  • Production Pattern: Significant changes occur in the production pattern because of technological, economic and institutional factors. The market structure should be re-oriented to keep pace with such changes.
  • Demand Pattern: The demand for various products, especially in terms of form and quality, keeps on changing because of change in incomes, the pattern of distribution among consumers, and changes in their tastes and habits. The market structure should be re-oriented to keep it in harmony with the changes in demand.
  • Costs and Patterns of Marketing Functions: Marketing functions such as transportation, storage, financing and dissemination of market information, have a great bearing on the type of market structure. Government policies with regard to purchases, sales and subsidies affect the performance of market functions. The market structure should keep on adjusting to the changes in costs and government policy.
  • Technological Change in Industry: Technological changes necessitate changes in the market structure through adjustments in the scale of business, the number of firms, and in their financial requirements.

Agriculture Marketing

• Marketing connotes a series of activities involved in moving the goods from the point of production to the point of consumption.
• It includes all the activities involved in the creation of time, place, form and possession utility.
• Agricultural marketing is the study of all the activities, agencies and policies involved in the procurement of farm inputs by the farmers and the movement of agricultural products from the farms to the consumers.
• The agricultural marketing system is a link between the farm and the non-farm sectors.

Importance of Agricultural Marketing

• Agricultural marketing plays an important role not only in stimulating production and consumption, but in accelerating the pace of economic development.
• Its dynamic functions are of primary importance in promoting economic development. For this reason, it has been described as the most important multiplier of agricultural development.
• The importance of agricultural marketing in economic development has been indicated in the paragraphs that follow.

Optimization of Resource use and Output Management

• An efficient agricultural marketing system leads to the optimization of resource use and output management. An efficient marketing system can also contribute to an increase in the marketable surplus by scaling down the losses arising out of inefficient processing, storage and transportation. A well-designed system of marketing can effectively distribute the available stock of modern inputs, and thereby sustain a faster rate of growth in the agricultural sector.

Increase in Farm Income

• An efficient marketing system ensures higher levels of income for the farmers by reducing the number of middlemen or by restricting the commission on marketing services and the malpractices adopted by them in the marketing of farm products.
• An efficient system guarantees the farmers better prices for farm products and induces them to invest their surpluses in the purchase of modern inputs so that productivity and production may increase. This again results in an increase in the marketed surplus and income of the farmers.
• If the producer does not have an easily accessible market-outlet where he can sell his surplus produce, he has little incentive to produce more. The need for providing adequate incentives for increased production is, therefore, very important, and this can be made possible only by streamlining the marketing system.

Widening of Markets

• A well-knit marketing system widens the market for the products by taking them to remote corners both within and outside the country, i.e., to areas far away from the production points.
• The widening of the market helps in increasing the demand on a continuous basis, and thereby guarantees a higher income to the producer.

Growth of Agro-based Industries

• An improved and efficient system of agricultural marketing helps in the growth of agro-based industries and stimulates the overall development process of the economy.
• Many industries depend on agriculture for the supply of raw materials.

Price Signals

• An efficient marketing system helps the farmers in planning their production in accordance with the needs of the economy.
• This work is carried out through price signals.

Adoption and Spread of New Technology

• The marketing system helps the farmers in the adoption of new scientific and technical knowledge.
• New technology requires higher investment and farmers would invest only if they are assured of market clearance.

Employment

• The marketing system provides employment to millions of persons engaged in various activities, such as packaging, transportation, storage and processing.
• Persons like commission agents, brokers, traders, retailers, weighmen, hamals, packagers and regulating staff are directly employed in the marketing system.
• This apart, several others find employment in supplying goods and services required by the marketing system.

Addition to National Income

• Marketing activities add value to the product thereby increasing the nation’s gross national product and net national product.

Better Living

• The marketing system is essential for the success of the development programmes which are designed to uplift the population as a whole.
• Any plan of economic development that aims at diminishing the poverty of the agricultural population, reducing consumer food prices, earning more foreign exchange or eliminating economic waste has, therefore, to pay special attention to the development of an efficient marketing for food and agricultural products.

Creation of Utility

• Marketing is productive, and is as necessary as the farm production. It is in fact, a part of production itself, for production is complete only when the product reaches a place in the form and at the time required by the consumers.
• Marketing ads cost to the product; but, at the same time, it adds utilities to the product.
• The following four types of utilities of the product are created by marketing:
  • Form Utility: The processing function adds form utility to the product by changing the raw material into a finished form. With this change, the product becomes more useful than it is in the form in which it is produced by the farmer. For example, through processing, oilseeds are converted into oil, sugarcane into sugar, cotton into cloth and wheat into flour and bread. The processed forms are more useful than the original raw materials.
  • Place Utility: The transportation function adds place utility to products by shifting them to a place of need from the place of plenty. Products command higher prices at the place of need than at the place of production because of the increased utility of the product.
  • Time Utility: The storage function adds time utility to the products by making them available at the time when they are needed.
  • Possession Utility: The marketing function of buying and selling helps in the transfer of ownership from one person to another. Products are transferred through marketing to persons having a higher utility from persons having a low utility.