MARKET CHANNEL AND PRICE SPREAD OF VEGETABLES A PROJECT REPORT Submitted by ...
ACKNOWLEDGEMENTWe students of ITM (Institute Technology of management) Did a detailstudy of Market channel and Price sprea...
INTRODUCTIONThe efficiency of marketing for fruits and vegetables in India has beenof significant concern in the recent ye...
OBJECTIVESPrimary Objective:-To study the market channel and price spread of vegetables/fruits inChennai.Secondary Objecti...
Scope of the studyThe project mainly covers the price spread and market channel ofvegetables/fruits in Chennai. However, i...
Research Methodology ?Population study - The wholesalers, sub wholesalers, retailers andcu...
AnalysisIn this section we are going to analyze the primary data collected through a structuredquestionnaire using bar-gra...
Age 30.00% 35.00% ...
Byuing source 100.00% ...
Frequency of Purchasing 5.00% 30.00% ...
Setting of the selling price 120 100 80 60 Se...
The table below represents:-  Average quantity of the vegetables purchased by a wholesaler every day.  Average cost ...
RETAILERSIn this section we are going to analyze the retailer’s data by using pie-charts, bar-graphs andaverages and perce...
Income per month(Rs) 17.39% ...
Buying source Wholesalers ...
Components of Cost 120 100 80 60 40 20 0 Compone...
Frequency of Purchasing 100.00% ...
Setting the selling price 90 80 70 60 50 40 Set...
High price fluctuation 4.35% 4.35% 8.70% ...
CUSTOMERS Qualification 0.1666 ...
Income per month 7.41% 4.54% 36.36% ≤ ...
Buying Source 3.70% 18.51% ...
Factors effecting the buying decisions of the cutomers(1-7 Ranking Based) 8 7 6 5 4 3 2 ...
Do the customers bargain 30.43% ...
The table represents:-  The average cost incurred by a customer to buy one Kg of vegetables.  Average amount of vege...
FINDINGSThe survey was conducted between wholesalers, retailers and customers. And among customersthe findings that we acq...
SUGGESTIONSSeveral measures are recommended for improving the market of fruits andVegetables in Chennai which are as follo...
CONCLUSIONFruits and vegetables constitute an important part of daily diet and are in great demand round theyear. India no...
LITERATURE OF REVIEWMARKETINGAUTHOR: Marcia MogelonskyMeet the Inner-City Shopper. American Demographics, 20 (December 199...
MARKETING MARGINAUTHOR: Charles C.layon andgaryD.thompsonThe effects of temporal and spatial data aggregation on the perfo...
PRICING TECHNIQUESAUTHOR: carstenrohdeThis paper addresses how overhead cost allocation system design in multinational ent...
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Price spread of furits in chennai

Published on: Mar 4, 2016
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Transcripts - Price spread of furits in chennai

  • 1. MARKET CHANNEL AND PRICE SPREAD OF VEGETABLES A PROJECT REPORT Submitted by Athul. V. Ramasamy Akul Gupta Chandra Jeevan Immanuel Eshwar Reenesh.M.K Ram kumar Mohamad Yonus Balaji.R Rahila.K Kirthika Swetha PGDM iConnect Batch 2012-2014 GROUP 4 SECTION BINSTITUTE FOR TECHNOLOGY AND MANAGEMENT SIPCOT IT Park, OMR, Siruseri CHENNAI 603103 JULY 2012
  • 2. ACKNOWLEDGEMENTWe students of ITM (Institute Technology of management) Did a detailstudy of Market channel and Price spread of fruits and vegetables inChennai, we first thank our institute for giving us the opportunity toundergo a study on this channel as a part of our PGDM course. Ourmentor Prof Mrs.Sarada was extremely supportive and directed us in theright path with her overwhelming advice for doing the project, we wouldthank her for this support. We are also grateful to the wholesaler’s, sub-wholesalers, retailers and customers for giving us the information wewanted. This was a learning experience for us as the road to this projectwas tough with a lot of ups and downs. This helped us to know how toapproach people in the right way. Nevertheless it was a good gesture ofthe ITM institute in providing the students the opportunity to undergosuch practical studies while preparing the project report. Finally wewould thank all the blessed souls who were directly or indirectlyresponsible in making this project possible.
  • 3. INTRODUCTIONThe efficiency of marketing for fruits and vegetables in India has beenof significant concern in the recent years. Poor efficiency in themarketing channels and inadequate marketing infrastructure are believedto be the cause of not only high and fluctuating consumer prices, butalso too little of the consumer rupee reaching the Indian farmerstypically depend heavily on middlemen particularly in fruits andvegetable marketing. The producers and the consumers often get a poordeal and the middlemen control the market, but do not add much value.There is also massive wastage, deterioration in quality as well asfrequent mismatch between demand and supply both spatially and overtime. In the light of these concerns, studies were taken-up by us, thestudents of ITM in wholesale markets, under the coordination ofProf.Sarada. This project consolidates the results from Chennaimarkets. Fruits and vegetables typically constitute an essential part ofthe daily diet in India and they are in great demand round the year frommost sections of the population. The commercial value of fruits andvegetables in terms of direct consumption, processing as well as tradehas risen substantially in recent years. Their economic importance hasalso increased and high labor intensity in the production of most fruitsand vegetables production also makes them important from theemployment angle as well.
  • 4. OBJECTIVESPrimary Objective:-To study the market channel and price spread of vegetables/fruits inChennai.Secondary Objective:-  To study the components of cost involved for retailers and wholesalers of vegetables/fruits in Chennai.
  • 5. Scope of the studyThe project mainly covers the price spread and market channel ofvegetables/fruits in Chennai. However, it gives some insights on thepricing strategies, profit policies, customer preferences, buyingbehaviors, consumption patterns, cost components etc. The study isbeneficial as today the food inflation is very high and a study like this onthe market channel and price spread of vegetable/fruits (in Chennai) canhelp us to understand how the different agents in the market act, themarket dynamism, and help us understand the different market forcesresponsible for the high rate of inflation in the particular market inquestion.
  • 6. Research Methodology ?Population study - The wholesalers, sub wholesalers, retailers andcustomers in the vegetable/fruit market in Chennai made the populationof the research.Sampling – In our research we used the random sampling method.Sample Size - The sample size chosen was 100 keeping into account thescope of the study and ensuring that it gives us insights into thevegetable and fruits market channel as well as the price spread ofvegetables/fruits in Chennai.The sample size of 100 was subdivided into 25 wholesalers, 25 subwholesalers, 25 retailers and 25 customers so as to cover all four pivotsof vegetable market (farmers were excluded considering the scope ofstudy).Data Collection – Only primary data collection was done using aquestionnaire.Period of study – The period of study was ten days i.e. from 16th July2012 to 26th July 2012.Method of data analysis – After data collection we used percentageanalysis and averages method to analyze the data.
  • 7. AnalysisIn this section we are going to analyze the primary data collected through a structuredquestionnaire using bar-graphs, exploded pie charts, averages and percentage calculations. Thenwe will try to find inferences and implications of the statistical findings using these charts andgraphs and the experience of the interviewers (gathered while collecting the primary data).Firstly we will be analyzing the data for wholesalers, then the retailers and lastly for customers.After that we will try to link the findings at the three levels and reach a conclusion for the study. WHOLESALERS Qualification 35.00% High School 65.00% professionalFrom this pie-chart we can infer that 65% of the correspondents have a professional degree andthe remaining 25% have High school degree
  • 8. Age 30.00% 35.00% 18-29 30-40 41-60 35.00%From this pie-chart we can infer that 30% of the correspondents were falling in the age group of18-29years, 35% of the correspondents were falling in the age group of 30-40yars and theremaining 35% fell in the age group of 41-60 years which shows almost an equal mix of young,and middle aged men involved in the trade. Revenue per month (Rs) 22.22% 33.33% ≤ 50,000 50,000-1,00,000 27.78% 1,00,000-2,00,000 16.67% 2,00,000-4,00,000From this pie-chart we can infer that wholesalers fall under different income groups. Therevenue of wholesalers might be differing due to:-  Product they deal in.  Scale of operation.
  • 9. Byuing source 100.00% FarmerFrom this pie-chart we can infer that all the correspondents purchased directly from the farmers.This data is from the Koyambedu Market of wholesalers which is the main wholesale market inChennai. Being the main wholesale market in the region it purchases directly from the farmers.Some of the wholesalers purchased from the farmers of nearby states like Andhra, Kerala etc. Components of Cost 120 100 80 60 40 20 Components of Cost 0The bar-graph shows the percentage of correspondents among the wholesalers who said that theconcerned factor was a part of their total cost. Accordingly it shows the cost-mix of thewholesalers operating in the market. Hence, shows where more cost is incurred (liketransportation) and if investment is made in high cost areas to bring efficient practices into usethen per unit cost can be reduced and hence it can be transferred to the customer in terms oflower price.
  • 10. Frequency of Purchasing 5.00% 30.00% Daily 60.00% Every three days Weekly Fortnightly 5.00%From the pie-chart we can infer 60% of the correspondents bought vegetables every day whereasaround 5% of them bought once in every three days. Another 30% of them purchased once aweek and 5% of them purchased once every fortnight. By experience of the interviewers it canbe said that this difference of purchasing frequency can be attributed to:-  Warehousing facilities  Scale of operations  Dealing good  Demand  Supply  Fund flow available  Inventory management  High lead-time
  • 11. Setting of the selling price 120 100 80 60 Setting of the selling price 40 20 0 Competitively Maximizing Differential Consesus in the Profit Pricing marketFrom this bar-graph we can infer that no correspondent said that they fix selling price with aconsensus among the various wholesalers, this shows that there is no existence of a union of thewholesalers in the wholesale market or even if the union exists it doesn`t decide the selling pricefor the whole market. Many wholesalers set the price competitively with a profit maximizingview. Some others follow differential pricing strategy. which commodities in your experience will have price fluctuations 5.00% 5.00% 10.00% Apple 30.00% Tomato 10.00% Onion 15.00% 20.00% Cabbage Coconut Potato BananaFrom this pie-chart we can infer that apple will experience the highest price fluctuationaccording to the majority of wholesalers.
  • 12. The table below represents:-  Average quantity of the vegetables purchased by a wholesaler every day.  Average cost incurred by a wholesaler to buy 1 Kg of vegetables.  Profit margin added by the wholesalers on an average.  Sales made per day by the wholesalers on an average.Average purchase per day 8178.06 Kg`sAverage Cost per Kg Rs. 53.87Average Profit Margin added by the wholesalers 40%Average sales per day 7500.80 Kg`s
  • 13. RETAILERSIn this section we are going to analyze the retailer’s data by using pie-charts, bar-graphs andaverages and percentage method. Then we are going to infer findings from these. Qualification 7.69% 7.69% 7.69% Management Arts 76.92% Science MultimediaFrom this pie-chart we can infer that among the retailers approx. 77% of the correspondents weremanagement graduates and by the field experience of the interviewers many among them raneither organized retail shops like Sarvana stores or their own local shops. Age 13.04% 30.43% 18-29 30-40 56.52% 41-60From this pie-chart we can infer that 57% of the correspondents who worked as retailers fell inthe age group of 30-40 which justifies the fact that most of them join the business aftercompleting their studies and try to make their retail outlets more competitive. It shows a youngforce of retailers working in the city. This can be considered positive.
  • 14. Income per month(Rs) 17.39% ≤ 50,000 39.13% 50,000-1,00,000 17.39% 1,00,000-2,00,000 2,00,000-4,00,000 ≥ 5,00,000 8.70% 17.39%From the graph we can infer that approx. 40% of the retailers earn a nominal income of up to Rs.50,000. This is because:-  Many retailers work on small scale i.e. serving families in the street or sometimes only in one building.  Some retailers keep their operating on small scale due to lack of capital.  This is also because the consumption of vegetables is less among the customers. As we see in the analysis of the customers that a customer buys 4.5Kg once a week for the whole family.But some famous stores like Saravana earn more because of sales generated by marketing effortsi.e. various schemes etc. earn a high income of 5lakh per month. This shows that organized retailcan generate more revenue and income because of the integrated business effort and bettersupply chain as well as inventory management.
  • 15. Buying source Wholesalers 100.00%Surprisingly, all the retailer correspondents we interacted to bought from wholesalers and nonefrom farmers. This maybe one of the reasons people are indifferent to retailers i.e. they buyaccording to proximity of retailers and it doesn’t matter to them if they are buying from anorganized retailer or an unorganized retailer as the prices didn’t vary much to effect the buyingbehavior of the consumers.Also, it shows that none of the retailers are working to cut-short the supply chain and supplytheir customers with the benefits in the form of lesser prices.
  • 16. Components of Cost 120 100 80 60 40 20 0 Components of CostTransportation- All the correspondents said that transportation was a part of their cost whichshows that all the retailers have to procure raw material from distant places which adds to thecost of the vegetables and hence increases their price.Bribes- Surprisingly, all the correspondents said that they had to bribe the government officialsfor the smooth running of their business. It included bribing for permits.Inventory Costs- All the correspondents said that they maintained some level of inventory whichadded to their costs.Helpers- All the correspondents said that they needed helpers to attend the customers timelywhich in turn helped them build some customer loyalty.Shop Maintenance- All the correspondents said that they had to maintain the shop well so thatthe customers feel good while buying and they could maintain some hygiene as it’s a must in thisbusiness.Wastage- All the correspondents said that they incurred losses due to wastage this shows lackof:-  Storage facilities  Technology  Awareness  Inventory managementCredit Buying/Selling- Approx. 57% of the correspondents said that credit buying/selling was apart of their cost. This shows that almost half of the retailers trade in cash only. The other halftrade on credit. It also shows that:-  Some traders lack liquidity and hence they have to purchase on credit which adds to their cost.  Some traders who maintain good liquidity & trade on cash which can help them in enhancing their profits and even providing their customers the benefit of vegetables at lower prices.
  • 17. Frequency of Purchasing 100.00% DailyAll the corresponding retailers were buying on daily basis In spite of the fact that many of themmaintained inventory. This show:-  Poor inventory management  Poor supply chain management  Lack of planning and forecasting  Inefficient use of resources and facilities
  • 18. Setting the selling price 90 80 70 60 50 40 Setting the selling price 30 20 10 0 Maximum Profit Consesus in the Competitive marketThis shows a market which has a mix of retailers operating under a union & retailers operatingindependently without being a part of any union.This can also be interpreted as a market showing the presence of organized as well asunorganized retailers (vegetables). The organized retailers have to do pricing competitively tostay ahead of the other players in the organized retail markets as well as local vendors. Whereas,the unorganized retailers depending upon the area they are follow different strategies.Also, some retailers will give good quality but will not compromise on price i.e. they will try toretain their maximum profit possible. Some others will give inferior quality and try to generatelarge sales volume by selling at lower price. Though such a retailer will compromise on hismaximum profit but by generating large sales volume he will compensate.
  • 19. High price fluctuation 4.35% 4.35% 8.70% Mangoes 8.70% 47.83% onion tomato 8.70% Apple Lichi 17.40% Bitterguards BananaFrom the pie-chart we can infer that in the experience of retailers the commodity that canexperience high price fluctuations is mango.The table below represents:-  Average quantity of the vegetables purchased by a retailer every day.  Average cost incurred by a retailer to buy 1 Kg of the vegetables.  Profit margin added by the retailers on an average.  Sales made per day by the retailers on an average.Volume of purchase per day 137.5 Kg`sAverage cost per Kg Rs. 75.91Average Margin profit added over cost 20.87%Volume of sales per day 100.2 Kg`s
  • 20. CUSTOMERS Qualification 0.1666 0.25 0.125 Science Commerce 0.0833 Management Arts Multimedia 0.375 High SchoolFrom this pie-chart we can infer that approx. 38% of the respondents were from sciencebackground and all the correspondents were graduates. Age 17.39% 34.78% 18-29 30-40 47.82% 41-60From the pie-chart we can infer that approx. 48% of the correspondents fall in the age group of41-60. It shows that the large chunk i.e. 48% of the target market of vegetable vendors is thepeople in their middle age/old age people.
  • 21. Income per month 7.41% 4.54% 36.36% ≤ 50,000 22.72% 50,000-1,00,000 1,00,000-2,00,000 2,00,000-4,00,000 27.27% ≥ 5,00,000In the pie-chart the range of income in rupees is given on the right hand side. The correspondentsfalling in the range are demonstrated percentage wise in the pie-chart. More than half of thecorrespondents had a monthly income of up to Rs. 1, 00,000. Frequency of Purchasing 9.09% 18.18% Weekly 50.00% Daily Every three days 22.72% FortnightlyThe general buying frequency of a correspondent was once in a week. But most of them whobought once a week did not buy large quantities. They bought 4kg on an average which is lessthan those who bought once in every three days. The ones who bought once in every three daysbought on an average 6.5 kg`s.This shows a wide variation of consumption among correspondents which can be interpreted asdue to:-  Difference in tastes and preferences  Pure vegetarians might be consuming more vegetables  People consuming more of fast food will consume less of vegetables  People consuming more of South-Indian cuisines will be consuming less of vegetables
  • 22. Buying Source 3.70% 18.51% Retailers 51.85% Wholesalers 25.92% Sub-Wholesalers FarmerA very large portion of the sample correspondents i.e. 52% (approx.) buy from retailers. Thisincludes organized retailers as well as unorganized retailers. So, the development of the retailbusiness through involvement of technology and advanced supply chain management thedifference of price between retailers and wholesalers can be diminished.Also, it shows that people are ready to pay a bit extra but they are not willing to go to wholesalemarkets (explicitly stated by correspondents) because:-  Distance  Unsafe to go there  One has to go to different shops to buy all the required vegetables  Lack of personal attention in the wholesale markets  Climate hostility  Time consuming  Tiring commuteThe people who do not care about all the above factors are the ones who really go to thewholesalers, sub-wholesalers or in some cases even the farmers.People who buy from farmers directly are generally the ones who have either some businesslinks or some relatives into farming.
  • 23. Factors effecting the buying decisions of the cutomers(1-7 Ranking Based) 8 7 6 5 4 3 2 Factors effecting the buying 1 decisions of the cutomers(1-7 0 Ranking Based)The most preferred factor was given a rank of 1 and so on by the correspondent. The factors arerepresented as they effect the buying decision of the customers in decreasing order. Do the customers go a long way to buy at wholesale prices 41.67% 58.33% Yes NOAlmost 60% of the correspondents did not prefer to go to wholesale markets, if they had to travela long distance. Only the correspondents who had easy access to wholesale markets or sub-wholesaler markets were the ones who preferred to go to these markets instead of buying fromretailers.
  • 24. Do the customers bargain 30.43% Yes 69.56% NoAlmost 70% of the correspondents try to bargain. However, these correspondents also said thatit’s no use of bargaining as like the organized retail unorganized retail shops are also now fixedprice shops. They just bargain because:-  It gives them self satisfaction  Sometimes it does make a difference of 5%-10% High price fluctuation 25 20 15 10 which commodities in your experience have high price fluctuations 5 0It’s expressed as percentage E.g.:- Mangoes will experience high price fluctuation according to20.51% of the correspondents.
  • 25. The table represents:-  The average cost incurred by a customer to buy one Kg of vegetables.  Average amount of vegetables bought by the customer whenever he/she buys (excluding special occasions). Avg. Cost/Kg Rs 97.1 Volume of purchase 4.53 Kg
  • 26. FINDINGSThe survey was conducted between wholesalers, retailers and customers. And among customersthe findings that we acquired are based on the response from the survey. Customers Most customers we surveyed prefer buying from retailers than wholesalers due to the various problems that should be faced if one wants to buy from a retailer. Also, 50% of customers buy both vegetables and fruits at one go and once in a week to avoid frequent visits to the market. The factor that most affects the customers while buying fruits or vegetables is their budget. 70% of the customers who were surveyed said that they bargain. This sometimes gives them a 5 to 10% of cost benefit. According to them, Mangoes and onions are the two top most products that experience price fluctuations. Retailers Almost every retailer we surveyed bought goods from a wholesaler. The components of cost that every retailer had to deal with were transportation, bribes, inventory, wages, and maintenance and wastage charges. Every retailer that we surveyed said that goods were bought every morning from the wholesaler which shows poor inventory management. Almost 80% of the retailers set their selling price to gauge maximum profit. According to them, mangoes experience highest price fluctuations. The average volume of sales per day are 100kgs Wholesalers Every wholesaler we came across bought goods from a farmer. The components of cost every wholesaler dealt with on frequent basis were transportation and bribes. 60% of wholesalers bought goods from a farmer everyday and the rest bought weekly twice or once Selling price is set based on the competition and maximum profit. According to the wholesalers, apple, onion and tomatoes are the three top most products that experience high fluctuations in the market. The average sales made per day by a wholesaler is 7500kgs. The salient features of the KFVWM market which is situated on the Chennai-Thirupathy highway, are stalls equipped with telephone facilities, stalls run by self-help groups, vehicle parking facility, canteen facilities and facilities for waste disposals. Services of weighing machines have been provided to the farmer sellers free of cost.
  • 27. SUGGESTIONSSeveral measures are recommended for improving the market of fruits andVegetables in Chennai which are as follows:-First, it is important to bring more markets under regulation and put them under thesupervision of a well represented market committee. Second it is important to promote, andperhaps even enforce through rules or laws, the practice of open auction in the markets. Third,it is important to bring more number of buyers and sellers to the wholesale markets so as toencourage healthy competition close to perfect market conditions and better price realizationto the producer farmers.Besides above measures, improvements in market infrastructure such as storage (godown)facilities, cold storage, better loading and weighing facilities, proper stalls, better road linksetc. would also be helpful in improving the market efficiency.Generally, traders are capable of sourcing price information from different sources whereaspoor farmers rely on minimum support price (MSP) from the government. Therefore, there isa great need to make information available to farmers at the right time and right place inresponse to this challenge. It is also good to develop an integrated agricultural marketinformation system that will be linked to World information center, and to link them togovernment’s program.Changing the attitudes of farmers is a crucial factor in improving the market performance. Iffarmers have awareness about the benefit of the specialty market, they do not need onlyimmediate economic advantages from the sale of their product. In case of production,household heads with very limited education encounter in successfully managing, fertilizerand pesticide applications, and also what to produce in line with taste and preference ofconsumers demand, especially in the presence of ineffective extension services. Sostakeholders’ and Agricultural and Rural Development Offices have to create awareness aboutthe specialty of market. Continuous education and training on production and marketing willhave a positive impact on their attitudes.Efforts to improve the transparency in the market operations through better supervision by themarket committee would be another important factor in improving the marketing efficiency.Finally there is substantial scope for improving the marketing efficiency by improving themarket information system by making available latest and extensive market information to allmarket participants through the use of internet facilities and other means of communications.
  • 28. CONCLUSIONFruits and vegetables constitute an important part of daily diet and are in great demand round theyear. India now ranks first in the world in the combined production of fruits and vegetables. Atpresent the horticultural crops in the country covers 13.6 million hectares of land, i.e. 7 per centof the gross cropped area and contributes to about 18-20 per cent of the gross value ofagricultural output. Indias share in World fruit production is very significant, the largestproducer of mango and banana in the world and fifth position in the production of pineapple andsixth in the production of orange, tenth in the production of apple. Similarly Indias presence inthe production of vegetables is also very significant. Among the production of major vegetables,India occupies the first position in cauliflower, second in onion, third in cabbage, and sixth inpotato in the world. The diverse soil and climatic conditions in the country gives great promise tocultivate a wide variety of fruits and vegetables.This study consolidates the major findings of the studies that are conducted at Chennai. Thesestudies mainly address issues such as present marketing practices of fruits and vegetables, theseasonal phenomenon in terms of their market arrival/sale, the physical market infrastructure atthe selected markets, existing major marketing channel and lastly the price spread in fruits andvegetable marketing and the share of producers in consumer rupee.In Chennai market share of farmers range from 15 to 69 percent. The high percentage of marginto farmer-consumer price difference is indicative of large inefficiencies and relatively poormarketing efficiency. There is great need to improve the marketing of fruits and vegetables.Finally there is substantial scope for improving the marketing efficiency by improving themarket information system by making available latest and extensive market information to allmarket participants through the use of internet facilities and other means of communication.
  • 29. LITERATURE OF REVIEWMARKETINGAUTHOR: Marcia MogelonskyMeet the Inner-City Shopper. American Demographics, 20 (December 1998), pp. 38–41.[Survey, Underserved market segments, Minorities, Demographic characteristics,Expenditures, Retailers, Market strategy, Apparel stores, Brand names, Sales people, Statisticaldata.PRICEAUTHOR:GuillemLópez-CasasnovaThis paper reviews the literature on reference pricing (RP) in pharmaceutical markets.The RP strategy for cost containment of expenditure on drugs is analyzed as part of theprocurement mechanism. We review the existing literature and the state-of-the-artregarding RP by focusing on its economic effects. In particular, we consider: (1) theinstitutional context and problem-related factors which appear to underline the need toimplement an RP strategy; i.e., its nature, characteristics and the sort of health careproblems commonly addressed.MARKETING COSTAUTHOR: svenA.hauglandWhy do firms that make specific downstream investments as they start international operations,sometimes turn to more market-like arrangements as they gain international experience and theirinternational sales increase? This paradox in international marketing is the key question to beaddressed in this article. We use the concept of dynamic or temporary governance costs toexamine the paradox. The pattern of internationalization in the Norwegian farmed salmonindustry provides an example whereby Norwegian exporters established their own sales officesin several international markets in the early stages of internationalization, but subsequentlydisintegrated vertically and came to rely on more market-like arrangements. An analysis of theinternationalization of this industrysuggests that, over time, the market provided bettercapabilities than vertical integration. This reduced the transaction costs, thus making verticaldisintegration an efficient strategy.PRICE SPREADAUTHOR:Michael K. Wohlgenant and John D. MullenA new model for the farm-retail price spread, which accounts for both farm supplyand retail demand changes, is introduced. This model is applied to beef, and itsempirical performance relative to the mark up pricing formulation is evaluated usingNon nested testing procedures. The results are consistent with theory and indicate theMark up pricing model is misspecified.
  • 30. MARKETING MARGINAUTHOR: Charles C.layon andgaryD.thompsonThe effects of temporal and spatial data aggregation on the performance of alternative marketingmargin models is assessed using monthly, quarterly, and semiannual fluid milk prices from threeU.S. cities. Nonnested tests for multivariate and single equation models with serial correlationare used to choose among alternative models at each aggregation level. While model choice isaffected by temporal and spatial aggregation, model choice becomes more difficult as data aretemporally or spatially aggregated.MARKETING EFFICIENCYAUTHOR: singfatchuHow can a service firm right-size marketing expenses and yet strive to maximize revenue? Thispaper represents the first attempt to model these efficiency and effectiveness issues using a 49-unit Asia–Pacific hotel chain as illustration. We employ a triangular DEA model with totalexpenses (controlling for number of rooms) as the raw input, marketing expenses as intermediateoutput/input and revenues from room rentals and F&B as final outputs. We inferthat efficiency tails off when more than 12% of the budget is expended onmarketing activities. Interms of effectiveness, we find that all the units rated as relatively inefficient can accrueincreasing returns to scale in revenues from marketing activities. By contrast, in the productivitystage linking the raw inputs to the revenues, we observe mostly decreasing returns to scale. Ourresults highlight the crucial role of marketing in service organizations.SUPPLY CHAINAUTHOR: simoncroomThere can be little dispute that supplychain management is an area of importance in the field ofmanagement research, yet there have been few literature views on this topic (Bechtel andMulumudi, 1996, Proceedings of the 1996 NAPM Annual Academic Conference; Harland, 1996,British Journal of Management 7 (special issue), 63–80; Cooper et al., 1997). This paper sets outnot to review thesupplychainliterature per se, but rather to contribute to a critical theory debatethrough the presentation and use of a framework for the categorisation of literature linkedto supplychain management. The study is based on the analysis of a large number of publicationson supplychain management (books, journal articles, and conference papers) using aProcite© database from which the literature has been classified according to two criteria: acontent- and a methodologyoriented criterion.
  • 31. PRICING TECHNIQUESAUTHOR: carstenrohdeThis paper addresses how overhead cost allocation system design in multinational enterprises(MNEs) is affected by transfer pricing tax regulation. Using a case study research strategy wefind that the implementation of a transfer pricing tax compliance strategy gives rise to a numberof changes to the overhead cost allocation system design. Findings suggests that a contingentrelationship exists between overhead cost allocation and transfer pricing tax compliance. Weargue that when seeking to understand and explain MNEs’ overhead cost allocation systemdesign for intra-company services, the MNEs’ response to its tax regulatory environment is asignificant explanatory variable.MARKET STUCTUREAUTHOR: A.lainczConclusions about optimal R&D policies in existing endogenous growth models rely on strongassumptions regarding marketstructure. In particular, each industry is dominated by a singlemonopoly in most models or firms are cast as oligopolistic or monopolistic competitors. A modelwhich combines the endogenous growth framework with the Ericson and Pakesmodel ofindustrial dynamics is proposed to allow for direct market competition between multiple firms ineach industry. Thus key features of competition through R&D typically missing in mostendogenous growth models are introduced, including: (1) non-degenerate entry and exit; (2)distribution of firm sizes; and (3) more complex marketstructures that vary across industries andover time. This paper presents the partial equilibrium for a single industry demonstrating howgrowth-promoting R&D subsidies alter the endogenously determined marketstructure. Subsidiesto R&D ‘stretch’ the distribution of market shares with an increased number of firms inthe marketbut a higher variance in the market shares across firms.MARKETING INTEGRATIONAUTHOR: benitoE.floresResearch in the areas of both manufacturing and marketing/sales have advocatedthe integration of several important interrelated decisions between the two functions (i.e. productdevelopment, process development,marketing/sales planning, and manufacturing planningdecisions). The process of managing the strategic alignment between a firm’s business strategy,external environment, and the integration of manufacturing and marketing/sales decisions is verycomplex phenomenon that requires a level of analysis that has not occurred previously. Thisstudy examined the moderating effects of business strategy and demand uncertainty on therelationship between the integration of manufacturing and marketing/sales-based decisions andorganizational performance. The study found general support for the proposed model, suggestingthat the impact of the integration of manufacturing and marketing/sales decision onorganizational performance is moderated by a firm’s business strategy and demand uncertainty.

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