Cooperative Marketing

Contents
1. Meanings and definitions of Marketing
 Market,
 Marketing
2. Importance of Agricultural Marketing
3. Characteristics of Agricultural Marketing
4. Evolution of Marketing concept
4.1. Production concept
4.2. Product concept
4.3. Selling concept
4.4. Marketing concept
4.5. Societal Marketing concept
5. Marketing system
5.1. Capitalism
5.2. Socialism
5.3. Mixed economy
6. The Environment of Marketing
6.1. Controllable factor
6.2. Uncontrollable factor
7. Market Segmentation
7.1. Definition
7.2. Importance
7.3. Bases for Market Segmentation
7.4. Methods of Market Segmentation
7.5. Steps in target Marketing
8. Marketing Mix
8.1. Product
8.2. Pricing
8.3. Distribution Strategies
8.4. Promotion
9. Concept of service Marketing and their distinctive features
9.1. Characteristics
9.2. Classifications
10. Marketing Research (MR)
10.1. Definition
10.2. Purpose and scope
10.3.Major areas of Marketing Research
10.4. Marketing Research Process
10.5. Characteristics of good Marketing Research

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 10 6. Problems of Marketing Research
11. Demand Forecasting
12. Consumer Phsycology and Motivation
12.1. Consumer Behaviour
12.2. Major factors influencing consumer behaviour
12.3. Stages of Consumer’s buying process
13. Marketing Planning and Implementation
14. Features of cooperative Marketing
14.1. The need of cooperative marketing
14.2. Objectives and functions
14.3. Marketing Practices
15. International Marketing
15.1. International Marketing
15.2.Environmental and Cultural dynamics of Global Market
15.3. Main tasks involved
15.4. World trade Organizations and role Cooperatives
የትብብር ግብይት
ይዘቶች
1. የግብይት ትርጉሞች እና ትርጓሜዎች
• ገበያ፣
• ግብይት
2. የግብርና ግብይት አስፈላጊነት
3. የግብርና ግብይት ባህሪያት
4. የግብይት ጽንሰ-ሐሳብ ዝግመተ ለውጥ
4.1. የምርት ጽንሰ-ሐሳብ
4.2. የምርት ጽንሰ-ሐሳብ
4.3. የሽያጭ ጽንሰ-ሀሳብ
4.4. የግብይት ጽንሰ-ሀሳብ
4.5. የማህበረሰብ ግብይት ጽንሰ-ሀሳብ
5. የግብይት ስርዓት
5.1. ካፒታሊዝም
5.2. ሶሻሊዝም
5.3. የተቀላቀለ ኢኮኖሚ
6. የግብይት አካባቢ
6.1. ሊቆጣጠር የሚችል ምክንያት
6.2. ከቁጥጥር ውጪ የሆነ ምክንያት
የገበያ ክፍፍል
7.1. ፍቺ
7.2. አስፈላጊነት
7.3. ለገቢያ ክፍፍል መሠረት
7.4. የገበያ ክፍፍል ዘዴዎች
7.5. ኢላማ ግብይት ውስጥ ደረጃዎች
8. የግብይት ድብልቅ
8.1. ምርት
8.2. የዋጋ አሰጣጥ
8.3. የስርጭት ስልቶች

8.4. ማስተዋወቅ

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9. የአገልግሎት ግብይት ጽንሰ-ሀሳብ እና ልዩ ባህሪያቸው
9.1. ባህሪያት
9.2. ምደባዎች
10. የግብይት ጥናት (ኤምአር)
10.1. ፍቺ
10.2. ዓላማ እና ወሰን
10.3.ዋና ዋና የግብይት ምርምር ዘርፎች
10.4. የግብይት ምርምር ሂደት
10.5. ጥሩ የግብይት ምርምር ባህሪያት
10 6. የግብይት ምርምር ችግሮች

11. የፍላጎት ትንበያ

12. የሸማቾች ፊዚኮሎጂ እና ተነሳሽነት
12.1. የሸማቾች ባህሪ
12.2. የሸማቾች ባህሪ ላይ ተጽዕኖ የሚያሳድሩ ዋና ዋና ነገሮች
12.3. የሸማቾች ግዢ ሂደት ደረጃዎች
13. የግብይት እቅድ እና ትግበራ
14. የትብብር ግብይት ባህሪያት
14.1. የትብብር ግብይት ፍላጎት
14.2. ዓላማዎች እና ተግባራት
14.3. የግብይት ልምዶች
15. ዓለም አቀፍ ግብይት
15.1. ዓለም አቀፍ ግብይት
15.2.የአለም አቀፍ ገበያ የአካባቢ እና የባህል ተለዋዋጭነት
15.3. ዋና ዋና ተግባራት
15.4. የዓለም ንግድ ድርጅቶች እና ሚና ህብረት ስራ ማህበራት

1. MEANING AND DEFINITION

Market:-
 includes both place and region in which buyers and sellers are in free competition with one another” – Pyle.
 refers not to a place but to a commodity or commodities and buyers and sellers who are in direct competition
with one another ---Chapman.
 consist of all potential customers sharing a particular need or want who might be willing and able to exchange in
exchange to satisfy that need or want
 a geographical meeting place but as getting together of buyers and sellers in person, by mail, telephone, telegraph
or any other means of communication” – Mitchell.
Marketing;-
 includes those business activities which are involved in the flow of goods and services from production to
consumption – Converse.
 is concerned with the people and the activities involved in the flow of goods and services from the producer to the
consumer –American.

 is the business process by which products are matched with the markets and through which transfer of ownership
are effected --Cundiff,

 is a total system of business activities designed to plan, price, promote and distribute want satisfying goods and
services to present and potential customers. – W.J.Stanton

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 is a social and managerial process by which individuals and groups obtain what they need and want through
creating, offering and exchanging products of value with others.
 is the management process responsible for matching resources with opportunities, at profit, by identifying ,
anticipating, influencing, and satisfying customers demand. (UK chartered institute of marketing)
Importance of Agricultural Marketing
 Optimization of resources and output - management
 Increase farm income
 Widening of markets
 Growth of Agro- based industries
 Adoption and spread of new technologies
 Employment opportunities
 Addition to national income
 Better living
Characteristics of Agricultural products
 Pershability
 Seasonality
 Bulkiness
 Irregular supply
 Small size and scattered production
 Requirement of further processing
 Variation in quality of the products
4. EVOLUTION OF MARKETING CONCEPT
There are 5 sequences of stages
1. Production concept
2. Product concept
3. Selling concept
4. Marketing concept
5. Societal Marketing concept
4.1. Production Concept
Characteristics
 It is one of the oldest concept
 Gives importance to sellers interests and neglects the buyers interests.
 Holds that customer favors the product which is widely available.
 Low cost of the product is the principle guiding force behind this concept.
 Management concentrates on achieving high production efficiency and wide distribution network.

LIMITATION
 Holds good only when demand exceeds supply.
 When market is monopolistic rather a perfect one
 Lack of consumerism.
 Suitable in service oriented organization, banks insurance companies etc.

4.2. PRODUCT CONCEPT

CHARACTERISTICS
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 Seller oriented concept
 Buyers interests are not protected
 Believe in product quality
 Management focuses product development and product quality.
 High expenditure on research and development of the product
 Believer of ‘better mousetrap policy.
SUITABILITY
 Suitable in HI-tech specialty products
 Where demand specifications of the product are available in capital goods/heavy machineries.

LIMITATIONS
 Leads to marketing myopia i.e. undue concentration on products.
 Ignorance of customer demand/needs leads to long run failure of the organization
4.3.SELLING CONCEPT
CHARACTERISTICS
 Highest priority on sales promotion, push sales and heavy advertisement.
 Aggressive selling leads to more profitability.
 Perceived resistance from potential buyers as the main threat.
 Ignores the need/wants of the customer.
LIMITATION
 After the initial success gradually brand image fades away in long run.
 Aims at selling what they produce rather than to produce What they can sell leads to stagnation of sale despite hard
selling effort.
 Does not distinguish between marketing and selling
4.4. MARKETING CONCEPT
CHARACTERISTICS
 It came into existence only mid 1950’s
 Tries to determine the needs and wants in target market.
 Tries to deliver satisfaction more efficiently and effectively over its competitions.
 Believes in profitability through customer satisfaction.
 Custumers wants and needs are of prime importance.
 Tries to produce what will sell rather than sell what they produce.
4.5. SOCIETAL MARKETING CONCEPT
 Latest concept in marketing.
 It designs, implements and controls Programmes seeking to increase the acceptability of a social idea or practice in
a target group.
 Tries to maximize target group response by utilizing the concept of consumer research, idea configuration
communication and facilitation.
5.MARKETING SYSTEM
There are three economic systems
1. Capitalism
2. Socialism
3. Mixed economy
5.1.Capitalism
Major features:-

 Individualism and personal gain as primary motives

 The private ownership of the means of production

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  Private property and inheritance
 Competition in the market as the regulator of price and business activity
 Freedom of contract and enterprise
 Class conflict between labour and capital
 Freedom from state interference
5.2.Socialism
Essential features
 All means of production and distribution are to be owned by the state
 No private enterprise is peremitted
 The state takes the responsibility of employment
 Central planning is the chief instrument of bringing about socialism
 All social services like education, medical facilities and other welfare services get top priority and become
responsibility of the state
 Each individual gets fixed wages
 Profits go to the state
5.3.Mixed Economy
 Co-existence of different sectors
 Public institutions (enterprises)
 Cooperative institutions
 Individual firms
 Joint sectors
 Existence of economic planning
 Economic planning coordinates and regulates the economic development
 Government’s positive role
 The state consciously and deliberately intervenes in the economic sphere by applying positive
and negative instruments.
6.THE ENVIRONMENT OF MARKETING
Broadly classified in to two: -
1. External (uncontrollable) factors
2. Internal (controllable) factors
6.1.Controllable factors
 Can be controlled or solved by the management of the organization
 Factors
 Access and efficient utilization of factors ( labour ,capital and land) of
production(marketing)
 Management capacity of firms
 Planning
 Organizing
 Staffing
 Leading
 Controlling
6.2.Uncontrollable (External) factors
 Are external factors (elements) affecting an organizations performance that cannot be fully directed by the
organization and its marketers.
Factors
1. Demography
 Sex, size , structure and distributiotion of population
2. Economy
 growth rate of the economy
 stages of the business cycle
-prosperity , recession ,depression and recovery
 inflation
 interest rate

3. Competition
 Competition in production , pricing, distribution systems and promotional programs

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 4. Social, Cultural and religion
 Social values , beliefs, life styles
5. Politics and Legislation
 Peace, relation between or among countries
 Laws exercised
6. Technology
 The presence of advanced technology make the product quality and cheap
 Save time for consumers
Example
 Making sea water drinkable cheaply
 Development of cheap energy sources
 Technologicaldevelopmentslike–TV,Airplane, Computers, internet, fridge, etc
7. Raw material potential
8. Suppliers
 Suppliers’ prices and services are significant influences on any company’s marketing
system.
7.MARKET SEGMENTATION:
7.1. Definition.
- is the act of dividing the total heterogeneous Market into smaller homogeneous markets having same or similar needs
and wants.
7.2. Importance:
 To design appropriate marketing mixes for each segments
 For best satisfaction of customers or consumers
 To know potential buyers
 For efficient utilization of resources or cost effective marketing work
7.3. Bases for Market Segmentation:
1. Geographical consideration:
 urban, sub-urban and rural areas.
 Agro-ecology- Dega, w/dega and kolla
2. Demographic structure

 age, sex, marital status, number of children etc.

3.Education:
  Reading habits of college and high school students:
3.  Living habits of literate and illiterate.
4.Religion
 Clothing feeding ,etc
 Laws of each religion
5.Income:
 level of income
6.Social Class:
 Social classes such as upper class, middle and lower class.
 Occupation, education and place of residence .
7.Psychological factors:
 aggressiveness, dominance motivation of the people would reflect the manner in which people live and shape
their family budgets.
7.4. Methods of Market Segmentation:

There are mainly three methods.

1. Each buyer a separate market:
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  Wants and philosophy of buyers are diverse and they are to be treated separately.
 is suitable to product with limited buyers,
e.g Aero planes, heavy machinery etc.
2. Broad Classes of buyers:
 on the basis of male, female, children and people belonging to any group would be placed in the same segment
irrespective of community, class etc.
3. Market Segmentation strategies:
 is based on the philosophy that wants and desires of consumers are diverse.
 There are three strategic options as below.
 Concentrated Marketing strategy:
 usually adopted in very initial stage of development of the firm.
 the firm concentrates on one segment and makes all efforts to satisfy them
 only one marketing mix is used
eg. Publishing of books, manufacture and marketing of cars etc.
 Differentiated Market Segmentation Strategy
 different products are produced for each segment according to the demand.
 This strategy offers higher sales and customer satisfaction
Example;
 Cigarettes-filtered/non filtered
 Milk-non, medium and high fat content
 Undifferentiated Marketing Strategy:
 Generally adopted in beginning stage, i.e. Marketing mix for several markets.
 Production concentrated on one-product and advertisement appeals formulated accordingly (e.g coca cola;
Pepsi, etc.)
 But this will not be successful when the magnitude of competition is high.
7.5. Steps in target marketing
Stage one
1.identify bases for segmentation
2.determine important characteristics of each segment
Stage two-market targeting
3.evaluate potential and commercial attractiveness of each segment
4.select one or more segments
Stage three-product positioning
5.develop detailed product position for selected segments
6.develop a marketing mix for each segment
Marketing mix
 is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market.
 Describes the specific combination of marketing elements used to achieve an organization ‘s objectives and
satisfy the target market.
 McCarthy popularized four factors, commonly known as four P’s.
1. Product
2. Price
3. Place
4. Promotion
 Each mix includes:-

Products ;- The right one for the target

 Quality, Brand Name Features, Packing options, Sizes style, Services, Warranties Returns
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Place – reaching the target:
 Channels, Coverage, Locations, Inventory, Transport
Price – Making it right:
 List Price, Discounts, Allowances, Payment period, Credit terms
Promotion-telling and selling the customer:
 Advertising, Personal Selling, Sales Promotion, Public relation.
They are also known as the four pillars of marketing

MARKETING Promotion

Price
Product Place
PRODUCT
 is a set of tangible and intangible attributes ,i.e goods and services.
 Types of product
 Innovative-totally new product resulting from market research.
 Adoptive-modify the existing one to prolong their life.
 Initiative-products which are developed to be similar with those already in the market.
Product Planning & Product Development:
Product Planning
 Embraces all activities that enable a company to determine what products it will market.
Product Development
 A more limited term encompasses the technical activities of product research , engineering and design.
Decision making areas of product planning and development
1. which products should the firm make and which should it buy ?
2. Should the company market more or fever products?
3. what new uses are there for each product?
4. what brand, package, and label should be used for each product?
5. How should the product by styled and designed, and in what sizes, colors, and materials should it be
produced?
6. In what quantities should each item be produced?
7. How should the product be priced?
Product life cycle.
The Product Life Cycle and its stages.
 Any product or service moves through identifiable stages, each of which is related to the passage of time (as the
product or service grows older) and each of which has different has different characteristics

Growth

Maturity

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 Introduction Decline

Introduction Stage
 Suppliers invest to gain the maximum share of anew market
 profits are negative or low because of the low sales and heavy distribution and promotion expenses.
 Much money is needed to attract distributors and fill the pipelines.
 Promotional expenditure are at their highest ratio to sales “because of the need for a high level of promotional
effort to
1. inform potential consumers of the new and unknown product,
2. induce trial of the product, and
3. secure distribution in detail outlets.
Marketing Strategies in the introduction stage
1-A rapid
 skimming strategy consists of launching the new product at a high price and a high promotion level.
 assumptions.
1. a large part of the potential market is unaware of the product,
2. those who asking price,
3. the firm faces potential competition and wants to build up brand preference.
2. A slow skimming strategy consists of launching the new product at a high price and low promotion.
 Assumptions.
1. the market is limited in size:
2. most of the market is aware of the product.
3. buyers are willing to pay a high price, and
4. potential competition is not imminent.
3.. A rapid penetration strategy
 consists of launching the product at a low price and spending heavily on promotion.
 This strategy promises to bring about the fastest market penetration and the largest market share.
 This strategy makes sense when
 the market is large;
 the market is unaware of the product.
 most buyers are price sensitive
 there is strong potential competition, and
 the company’s unit manufacturing costs fall with the scale of production and accumulated
manufacturing experience.
4.A slow-penetration strategy
 consists of launching the new product at a low price and low level of promotion.
 The low price will encourage rapid product acceptance, and the company keeps its promotion costs down in
order to realize more net profit.
 This strategy makes sense when
1. the market is larger
2. the market is highly aware of the product
3. the market is price sensitive, and

4. there is some potential competition.

Growth Stage
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  is marked by a rapid climb in sales.
 The early adopters like the product, and middle-majority consumers start following their lead.
 The feature of this phase/stage has been the battle for distribution ,and hence the increased number of
competitors leads to an increased number of distribution outlets, and factory sales jump just to fill the
distribution pipeline.
Marketing Strategies in the Growth Stage –
During this stage, the firm used several strategies to sustain market growth as long as possible:
1) the firm improves product quality and adds new product features and improved styling.
2) the firm adds new models and flanker products.
3) it enters new market segments.
4) it enters new distribution channels.
5) it shifts some advertising from building product awareness to bringing about product conviction and purchases.
6) It lowers prices at the right time to attract the next layer of price-sensitive buyers.
Maturity Stage
 product’s rate of sales growth will slow down, and the product will enter a stage of relative maturity.
 normally lasts longer than the previous stage
 The stage can be divided into three phases.
 In the first phase, Growth Maturity,
 the sales – growth rate starts to decline.
 there are one new distribution channels to fill, although some laggard buyers still enter the
market.
 In the second phase, stable maturity
 sales become level on a per capital basis because of market saturation, most potential
consumers have tried the product, and future sales are governed by population growth and
replacement demand.
 The third phase , Decline maturity
 Sales now starts to decline , and custemers start moving towards other products and
substitutes.
DECLINE STAGE:
 The sales of most product forms and brands eventually decline.
 The sales decline may be
 slow,
 rapid,
 plunge to Zero,
 petrify at a low level and continue for many years at that level.
Number of reasons for sales decline,
 technological advances,
 consumer shifts in tastes, and
 increased domestic and foreign competition.
These reasons lead to
 overcapacity,
 increased price cutting, and
 profit erosion.

Marketing Strategies During the Decline Stage

Harrison distinguished five decline strategies open to the firm:
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1) Increasing the firm’s investment (to dominate or strong then its competitive position)
2) Maintaining the firm’s investment level until the uncertainties about the industry resolved.
3) Decreasing the firm’s investment level selectively, by sloughing off the unpromising customer groups, while
simultaneously strengthening the firm’s investment: posture within the lucrative nieces of enduring customer
demands.
4) Harvesting for (milking) the firm’s investment to recover cash quickly, regardless of the resulting investment
posture.
 Divesting the business quickly by disposing of its assets as advantageously as possible.
 Alternative Product Life Cycle
 Four alternate produce life cycle which are as follows.
 Instant Bust
 Aborted Introduction
 Specialist Product
 Pyramided Cycle
a. Instant Bust
 Some product are out rightly rejected by the consumers as soon as it is introduced in the market.
b) Aborted Introduction
 Some may get rejection at the time of introduction but quickly modified and reintroduction in the market.
 This is based on the information gathered during the test Marketing of the product.
c) Specialist Product
 due to the unique characteristics-some product stay along period of time in the market and stable maturity
stage.
d) Pyramided Cycle
 Marked by a series of re-growth period.
PRODUCT IDENTITICATION – BRANDING
Definition
“A brand is a name, term symbol or design or a combination of them which is intended to identify the goods or services
of a seller or group of sellers and differentiate them from those of competitors – (Marketing definition committee).
Brand Vs. Trade Mark:
Trade mark- Brand duly registered under the trade name and trade marks acts Brand duly registered under the trade
name and trade marks acts becomes a trade mark and enjoy legal protection.
 At the outset we fix brand and get it registered and after that it is called trade mark.
The differences
 Trade mark is registered under the act and becomes a legal name;
 Duplication or copying of brand is simple but copying of trade mark would invite legal action;
 All trade marks are brands but all brands are not trade marks.
 The trade mark can be used only by a particular producer, but brand can be used by others.
Essentials of an effective brand:
Brands should be:-
 distinctive, carrying interest impact and memory value.
 suited to markets, buyers and products.
 suggestive of the quality of product.
 suitable to a family.
 unique, attractive and distinctive.

 short (experts say it should be seven letters or even less)

 simple, easy to remember and convenient to identify and explain.
12
 It should not be too similar to other names.
 It should create pleasant feelings.
 capable of registration for legal protection and should be adaptable to advertising medium.
Brand Strategy:
Family brands –
 used by firms which offer merchandise under one brand
 But this connote be used for dissimilar brand
Example
 Amul - for milk product,
 Ponds- for cosmetics etc.
Individual brand
 means applying one brand to one product.
Umbrella brand
 When producers manufacture varieties of goods but prefer to apply one brand it is called umbrella brand.
 This minimizes promotion cost.
Brand Testing methods:
 Memory test;
 preference test;
 learning test association test;
 uniqueness test etc.
Product \Service strategy
 The route by which to reach your long-term product objectives.
 Four basic product stratedies
1. Market penetration
 Increased share of the existing market persuading users to use more.
2.Product Development
 Major modification of the product or service such as quality ,style , performance, variety and
so on.
 This may mean cause some existing users to use more,but may also attract new users,or
 Extend the product in to new segment.
3. Market Extension
 Finding new users for the existing product \ service there by taking in to entirely new
markets.
4.Diversification
 Creating new product or servicing a new market.
Product sourcing
Methods of entering market other than developing ones own product.
 Over the Acquisition
 Take organization in order to enter alternative market.
 Merger
 Two or more organizations merge as a whole specific complement of any product lines
or business units.
 Joint Venture

 Two or more organizations collaborate

 This is due to the question of assets,skill,technology.
13
Packaging
Objectives
 Protection - to provide safety to produce
 Identification - to distinguish the brand of goods.
 Convenience in transport and handling of goods, storage.
 Profit generation - this is based on the logic that it minimize wastage.
An ideal packing
Should
 Attract attention
 Create interest
 Be action oriented
 Besuccesful inrepeating sales
 Tell product story
 Build confidence
 Look clean and sanitary
Packaging Decisions
 Packaging serves interest of producers and consumers.
 The decision to be taken in packaging are in areas of design , size, cost and package test.
Social responsibility of packaging
 Environment problem
 Wastage resource
 Unfair trade practices, etc should be seen.
PRICING
Definition
 Is one of the means of meeting customer needs requires due consideration in making price decision
and drawing pricing strategies.
 Price is the amount of money and /or products that are needed to acquire some combination of
another product and its accompanying service.
Pricing objectives.
The objectives of pricing may be classified as under
(1) Profit oriented.
a) To achieve target return on investment or net sales
b) To maximize profit
(2) Sales oriented
a) To increase Sales
b) To maintain or increase market share
(3) Status quo-oriented:
a) To stabilize prices
b) To meet competition
Factors influencing price determination:
A -Demand for the product
 Important factor in pricing
 Two steps in demand estimation

i)-determine whether there is a price that the market expects.

ii)-estimate the sales volume at different price.
14
 B -Target share of the market
 A company striving to increase its market share may price more aggressively (lower base price,
larger discounts) than an firm that wants to maintain its present market share.
 The expected share of the market is influenced by present production capacity and cease of
competitive entry.
 It would be a mistake for a firm to aim for a larger share of the market than its plant capacity
can sustain.
C -Competitive of the market
 Competition is an important influence in determining the price.
 Competition comes from three sources:
a) Directly similar products – Bata Vs. Corona
b) Available substitutes – Air freight Vs. Rail freight
c) Unrelated products – Tape recorder Vs. Bicycle.
D -Other parts of the marketing mix
 product-distribution and promotion.
(a) Product:
 Product features, quality, package and other allied items may influence price.
 There may be significant price difference between the new and old products.
 The price may also greatly be influenced by the product life cycle.
(b) Channels of distribution.
 The channels selected and the types of middlemen used will influence a manufacturers pricing.
(c) Promotional methods:
 The promotional method soused, and the extent to which the product is promoted by the manufacturer or
middlemen, are still other factors to consider in pricing.
 The heavy advertisement of manufactures make the price higher than retailers does.
Pricing Approaches
There are three broad types of pricing approaches:
1. Cost-related
2. Market –related ,
3. Competitor –related
1-Cost – related pricing systems:
1.1 Cost - plus-profit- pricing
1.2 Break –even analysis and target profit pricing
1.3 Marginal pricing
1.1 Cost - plus-profit- pricing
 Adding standard mark up to the cost of the product.
Illustration
a ) A retailer pays a supplier 10 birr for a product and mark up 50 % on the product to sell bir 15.If the
operating costs of the store are birr 4 per unit sold ,the retailer ‘s profit margin will be birr 1 or 10%.
b) Suppose a shoe manufacturer, whose unit cost of the product is birr 16 ,wants to earn a 20% mark up price
could be calculated as foolows:-
Mark up price = Unit cost
(1-desired return on sale)
=16 birr

1-0.2
=20 birr
15
Contractors, distributors and retailers are among the practitioners who frequently use mark up pricing approaches.
 Limitations (dangers ) of the approaches
 Over pricing if too much attention is given to profit margin.
 Under pricing if the perceived values are underestimated.
1.2 Break – even Analysis and target profit Pricing
 A Break even point is the quantity of output at which the sales revenue equals the total costs, assuming a
certain selling price.
 There is a different break-even point for each different selling price.
 Sales of quantities above the break even output results in a profit on each additional unit.
 Sales above the break even output means profit and below the break-even output means loss.

Total Sales

Total Cost
Total Cost & Revenue

B.E.P Variable Cost

Fixed Cost

B.E.P. Units = Total Fixed Cost.

==============
Unit Contribution
Or
=Total Fixed Cost
===============
Selling price – Variable cost
=Fixed cost
contribution/sales X 100
=Fixed cost
P\V ratio
Examples
1.Given
-variables cost/unit =12 birr
-fixed cost =60,000 birr
-unit selling price =18 birr
required
-B.E.P. =?
Solution
-B.E.P. =Fixed cost
Selling price-Unit contribution
= 60000
18-12
= 10000 units
 The cooperative has to sell at least 10000 units to cover its cost and a unit sell after 10000 units is a profit for it .
2. Let sales = 300000 units
Fixed cost = 180000 birr
Variable cost = 150000 birr
Calculate B.E.P. = ?
B.E.P.(sales) = Fixed cost
P\V ratio
Where P\V ratio = contribution \ sales X 100
= 300000-150000 X100

300000
= 50 %

16
 B.E.P. = 180000 = 360000 units
50%
The cooperative has to sell additional 60000 units with the existing price to cover its cost.

Service giving enterprises / coops

Addis Alem SACCO
S0urces of Funds
Amount interest product
1.Members &Non –Members
Volentary savings 194 3 582
2. Members compulsory
savings (monthly) 21168 3 63504
3.Donated Operational fund
from VOCA Ethiopa 24468.04 0 0
4. Members Share 4809 0 0
5.Profit (Reserves) 1542.26 0 0
Total 30161.3 640
Cost of funds =total cost / total fund
=64086 / 30161.3
= 2.12%
Application of funds
Amount Interest Product
1.Cash and cash deposits 21170.25 3 63510.75
2.Interest receivable from members 64.5 10.5 676.2
3.Account receivable (loans to members) 6589.06 10.5 69185.13
4.Penalities receivable (members) 11.95 0 0
5.Office equipment less depreciation or
total fixed asset 2325.64 0 0
Total 30161.3 133372.08
Average revenue or yield of asset = 133372.08/30161.3=4.42
Contribution or interest spread =4.42 – 2.12 = 2.3
Operating expenses
1.Fees paid to bank 2.0
2.Supplies expenses(stationary expenses) 153.25
3.Other expenses 30.0
4.Depreciation 122.4
Total expenses 307.65
Miscellanious Income
It is 50.00
 B.E.P. = Management or Operating expenses – Miscellanious Income x 100
Interest spread
= 307.65 – 50.00 x 100
2.3
= 11202.17
The Addis Alem SACO to be profitable has to lend at least 11202.17 birr or more than 11202.17
birr.Offcourse the society lend :-Cash deposit 21,170.25 and loans 6,589.06.
1.3 Marginal Pricing
 Setting the selling price of additional units by reference to the marginal cost of producing each unit.
 When an organizations total fixed and variable costs have been covered by the existing volume of
production ,the cost of producing an extra unit (marginal product) will only be the total variable cost of
producing and selling it.
 In such condition , any amount by which the selling price exceeds the variable cost of marginal out put is
then an additional contribution to the organizations net profit.
2. Market – related Pricing(Value – based pricing)
 Setting price based on buyers perceptions of value rather than on sellers cost.
 Value – based pricing system use the following approaches.

 Perceived Value pricing

 Psychological pricing

17
  Skimming
2.1.Perceived value pricing
 Determines prices from assumptions made about the belief customers may have of the value of the
product.
 These assumptions may be based on market research aimed at establishing the values in buyer’s mind
about the basic product.
 Problem will be created ,if the cooperative charges below or more than the value perceived (recognized)
by the customers.
2.2. Psychological pricing
 Many customers consider price to be an indicator of quality ,there fore “Prestige pricing ’’ uses higher
prices to promote the idea of value and status.
 Price levels can be set just below a round figure , for example birr 99.99 rather than birr 100.00
2.3. Promotional pricing
 It is a method of clearing excess stock nor generating high volume sales by offering large discounts.
2.4. Skimming
 Organizations that adopt a skimming strategy take a high price approach in order to skim the the cream of
the market.
 This policy is particularly attractive to an organization with a new and unique product with a perceived high
value.
 Example for this approach could be the rapidly changing field of computers.
3.Compititors – related pricing systems
 Fixes prices by reference to the going rate –the level of competitors’ process.
 The market leader usually makes the first move on prices up or down ,and the competitors tend to follow.
 Competitors-related pricing use the following approaches:-
 Discount pricing
 Penetration pricing
 Dumping
3.1.Discount pricing
 A technique which sets artificially high prices but then offers large discounts to attract customers.
3.2.Penetration pricing
 When the cooperative (organization) wants to increase its market share and has nothing special to offer in
the form of superior or well differentiated product , it may adopt a penetration pricing policy.
 That is ,cutting price in order to increase sales volume (a price war).
 This measure can be only a temporary step unless a product can be produced at cheaper cost.
3.3. Dumping
 Is charging a very low price to reduce stock holdings quickly , for example food staff which would other
wise perish.
Pricing strategies
Pricing strategy options may include the followings:-
1. Discouts and allowances
1.1. Quantity discounts
 Are based on the size of purchase , either in birr or in units.
1.1.1. non-cumulative discount
 is based up on the size of an individual order of one or more products.
1.1.2. Cumulative
 discounts are based on the total volume purchased over a period of time.
1.2. Trade discounts
 sometimes, called functional discounts,
 are reductions from the list price offered to buyers in payment for marketing functions that they will
perform.
1.3. Cash discounts
 is a deduction granted to buyers for paying their bills within a specified period of time.
 The discount is computed on the net amount due after first deducting trade and quantity discounts from the
base price.

1.4. Other discounts and allowances

1.4.1. Seasonal discount
18
  This is a discount of, say 5%, 10% or 20% given to a customer who places an order during the slack season.
Eg. Fans, Air condition, umbrellas etc.
1.4.2. Forwarding dating
 Is a variation of both seasonal and cash discounts.
 Order will be given in the slack season by the wholesalers to ensure continuous production but the bill will
be made latter period at the season and he may enjoy the seasonal as well as cash discount (some times any
one or both)
1.4.3. Promotional allowances
 are price reductions granted by a seller in payment for promotional services performed by buyers.
2. Geographic pricing strategies
2.1. F.O.B. Point of production pricing:-
 The seller quotes the selling price at the factory or at some point of production.
 In this situation, the buyer pays the entire cost of transportation.
 This is usually referred to as F.O.B. mill or F.O.B. factory pricing. F.O.B. means free on board.
2.2. Delivered Pricing:
 The same delivered price is quoted to all buyers regardless of their locations.
 This strategy is sometimes referred to as postage stamp pricing’ because of its similarity to the pricing of
first-class mail service.
2.3. Zone delivered pricing:-
 A seller’s market is divided into a limited number of board geographic zones.
 Uniform delivered price is set with in each zone.
Example- telephone service.
2.4. Freight Absorption pricing:-
 A freight absorption pricing strategy may be adopted to offset some of the competitive disadvantages of
F.O.B factory pricing.
 Thus a seller will quote to the customer a delivered price equal to
(i) A’s factory price plus
(ii) The freight costs that would be charged by the competitive seller located nearest to the customer.
3. Skimming and penetrating pricing:-
3.1. Skimming:-
 The cream-skimming strategy involves setting a price that is high in the range of expected price.
 This strategy is particularly suitable for new products.
3.2. Penetration:
 a low initial price is yet to reach the mass market immediately.
 This strategy can also be employed at a later state in the product life cycle.
4. One price and flexible price
Strategies:-
 Under a one-price strategy, a seller charges the same price to all similar customers who buy similar
quantities of a product.
 Under a flexible-price (also called variable-price strategy) similar customers may each pay a different price
when buying similar quantities of a product. (E.g. a doctor may charge less consulting fee for the poor than
the affluent patients.)
5. Unit pricing:-
 Pricing is for each separate product and package size.
 there is a shelf label that states

(i) The price of the package and

(ii) This price is expressed in birr per kg., Liter, meter or some other standard measure.
19
DISTRIBUTION STRATEGIES
1. Distribution channel
 are alternative routes of goods flows from producer to consumers- (Kohls and Uhl,19980
 As path traced in the direct or indirect transfer of title to produce as it moves from a producer to ultimate
consumers or industrial user.-Condiff and still.
 The channels of distribution thus represents asset of marketing activities involved in the movement of flow
of goods or services from primary producer to ultimate consumer.

Types of channels
 Two choices:-
 Direct selling, and
 Indirect selling
Direct selling:-referred as sales by manufacturer to consumer.
Merits:- - consumers get original (quality) produce
- consumers get goods relatively cheep price.
Indirect selling:-is selling the product through middle men.
 There are four alternative channels described as under :-
1. Manufacturer-retailer-consumer.
 This is a short trade channel and suitable when buyers are large retailers.
 For success there should be :-
 adequate finances;
 large scale production,
 full line of goods and
 Almost constant demand for goods.
2. Manufacturer- wholesaler-retailer-consumer channel.
 known as traditional channel,
 Useful for producers with limited financial sources, narrow product lines and for products which are
durables and not subject to changes in fashion.
3. Manufacturer-agent - wholesaler-retailer-consumer channel.
 Adopted when manufacture wants to avoid marketing task or when he cannot afford to develop his
own sales force.

4. Manufacture-wholesaler-consumer.
 Here retailers are bypassed.
 This is done in the case of big institutional buyers like cooperatives, government etc.
Channel Choice-Influencing factors
Factors affecting channel choices are numerous as below:
1. product factor—like perish ability, size, style unit value, type of end users and other factors like after sales service
etc.
2. Market factor—such as market size, dispersal of consumers size of consumer orders etc.
3. Consumer factor i.e. type of consumer; and their buying habits.
4. intermediary factor (services rendered by middlemen)
5. enterprise factor (financial factor, experience, need for control; quality and quality of marketing services)
6. environment factors such as competitors channel and cost of channel also affect channel selection.

Channel Motivation & Control

20
  Various channel members like agents, wholesalers and retailers are to be motivated for effective
functioning.
 Here the major motivating factor is trade margin which will depend upon the cost of product and value of
sale.
 Also other helps like training, display assistance, sales accounting etc. also would motivate the dealer.
Middlemen
 are classified into merchant middlemen and agent middlemen.
1.Merchant Middlemen
 Wholesaler, and
 Retailers
Wholesalers
 are classified on the basis of commodity, territory and functions performed.
Commodity based wholesalers
 can be general merchandise wholesaler.
 Single line wholesaler.
On the bases of territory
 Local , district , and national wholesaler
Function based wholesalers
 Full function and limited function wholesaler.
Functions Performed by wholesalers
 assembling, storage and warehousing, dispersion, transporting, financing risk bearing, grading,
packaging and packing and providing market information.
 They provide services both to manufacturer and retailer.
2. Agent Middlemen
 Brokers
 Commission Agent
 Manufacture Agent
 Selling Agent
 Auctioneers , etc.
PROMOTION
 An organization has to promote its offerings to its chosen market (s) so that the target audience is not only
aware but also understands all benefits attached to it.
Purposes
 Three
1. To inform your customer what type of service you have intended to give , how you have planned to
deliver it ,etc.
2. To persuade the customer or the intermediaries to make use of (buy) your services. Here the service
provider should give sufficient information to the customers on why they would buy and use that
particular service.
3. To remind the existing customers not to forget to make use of the service supplied by the firm .This is
necessary especially when the service is offered at the specific intervals.
Tools available for promotion
 Advertising
 Sales Promotion
 Personnel Selling

 Public Relation

21
ADVERTISING
Definition:-
 a paid for communication intended to inform or influence one or more people.
 Is one method of promotion which describes products /services publicly with a view of increasing
sales.
 “any paid form of non-personal presentation of ideas, goods and services by an identified sponsor”.-
The American Marketing Association
 “consists of all the activities involved in presenting to an audience a non personal, sponsor-identified,
paid-for message about a product or organization”. - William J.Stanton. William J.Stanton
 is a form of communication intended to promote the sale of the product/service, to influence public
opinion, to gain political support or to advance a particular cause”. - In Encyclopedia Britannica.
Elements of these definitions
 Advertising is paid for- it is commercial transaction.
 Advertising is non- personnel – whatever be in the form of Visual , Spoken or Written which are
directed.
 Advertisings are identifiable with their sponsor or originator –
 In developing an advertising program marketing managers must always start by identifying the target
market and then they processed to make the five major decisions:
i. What are the Advertising Objectives? (mission)
ii. How much can be spent? (money)
iii. What message should be sent?(message)
iv. What media should be used?(media)
v. How should the results be evaluated? (measurement)
Objectives of Advertising
1. Preparing ground for new product
 Since new products are not known by customers.
2. Creation of demand
 Advertisement can create demand.
 Customers are to be commonly reminded about the product and the brand.
3. Facing competition
 Under competitive conditions ads helps to build up brand image and brand loyalty.
 A brand image may be defined as the impression of a particular product that has formed in the consumer’s
mind.
 When customers have developed brand loyalty, it becomes difficult for the middlemen to change.

4. Creation of goodwill
 Large scale Advertising is often undertaken with the objective of creating or enhancing the goodwill of the
producer company.
 This is turn, increases the market receptiveness of the company’s product and helps the salesman to win
customers easily.
5. Informing the changes to the customers.
 Informative Advertising is used heavily when a new product category is being introduced.
 Informative Advertising explains how the product is being introduced.

 Informative Advertising explains how the product works, describe the available services and informs the
market of a price change.

22
6. Reminder Advertising is important for mature products.
 It keeps consumers thinking about the product.
 Coca-Cola ads on television are designed primarily to remind people about Coca-Cola, not to inform or
persuade them.
BENEFITS/FUNCTIONS OF ADVERTISING
1) Advertising adds value to products by providing information consumers.
2) Advertising is a marketing tool that facilitates communication among Marketing participants.
3) Product differentiation for a product is created by Advertising as much as by physical changes in the factory.
4) Advertising is a tool for opening two way communication for sellers and buyers, so that the needs of both are
clearly presented and satisfied in the most efficient and effective way possible.
5) Advertising enables both print and broadcast media to maintain independence from government, political parties,
and other special interest groups.
6) Advertising is an efficient source of information for both consumers and industrial purchasers about quality, new
merchandise, new technology and prices.
7) The great contribution which Advertising makes to the economy is that it furnishes an important means of
expanding the economy by creating demands for products and therefore providing employment.
8) Advertising serves the manufacturers by informing consumers of a product or service that is available.
9) It raises the standard of living of the general public by impelling it to use the modern products which add to his/ her
material well being. Modern Advertising has made the luxuries of yesterday the necessities of today.
10) It established the goodwill of the concern for the best articles produced by it and in course of time they sell like hot
cakes.
Theories
 Two theories on how first time buyers respond to advertising.
1.Hierarchy of effects model of advertising (AIDA model)
Awareness Interest  Desire Action.
 This suggests that advertising has a power of persuation in that it impinges desire on the consumer.
2.ATR model –interactive
Awareness  Trial  Reinforcement.
 The first stage is awareness after gaining awareness a trial purchase is made ,advertising may , according to
the theory, reassure the consumers that their decision to purchase the selected brand name was a good one .
Note
 It should be noted that the effectiveness of advertising becomes true when customer need identification and
satisfaction is done.
 It is customary that firms use external agencies getting their products advertised .
 These firms are then required to brief the agency on the product .
 The followings are some of the briefings required by the agency.
Back ground issues
 Brand name brief history
 Target audience
 Current brand strategy and positioning
 Current distribution arrangements and possible future changes
 Pricing structures
 Sales figures over the last five years
 Situation of direct competitors

 Previous Advertising and its defects indirect competitors.

 Indirect competitors.
23
  Summary of the market share
 Other internal or external issues the agency should know.
Advertising specific issues
 Why campaign needs to be changed (modified) started a new .
 Existing media considerations and previous advertising successes.
 Anticipated media preferences and reasoning coverage.
 Total campaign budget over what duration of time.
 Ways in which this brand can be differentiated and associated benefits over competitors.
 Internal thoughts on approach to campaign.
 Anticipated campaign launch date.
 Tangible objectives in terms of recall and awareness .
 Volume and value sales objectives.
Having given briefings , the cooperative or the firm has to judge the out put before execution whether it meets the
objectives or not.
2.Sales Promotion
Definition
 Comprising range of actual marketing techniques designed with a strategic frame work to add value to a product or
service in order to achieve specific sales or marketing objectives.-UK’’s Institute of sales promotion.
 Are those activities other than personal selling, advertising ,and publicity that stimulate consumer purchasing and
dealer effectiveness such as display ,shows and exhibitions ,demonstrations and various non- recurrent selling
efforts not in the ordinary routine.-American Marketing Association.
 Aimed at reaching the consumer at home or in his business establishment are generally in the form samples ,
demonstration, coupons.-R.S.Davar.
Objectives of Sales Promotion
 To introduce new product—
 free samples and premiums are given to potential buyers and middlemen to penetrate in the market.
 To attract new buyers—
 by giving incentives like free samples, free gifts, premium and so on.
 To provide new incentives to actual users in order to prevent their shifting to other products.
 Actual users are given insensitive viz. price offs, promotion premium gifts and so on.
 To reduce seasonal fluctuation
e.g. incentives for fans cooler, refrigerators etc. during winter.
 To counter attack competitors.
 To simplify the task of selling.
 After introducing sales promotion selling task is simplified.
 To include middlemen.
 The promotion oriented goods witness positive responses of retailers to place order.
 Thus the overall purpose of sales promotion is to influence the buyer behavior favorable.
Functions of Sales Promotion.
The broad function of sales promotion are:
 Stimulate the impulsive buying and successfully create permanent group of customers.
 Assisting the middlemen in promoting sales-
 the various incentives motivates them.
 Assisting the Advertisement department through proper aid and treatment

 Assisting sales.
 It simplifies the task of sales force.
24
Some limitations of sales Promotion:
 It is a short term devise and cannot be used permanently.
 It is not an independent tool and to be used with advertising and personal selling.
 It fails in easing out marketing errors
 It affects adversely the brand image
 i.e. too much promotion may create doubt about brand image.
 Underestimating by advertising agencies who consider this not capable to minimize intensive competition.
Sales Promotion Tools
For Consumers:
1.Coupons.—
 is an effective and widely used promotional tool. Coupons are kept either inside the package or distribute separately
for increasing sale of an existing product or introducing a new product. Despite all plus points, this would increase
cost.
 Price off promotion available in the form of reduction of price or more than one item is packed and made available
at reduced price. This devise is generally practical during festival.
 Wherein consumers are offered prizes of for creative and analytical thinking.
 Games
 It is a sort of lottery where on receipt of curious lots are taken and name of winners are declared.
2. Trading stamps.
 This is a retailer sponsored sales promotion device where buyers are given ticket whiles purchasing goods.
 These tickets are produced and a particular item is given.
3. Demonstration:
 This can be with samples or pure demonstration.
 Here the buyers can witness merits using process, nature and quality of goods.
For Middlemen:
 There are a number of dealers aid for sales promotion and some of the device are given below.
1.Buying allowance
 which is short term device to induce middlemen to promote sales.
 Here the middlemen get the allowance after purchase more than the fixed point.
2.Count and recount.
 In this system counting is made at the buying and end of selling activities and allowance are at the time of
recount.
3.Mechanizing allowance
 which is a short term contract or agreement where advertising allowance and display allowance is paid as a
compensation.
4. Free goods
 in which a few goods are given free after reaching a target.
5. Sales force,
 incentives in the form of commission or bonus is given to sales force.
2.PERSONAL SELLING(PS)
Definition:
 is direct face-to-face communication between seller and a potential customer.
 as “oral presentation is conversation with one or more prospective purchaser for the purpose of making sales”-
American Marketing Association .

 is the personal communication of information to persuade somebody to buy something”.- William J.Stanton.
Importance
25
1. Personal selling helps in discovering and getting new customers
2. It is helpful in removing the doubts and confusions of customers.
3. The sophisticated and high unit value industrial products require personal selling.
4. The illiteracy of consumers particularly in rural markets, makes many companies dependent on the word-of-mouth
communication through personal selling.
5. Low purchasing power of the masses in Developing Countries due to poverty require sales persuasion and hence
necessitates personal selling.
Limitations
 cost of developing and operating a sales force is high.
 is unable to attract the quality of people needed to do the job.
 involves more of administrative problems i.e it has deal with manpower planning ,
organizing ,directing ,coordinating ,motivating and controlling.
 consumer loyalty built up toward a good salesman is usually lost with his retirement or exit.
Qualities of a good salesman
1.Physical Qualities
 health, posture, voice and appearance are very important.
 A salesman having a deficiency of any of these qualities cannot handle his customer properly.
2. Mental Qualities
 are alertness, imagination, resourcefulness, observation, self-confidence, initiative, memory and
cheerfulness.
 These qualities must be developed to improve the personality of a salesman.
3. Social Qualities
 ability and eagerness to meet people, effective speech, courtesy, tact, cooperation, good manners,
patience and tolerance.
5. Character Qualities
 honesty;
 courage;
 sincerity;
 loyalty;
 determination; and
 industriousness.

4. PUBLIC RELATIONS
Meaning and Definition
 refer to the communication activities designed to create and maintain a favorable image of an organization.
 It is a planned effort by an organization to influence the attitudes and opinions of a specific group.
 It is the deliberate, planned and sustained effort to establish and maintain understanding between an organization
and its public. –the London Institute of Public Relations.
Tools Available:
1. News:
 the field of business particularly films, literature
 well written, interesting and entertaining news release sent to appropriate presses.
2.Events:
 Press conference, annual general body meeting, seminars, exhibitions etc.

3. Public Service Activities:

 Building bus stops
26
  Donating garbage disposal containers.
 Maintaining public parks, zoo and so on.
 Setting up charity hospitals.
 Providing drinking water facilities.
PUBLIC RELATION AND COOPERATIVES
 Public relation is the most essential requirement for the cooperatives since they are dealing with the many
parties, both internal public and external public viz; members, farmers, suppliers, consumers, dealers,
distributors, government etc.
Public Relation Objectives
1. To build awareness
 Launching of anew product
 Extension of product range or informing about major modifications repositioning.
 Change in the management, appointments , transfers.
2. To build credibility
 Winning of national or international awared for some achievement for the company or its executive .
 Contribution to some social cause.
 Developing a corporate image
 Defend products (events) that have encountered public protests.
3.To boost the moral of sales force dealers
4.To improve marketing effectiveness at reduced promotion costs.
Major PR Activities
1.Press relation
 The aim of press relations is to place news worthy information in to the news media to attract attention to
a person , product or service.
2. Product Publicity
 This involves various effects to publicize specific products.
3. Corporate communication
 This activity covers internal and external communication and promotes understanding of the
organization .
4. Lobbing
 This involves advising management about public issues , company positioning and image.
 All this alternatives may not directly contribute in the Marketing activity of the company .It is also difficult to
exactly measure their effectiveness .However ,it has been acknowledge that it does improve the communication
effectiveness of the organization.
Advertising is applied
 When market
 Is geographically dispersed
 Have many customers
 Have many industries
 When product / service is
 Standardized
 Of low unit value
 Non-technical–not required demonstration
Personnel Selling is applied

 When market
 Is geographically concentrated
27
  Have few customers
 Have few industries
 When product is
 Customer made
 Of high unit value
 Technically requires demonstration
 Trade –in type
 To be fitted in to individual customer needs.

CONCEPT OF SERVICE MARKETING AND THEIR DISTINCTIVE FEATURES

Characteristics
1.Intangibility
 they cannot be seen or tasted
 This can cause lack of confidence on the part of the consumer.
 It is often difficult for the consumer to measure service value and quality.
 To cover come this, consumers are forced to to compare with others or can consult professionals.
2.Inseparability
 Services are produced and consumed at the same time, unlike goods, which may be manufactured, then
stored, for later distribution.
 This means that the service provider becomes an integral part of the service itself.
 The waitress in the restaurant, or the cashier in the bank, is an inseparable part of the service offering.
 The client also participates to some extent in the service, and can affect the outcome of the service.
 People can be part of the service itself, and this can be an advantage for services marketers.
3. Heterogeneity/variability
 Because a service is produced and consumed simultaneously, and because individual people make up part
of the service offering, it can be argued that a service is always unique; it only exists once, and is never
exactly repeated.
 Personnel training and careful monitoring of customer satisfaction and feedback can help to maintain high
standards.
4. Perish ability
 Services are perishable; they cannot be stored.
 Therefore an empty seat on a plane, for example, is a lost opportunity forever.
 Perish ability does not pose too much of a problem when demand for a service is steady, but in times of
unusually high or low demand service organisations can have severe difficulties.
Classifications
1.Equipment – based services and people – based services
I-Equipment – based services
 Vending machines
 Car and Airlines
II- People-based services would include:
 Nursery infant care
 Architects

 Legal services
2. Personal – basis and business – to business or industrial services.
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 MARKET RESEARCH
DEFINITION OF MARKETING INFORMATION SYSTEM (MIS) AND MARKETING RESEARCH (MR):
Marketing information System
 is a continuing and interacting structure of people equipment and procedures to gather, sort, analyze,
evaluate, and distribute pertinent, timely and accurately information for use by marketing decision makers
to improve their marketing planning execution and control.”
Marketing Research is defined as –
 “The systematic, objective and exhaustive search for the study of the facts relevant to any problem in the
field of marketing.”
 According to Philip Kotler, “Marketing Research is systematic problem analysis, model building and fact
finding for the purposes of important decision making and control in the marketing of goods and services.”.
 According to American marketing Association, “Marketing Research is the systematic gathering, recording
and analyzing of data about problems relating to the marketing of goods and services.”
 According to Green and Toll, “It is the systematic and objective search for and analysis of information
relevant to the identification and solution of any problem in the field of marketing.”
 From the above definitions we can say that the job of marketing information system is to supply marketing
information and problem analysis is the job of marketing research. Further, we can differentiate the two as follows:

DIFFERENCE BETWEEN MR AND MIS

Marketing Research
A. It is concerned with solving problems
B. It operates on specific problems
C. Its emphasis is on handling external
information
D. Focus is on past information
E. It is pertaining to particular field of
activity.
Marketing information System
A. It is concerned with preventing
complaints and solving problems
B. It is a continuous process.
C. It handles both internal and external
information.
D. It tends to the future-oriented.
E. It suggests solution to problems of the
whole organization.

PURPOSE AND SCOPE OF MARKETING RESARCH

1) To understand the economic factors affecting the sales volume and their opportunities.
2) To understand the competitive position of rival products.
3) To evaluate the reactions of consumers and customers.
4) To study the price trend.
5) To understand the system of distribution.
6) To understand the advantages and limitations of the products.
7) to find new methods of packaging, any comparing other similar packages.
8) To analyze the market size.
9) To know the estimation of demand.
10) To evaluate the profitability of different markets.
11) To study the customer’s acceptance of products.
12) To assess the volume of future sales.
13) To study the nature of the market, it’s location and its potentialities.
14) To find solutions to problems relating to marketing of goods and services.
15) To evaluate policies and plans in the right course of action.
16) To know the development of science and technology.

17) To know the complexity of marketing

18) To measure the effectiveness of advertising.
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Major Areas of M.R.
1. Research of Market:
 This includes markets trends, market share and market potential.
 It is a study of the size, location, nature and characteristics of markets; and market is segmented on the basis
of many a variables-age, sex, income, education, occupation, religions etc. in short, it can be restricted to
the study of “who, what, when, where and how” of actual and potential buyers.
2. Research on Product:
 It involves new product development, brand image, concept tests, product tests, test marketing of new
product etc.
 It analyses the strength and weakness of present products in relation to diversification, simplification etc.
3. Research on Sales
 It covers sales forecasting, quota selling, sales territory design and other sales related activities.
 It analyses sales volume, salesman performance data, new product performance in test markets, opinion on
customer-related product data etc.
4. Advertising and Promotion Research:
 It includes media research, copy research, merchandising, packaging and measuring effectiveness of various
methods of advertising and promotion.

5. Corporate Growth Research:

 It emphasizes the studies on economic and technological forecasting, measuring company image, profitability
measurement, merger, acquisition, location etc.
6. Business Economic Research:
 It is concern with economic forecasting and business trend analysis. Planning and product mix, price and profit
analysis etc. are included.
Summarized Scope of M.R.
10 most common activities
1. determination of market characteristics
2. Measurement of market potentials
3. Market share analysis
4. Sales analysis
5. Studies of business trends
6. Short range pre – casting
7. Competitive products studies
8. Long range pre – casting
9. Pricing studies
10. Testing of existing products
MARKETING RESEARCH PROCESS

Research Process

Defining the problem and Developing the Collecting the Analyzing the
Research objectives Research Plan information information

1 2 3 4
Presenting the
finding
5
The given research process in the diagram has five main steps.
30
1. Defining & Objective:
 Defining the problem carefully and agree on the research objective.
 A problem well defined is half solved.
 Management must steer between defining the problem too broadly and defining it too narrowly.
 Research projects can be distinguished as:

a) Exploratory:
 Preliminary data collection shed light to the problem and suggest some type of these, or new idea.
b) Descriptive:
 Describe certain magnitude like how many customers will use the product.
c) Casual:
 To test cause and effect relationship.
2. Developing Research Plan:
 Second step calls for developing the most efficient plan for gathering the needed information.
 Plan should be professionally designed.
 Marketing managers should have knowledge about marketing research to approve the research plan and budget
and know how to interpret the findings.
 Designing a research plan calls for decision on:
1.Data Source:
Primary Data:
 Which consists of original information of the specific purpose at hand.
 The data are more relevant to the issue at hand.
 The only disadvantage is about the high cost.
Secondary Data:
 Which already exists somewhere, having been collected for another purpose.
 advantages
 lower costs and quicker availability.
 disadvantages
o inaccurate or unreliable.
2 . Research Approaches:
Primary data can be collected in four broad ways.
i. Observational Research:
 Fresh data is collected by observing relevant factors and selling’s. This exploratory might yield some useful
hypothesis.
ii. Focus Group Research:
 it is group or gather of six to ten persons who discuss project, service organisation or other marketing entity.
 The interviewers needs objectivity, knowledge of the subject matter and industry and knowledge of group
dynamics and consumer behaviour.

iii. Survey Research:

 It is a midway between the exploratory nature of observational and focus group research and the vigour of
experimental research.
 Observation and focus groups best suited for exploratory research,

 surveys are best suited for descriptive research and

 experiments are best suited for casual research.
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  Company’s undertake surveys to learn about people’s knowledge, belief, preferences, satisfaction and so
on and to measure these magnitudes in the population.
iv. Experimental Research:
 The most scientifically valid research.
 It calls for selecting matched groups of subjects, subjecting them to different treatment, controlling,
extraneous variables and checking whether observed response differences are statistically significant.
 The purpose of experimental research is to capture cause and effect relationships by eliminating
competing explanations of the observed findings.
CHARACTERISTIC OF GOOD MARKETING RESEARCH:
i. Scientific Method:
 Effective MR uses the principles of the scientific method.
 Careful observation, formulation of hypothesis, prediction and testing.
ii. Research Creativity:
 MR at best develops innovative ways to solve a problem.
iii. Multiple Methods:
 Competent MR fly away from over reliance on any one method. PROBLEMS OF MARKETING
RESEARCH:
1) A narrow conception of marketing research:
 Many executives see to as a fast findings operation.
2) Late Results:
 Carefully designed marketing research can take a long time to carry out.
 The report may come too late in terms of when a decision has to be made.
3) Occasional erroneous findings by Marketing Research:
 Executive wants conclusive information from marketing research although marketing phenomena are often
too complex to yield conclusive finding.

4) Intellectual different:
 Between mental style of managers and marketing researcher’s.
 The report is more often more complicated and tentative, while manager want is completeness simplicity
and certainty.
5) Marketing research needs the services of qualified and trained persons.
 Such persons are rarely found.
6) It is highly expensive and time consuming.
7) If the researcher is biased to the problem, the result will be unsatisfactory and misleading.
8) Marketing research studies the Behaviour of customers; so it is quite impossible to achieve mathematical accuracy.
9) By the time the results are ready, the circumstances might have changed; then the whole study will be valueless.
10) It is not an end itself.
 It presents the correct information for decision-making.
 Unless a qualified manager uses the information; the study will be of no use.
DEMAND FORECASTING
 After gathering information about various aspects of the market and demand from primary and secondary
sources, an attempt may be made to estimate future demand.
 A wide range of forecasting methods is available to the market analyst.
 Forecasting the future is a much more difficult , especially when more variables come in to pay.

 Future forecasting usually uses the following techniques :-

1.Time series analysis
32
  is a forecasting technique of analysing data over a long period .
 under this technique there are :-
o Trend fitting:-
 Where actual historical date is plotted and the trend projected.
o Moving annual averages or totals
 Smooth data in time series of reasons , cyclical or random fluctuations.
o Exponential smoothing
 Where extra weighing is given either to earlier or recent data.
2.Statistical Demand analysis.
 Is a technique which needs expertise knowledge or computer access.
 This technique is used in large and complex companies.

2.1 . Regression Analysis

 Where equations are developed that relate the volume of sales to a No of independent variable known to impact
on sales performance and a line of regression (line that best fit ) describes in quantitative terms the under line
correlation between any two sets of data.
2.2. Economic Models:-
 Looks at the independent relation ships of a number of factors.
2.3. Input / Output Models:-
 Useful for ingredients or components forecasting where projections will encompass the demand for inputs in
relation to outputs in user industries.
3. Market Test
 New products are tested on consumer ,judged the performance and then forecasted at large.
4. Expert Opinion:-
 Qualitative approach to forecasting ,panels experts on the industry (distributors ,dealers , retailers ,marketing
consultants ,market researchers ,trade association representatives ,etc.) give their reason opinions on trends and
estimates of market volumes in this technique.
 The sales forecaster can then take account of panel inputs in planning market strategy and developing sales
forecast.
5.Marketer’s Opinion:-
 In this sales forecaster uses his or her experience to make a primarily qualitative judgement of demand or
sales to each market sector based upon historical performance ,and a considered view of the trading
environment .
6. Surveys of future buying plans (buyers’ intentions):-
 This is a qualitative technique commonly used for industrial products or consumer products where users are
asked about :-
 Expected product category purchases to meet company needs.
 Their intention to replace the company’s products with other products (company’s other product or
competitors )
 Pattern of future buying of users
 Advance knowledge of users buying intentions and patterns can be important to plan developing sales
forecast.

Note
Total Market potential is basically an estimate of the total sales potential for all industry suppliers in a market.

Example

33
 Market potential of whisky in litre = No of Males meeting the profile criteria (over age 35 years and earning
relevant income level ) X Average consumption (litre)per whisky consumer.

34
 CONSUMER PSYCHOLOGY AND MOTIVATION
Consumer behavior:-
 Is simply a sub set of the larger field of human behavior .
 Is an attempt to study and predict buyers actions while buying something.
 It is defined as all psychological social and physical behavior of potential customers as they become aware of
evaluate , purchase ,consume and tell others about product and services.
 By studying buyer behavior of various market segments a seller can select the most effective product
design ,price ,advertisement made , channels of distribution and many other aspect of their marketing program
which can help them successful and competitative in the market.
 As Marketers – it is important for us to recognize why and how individuals make their consumption
decisions so that we can better strategic marketing decision .
Major factors influencing consumer’s behavior.
1. Cultural
2. Social
3. Personal
4. Psychlogical
1.Cultural Factors
 Is the most fundamental determinant of the person’s wants and behavior .
 A child growing up in a certain particular place acquires a set of values ,perceptions, preferences and
behaviors and behaviors through his or her family and other key institutions.
 Cultural factors include subcultures and social classes.
 Each sub – culture contains nationality groups such as Ethiopian , Japanese ,etc.
 Religious groups like Orthodox Moslem ,etc.
 There fore marketing could be influenced by the nationality ,religion ,race , geographic back ground, etc.of
the buyer.
2 . Social factor:-
 Includes reference groups ,family ,social roles and status is of the consumer.
 Reference groups are those groups who have direct or indirect influence on the person’s attitude and
behavior.
 Reference groups may expose on individual to new behavior or life style.
 The influence on consumer behavior can vary between very important to almost negligible.
 Marketers have to identify the reference groups within their target customer and try to influence the
opinion leaders in the reference group.
 Family members also have a strong influence on the behavior of buyers.
 Parent’s family orientation and influence on various issues affect buyers’ behavior.
 Roles and status includes persons ’position in the society and this affects the buying decision.
 People usually choose products that show their role and status.
2. Personal factor:-
 Include the buyers’ age, life style, occupation, economic condition, personality and self – concept.
 Age:- buyers behavior changes with changes in their ages ,habits testes and motivation changes in the
course of buyer’s life.
 Occupation: - is a major symbol of status and social class, the buyers will be strongly
influenced by occupational level.
 The income of the buyer affects his/her choice and purchases of the products.

4. Psychological factors :-

35
  Consists of the level of motivation , perception of buyer for certain things , learning process and buyers
beliefs and attitude is very vital in selecting various items for purchase.
Stages of consumers’ buying process
 Five
1. Problem or need recognition
 The buying process starts when the buyer recognizes a problem or need .
 The need can be triggered by internal or external stimuli.
3. Information search:-
 an aroused consumer will be included to search for more information.
 The consumer information source can be :-
 Personal source:-family, friends , neighbors , etc.
 Commercial sources:- advertisement ,sales persons, packaging.
 Public sources :- mass media, news papers
4. Evaluation of alternatives
4. Purchase decision
5.Post purchase behavior.
MARKETING PLANNING AND IMPLEMENTATION
Marketing Planning:-
 is the basis for Marketing Strategy development for an existing/new product.
 It moves with the initial identification of market opportunities and assessment of how well the market is being
served by the existing manufacturers and the level of dissatisfaction level existing in the market.
Market Opportunity:-
 is critical before the management of a firm takes a decision to launch or diversify in any product area.
 this involves an analysis of the following:
1. Size of the market
2. Marketing strategies and the extent and quality of services rendered by other firms (competition) in the industry.
3. Marketing Programme required to satisfy market wants.
4. Identification of key success factors in an industry and linking them up to a firm’s strength and weaknesses.
1. Size Of The Market
Factors that determine the size of a market are:
1. Demand analysis
2. Segmentation analysis
3. Industry analysis
4. competitor analysis
1.1. Demand Analysis:
 is the core part of market opportunity analysis is demand analysis.
 The market consists of existing and potential buyers.
 It is important that these individuals should not only have the desire to buy, but also the means to buy a
product/service.
 This implies that market demand will come from only those customers who have the willingness and
purchasing power to buy a product or service, at a given price level.
1.2. Segmentation Analysis:
 Segmentation, is the process of dividing the market into homogeneous sub-units.

 Homogeneity in the market is brought about on the basis of the demographic, geographic and psychograph
characteristics of consumers. Besides, this is also brought about on the basis of product usage.

36
  Dividing the market into segments helps the firm in sharply focusing its attention and also on the viability
of satisfying market demand.

1.3. Industry Analysis:

 Assesses the strength and weaknesses of the firm itself.
 The common practices of the other industry
 The trend of trade of the industry.
1.4. Competitor Analysis:
 Helps to know whether the market is attractive enough to enter.
 If the market is well served and customers are satisfied with what they are getting , then , very little
opportunity exists for any new entrant.
 Dissatisfaction with competitors ’products and services provides an opportunity for a firm to enter the
market and make profit.
2. Marketing strategies and the extent and quality of services rendered by other firms in the industry .
 The firm needs to study the characteristics of the channel and whether it needs to adopt the established
pattern of distribution.
3. Marketing programs required to satisfy the customer
 The focus of this analysis is on the marketing effort and cost likely to be incurred on order of satisfy
customer needs or even generate demand for a product /service.
 Example :-
the two most important elements of the marketing mix for an ice cream in India are –
advertising and distribution.
4. Identification of key success factors in an industry and linking them up to a firm’s strength and weaknesses.
Product – market selection.
 Based on the above mentioned points it is important to carry out a product – market analysis for evolving a
marketing plan.
 Some of the key issues that need to be addressed are:-
 What markets should be served ?
- identify the target market.
 What form should the product take ?
-should the product be marked as a commodity or as a branded product?
 What should the product offer for use ?
 For whom is the product most important?
APPROACHES TO MARKETING PLANNING
 Once the firm has made the product-market choice, it is now reedy for the marketing planning exercise.
 One model planning approach is described below: -
1. Situation Audit
 Where are we?
 How did we reach here?
 Who have been our major competitors? Their strategies?
2.Analysis of firm’s strengths and weaknesses
o What are the key facilitators or hindrances in our situation ?
3. Objective setting
 Market share?

 ROI?
 Sales turn over ?
37
4. Develop and evaluate strategy options
5. Strategies decision making
6. Implementation
5. Features of Cooperative Marketing
The Need for Co-Operative Marketing:
 To protect the members from unfair trade or adulterating:_
 False weights and measures
 undue deductions including those for religious and charitable purposes,
 large samples taken by wholesales
 traders go to the villages and purchase stocks from the cultivators at unfavorable rates.
 speculation and withholding of stocks are used for creating artificial scarcity and boosting the prices at the time
of sale.
OBJECTS AND FUNCTIONS
Marketing Co-operatives undertake one or more of the following activities.
i. To market members produce to their best advantage:
ii. To provide credit facilities to members on the security of their produces;
iii. To arrange for the storage of member’s produce;
iv. To provide the facility of grading or produce which would result in better price for better goods;
v. To introduce the system of pooling so as to require a better bargaining power and equal gains for member;
vi. To export member’s produce so as to bring in still better returns for the producer;
vii. To act as agents of government for procurement and implementation of price support policy;
viii. To arrange supply of farm inputs as a measure to increase produce and improve its quality;
ix. To arrange for the transport of produce; etc.
x. To arrange the supply of essential consumer articles to rural population.

MARKETING PRACTICES
To achieve the above mentioned objects the societies adopt one or more of the following marketing practices.
 Commission Agency System
 The society sells the produce in open auction and gets it delivered to the purchaser, after cleaning and bagging.
For these services, the society gets a small commission.
 Outright Purchases
 Procurement
 Bulk purchase at reasonable cost price.
 Price Support Scheme
 Cooperative are one best instruments to implement the administrative price-floor and ceiling prices.
 Advances Against Stock
 Price will fail after harvest.
 Societies give a ware house service to members.
 Advance payment at the initial and after sale pay the balance.
 And hence by this societies ensure better price to members.
 Grading
 Grading and standardization of produce for fetching better prices.

 Pooling

38
  Produces are physically assembled and sold as a single unit rather than in separate lots owned by
separate persons.
 Export
 This activity not only brings exchange for the country but also good prices for the grower.
 Input Supplies
 Like Indian IFFCO activities ,Improved seed multiplication ,etc.
 For Credit Services
 For both input and out put marketing .

INTERNATIONAL MARKETING
International / Export Marketing:
 International / Export marketing involves all those activities and elements that form part of domestic
marketing.
 Marketing concept is a s much relevant to international Marketing as it is to domestic Marketing.
 An enterprise engaged in export marketing has to correctly identify, assess and interpret the needs of the
overseas customers and carry out integrated Marketing to satisfy those needs.
 In other words, there is so much in common between export marketing and domestic marketing in the basic
functions of marketing.
 At the same time, there are several characteristics that are unique to export Marketing.
 When the business crosses the national borders of a given country, it becomes enormously more complex.
 The resulting problems and management situations transcend those of Marketing, finance and production.
 An entirely new and wide range of legal, political, cultural and sociological dimensions enter the picture.
 A correct understanding of the dimensions is essential for success in export Marketing.
Environmental and cultural Dynamics of Global Markets.
 The environmental and cultural dynamics and be understood only by studying the people, their patterns of
life, their social interactions, their sensibilities, their faiths and fancies.
 In other words, the export marketer has to become a native in the foreign land.
 He has to communicate with the people of those lands in their lingo and idiom and use symbols and colours
that will be understood by them and will to them.
 He should also deliver his products in places where they habitually shop in. in short, an international
marketer should venture into a foreign market only after acquiring a sound understanding into a foreign
market only after acquiring a sound understanding of the demands made on him by the cultural dynamics of
the market.

Main tasks involved in export marketing

The following are the main tasks involved in export Marketing:-
 Market selection
 Entry strategy
 Selection of appropriate distribution channels
 Development of right pricing strategy for the different segments of the export markets.
 International marketing communication.
 Forecast of future market potential
 Forecast of sales potential
 Forecast of costs and profits.
 Estimate of rate of return on investment

Deciding how to enter the market

 Once a company has decided to sell to a particular country, it must determine the best mode of entry.
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  Its choices are exporting, joint venturing and direct investment abroad.
 Each succeeding strategy involves more commitment, risk and possible profits.
 The three market entry strategies are shown below along with the various options under each:
1. Export
Indirect Export
 Domestic based export merchant
 Domestic based export agent
 Co-operative organization
Direct Export:
 domestic based export department or division
 overseas sales branch or subsidiary
 Traveling export sales representatives
 Foreign based distributors or agents.
2. Joint Venturing
 Contract manufacturing.
 Management contracting.
 Joint-ownership ventures.
3. Direct Investment
 Assembly facilities
 Manufacturing facilities
Export Promotion
o Countries have a large number of export promotion agencies export promotion councils, export
corporations, commodity boards etc.
o Most of these agencies are created or sponsored by the central/ Federal Government.
o In India for example has Central Advisory Council on Trade, Indian Institute of Foreign Trade, Trade
Fair Authority of India (TFAI), Commodity Boards and Export Promotion Councils, Export
Corporations, Federation of Export Organizations, Export Inspection Council, (ECGC) Export Credit
and Guarantee Corporation, Export Import Bank of India and Export Houses.
o And above all these agencies, a number of export houses are also contributing their bit in the export
promotion field.
o They are entitled to assistance from the marketing development fund of the Government.
WORLD TRADE ORGANISATION AND ROLE OF COOPEATIVES
 With the establishment of the World Trade Organization (WTO) is 1995, international economic order is
undergoing phenomenal changes affecting all sectors of national economy.
 In this context is only natural to think how cooperatives should respond to the external economic changes that are
taking place around them.
 An attempt is made in this three article, to explain;
 Origin, evolution and organization of WTO and its implications on the world
economy,
 Agreement on agriculture under WTO as it affects a major part of the
Developing Countries population, and
(c) Role cooperatives could play to protect the interests of their
members in a globalize economy.
Section I. The World Trade Organization (WTO)
 The World Trade Organization (WTO) came into existence on 1 st January 1995 and succeeded the General

Agreement on Tariffs and Trade (GATT) which was in existence since 1948.

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  The creation of WTO is the result of the eighth round of trade negotiations popularly known as Uruguay
round which started in September 1985 at the Ministerial level.
 GATT basically was limited to trade in goods by member countries and in this regard GATT attempted at
reduction of tariff and non-tariff barriers to trade in goods with a view to promote free trade between its
members.
 However, the World Trade Scenario has undergone substantive changes over the years since inception of
GATT which necessitated a fresh round of trade negotiations.
 For instance, the share of agriculture in World merchandise had fallen from 46% to 13% between1950 to
1987.
 Simultaneously, the structure and composition of various sectors to the economy had changed particularly
in developed countries and services accounted for nearly 70% of the GDP in these countries in 1986.
 An overwhelming majority of the work force was engaged in the service sector in these countries.
 As such, the volume of export of services by developed countries particularly the U.S.A had increased,
Further, in commodities the comparative advantage had shifted in favor of Japan and other newly
industrialized countries.
 In such a scenario USA and others developed countries took the leadership in initiating negotiations for
establishment of a new World Trade order covering the service sector.
 After a long and tortuous negotiations finally the members of GATT agreed upon a comprise document
prepared by Mr. Arthur Dunkel, Gatt’s secretary General, and 117 nations including India signed this
document on 15th April, 1994 leading to the creation of the WTO.
 As of now WTO has 138 countries as members with another 34 countries as observes including India
signed this document on 15th April, 1994 leading to the creation of the WTO.
 As of now WTO has 138 countries as members with another 34 countries as observes including China and
Russia.
 The member countries account for 95% of the World trade and when China joins as a full-fledged member
this share would increase to 98%.
 The members of WTO have to sign a total of 28 agreements of which 25 agreements are in the areas of
goods and services.
 All the members are bound by these agreements.
 A distinguishing features of WTO is the absolute equality it provides to its members.
 Unlike the IMF voting in WTO is based on the principle of one nation one vote and as such WTO is a
democratic body in the truest sense of the term.
 Decisions often are taken on the basis of consensus among members and resort to majority vote is done
very rarely.
 However, in practice the quad countries comprising of USA, Canada, EU and Japan influence the decisions
of WTO as these countries together account for 80% of the World Trade.
 To add to it the developing countries lack common issues on which their views can converge and as such
they are easily susceptible to pressures and inducements of developed countries.
The WTO aims at the following:
a) A fair, equitable, rule based and transparent multilateral trading system.
b) Progressive liberalization and elimination of tariff barriers.
c) Rejection of all forms of protection, and
d) Elimination of discriminatory treatment in trade relations
The above objectives are achieved by ensuring the following
a) Elimination of subsidies and such other measures, which result in creeping up of distortions in trade.
b) Elimination of non-tariff barriers like quantitative restrictions (QRs).
c) Prescription of bound rates for tariffs for different products.

d) Ensuring equal treatment to foreign capital and foreign goods on par with domestic capital and domestic
goods and

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 e) Conferring Most favored Nations (MFN) status on all member countries.
 The consequence of WTO is that the framing of national policies will had to be in conformity with the international
framework.
 It is this aspect of WTO which has swelled the numbers of its critics who argue that sovereignty of national states is
completely lost with the establishment of WTO as nation states cannot take any independent decision for protecting
its domestic sector.
 Even though there is some truth in the above argument, free world trade also confers wide range of benefits on
countries.
The scope of WTO covers the following:
(a) Trade in Goods
(b) Trade in Services
(c) Trade related investment Measures (TRIMS)
(d) Trade Related intellectual property right (TRIPS)
(e) Dispute settlement mechanism and
(f) Dumping and anti dumping rules etc.
 The organizational structure of WTO comprises of the Ministerial Conference at the apex level.
 Below the Ministerial conference is the General Council which in turn has three parts namely Council for Trade in
goods (CTG), Council for Trade in Services (CTS), and Council for TRIPS (C-TRIPS).
 The General Council also performs the role as a Dispute Settlement Body and as the Trade Policy Review Body.
 The General Council has four committees directly and indirectly under it namely committee on Trade and
development, committee on balance of payments restrictions, committee on Budget, finance and administration and
committee on Trade and Environment.
 Under the CTG there are 9 committees namely that Agriculture, monitoring on Textile, Technical Barriers on
Trade, TRIMS, anti-dumping practices, customs valuation, rules or origin, subsidies and countervailing measures,
and safeguards.
 The CTC has one committee under it namely committee on trade in financial services.
 The ministerial conference is the highest policy making body of WTO and holds its conference once in two years.
 The first biennial ministerial conference was held in December 1996 at Geneva and Seattle respectively.
 The fourth conference was held in November 2001 at Doha (Qatar)
 In conclusion the following features relating to WTO and the application that flow from these features will help in
better understanding of WTO.
a) The WTO is for transparency of policies, rules and procedures and for multilateral conformism. It is not for
insular and protected economic, trade and investment regime.
b) The WTO is for greater and greater market access; it is not for import restriction of import substitution.
c) The WTO does not believe in mere focus on export orientation, but is consistently and passionately seeking
outward orientation in economic policies of member countries.
d) The WTO is not for unrestrained or imprudent use of capital resources in the development strategy, but for
deploying capital on the basis of comparative and competitive advantage of nations.
e) The WTO is not for subsidies, but for wider and effective use of pricing mechanism for allocation of
resources domestically and globally.
f) The WTO is for internal deregulation servicing to compliment the process of trade and investment
liberalization.
g) The WTO is for promoting climate for FDI flows based on undistorted trade and investment regime; it is
not for substitution of trade by investment being protected through tariffs and restrictive im0port licensing
system.
h) The WTO is for competition and globalization. Therefore, member countries are under compulsions to
observe critical macro level disciplines-be it fiscal stability, be it price stability or be it exchange rate

management. Consequently, it is not for soft options, be it high tariffs, be it QRs, be it subsidies or be it lack
of transparency in the policies, procedures and rules governing trade and investment.

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Section-II: Agreement of Agriculture (AoA)
a. Since majority of the cooperatives in the World are concerned with agriculture in one way or the
other, it is essential to have a detailed understanding of agriculture related measures under WTO.
b. The agreement on Agriculture (AoA) forms a part of the Final Act of the Uruguay Round of
Negotiations and was signed by the member countries in April, 1994 at Marrakech (Morocco).
c. The AoA came into force from 1st January, 1995 and it incorporates the broad areas of
commitments from member states, namely:
a. Market Access i.e., the disciplines on
import restraints and tariffs,
b. domestic support i.e. subsidies by Govt. to
domestic producers, and
c. export subsidies.

(a) Market access

d. Under this is envisaged to remove all types of non-tariff barriers and the progressive reduction of
tariff rates to an agreed level over a period of time.
e. Non-tariff barriers include.
 Quota restrictions (QRs) which may take the form of quotas, licensing requirements,
canalization of imports through restricted number of entities who only will be permitted to
import.
 Under AoA protection to domestic tariff measures i.e. Varying the rates of import duties
subject to the bound rates stipulated under AoA.
 QRs can be continued only on the ground of problems relating to balance of payments.
 Under AoA, the tariff rates prevalent during 1986-88 is considered as the base rate and the
developed countries have to bring down their average tariff rates by 36 percent over a period of 5
years i.e. from 1995-2000.
 On the other hand, the developing countries are required to lower tariff rates by 24/spread over a
time span of 9 years (i.e. between 1995-2004). Further.
 The minimum cut per product line required for developed countries is by 15% (between 1995-
2000) and by 10% for developing countries (between 1995-2004).
 India has bound the following tariff levels for primary agricultural products, processed agricultural
products and edible oils with a few exceptions till the end period of Agreement.
o Primary agricultural products …..100%
o Processed agricultural products …..150%
o Edible oils …..300%
(b) Domestic Support
 The AoA on Domestic measures have two main objectives.
a) To identify acceptable measures of support to farmers and
b) To discipline trade distorting support to the farmers
 The above measures are aimed basically at containing the high levels of domestic agricultural
support in developed countries.
 This objective is to be achieved by quantification of domestic support i.e. the Aggregate Measure of
Support (AMS) and then by progressive reduction of AMS.
 AMS is also called amber box which consist of two parts:
i. Product specific subsidies i.e. the difference between the administered prices (minimum
support prices in India) and external reference prices (c.i.f. prices of import and f.o.b.
prices of exports), times the quantity of production which gets such support.
ii.
Non-product specific subsides, that is, subsidies on inputs such as fertilizers, electricity,
irrigation etc.

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  Under domestic support measures (DSMs) the member countries are required to bring down the
quantum of their domestic support in a phased manner, i.e. by 20% (between1995-2000) in case of
developed countries and by 13% (between 1995-2004) by the developing countries as compared to
the base year levels (i.e. 1986-88).
Under AoA three categories of DSMs are exempted namely.
i. Green Box measures:
 These have minimum impact on trade and include Govt. assistance on general services like
research, pest and disease control, extension work, advisory services, public stock holding
for food security purpose, domestic good and payments under environmental programmes,
etc.
ii. Blue box measures:
 These represent direct payments under production limiting programme.
 These concern mainly developed countries.
iii. Special and differential treatment for developing countries:
 Investment subsidies which are generally available to agriculture in developing countries
and agricultural input services generally available to low income and resource poor
producers’ in developing countries.
 The quantum of domestic support given to agriculture is restricted to 10% of the total value of
agricultural produce in developing countries and 5% in case of developed countries.
 AMS within the above limit is not subject to any reduction commitment. In India the minimum
support provided to commodities is less than the fixed external reference price determined under
the agreement. The product specific support, therefore, is negative the non-products specific
support i.e., subsidies on agricultural inputs, such as power, irrigation, fertilizer etc is well below
the permissible level of 10% value of agricultural output and therefore, India is under no obligation
to reduce the domestic support currently extended to the agricultural sector.
 The export subsidies are also subject to reduction commitments. As regards subsidy value,
developed countries are committed to reduce it by 36% (between 1995 to 2000) and developing
countries by 24% (between 1995 to 2004) as compared to the base year (i.e. 1986 to 1998).
Similarly, the reduction in quantity of subsidies is 21% and 13% by developed and developed
countries respectively when compared to the base year.
 Export subsidies of the kind listed in the Agreement, which attract production commitments, are
non-existent in India. It is also worth nothing that developing countries are free to provide certain
subsidies, such as reduction of export marketing cost, internal and international transport and
freight charges. India is making use of these subsidies to promote the export of horticulture
products.
Section III: WTO & Role of Cooperatives
 Globalization is fast encompassing all walks of our social and economic life including our value systems.
 For instance, the value of self-reliance is no longer considered as sacrosanct. In such a scenario social
institutions like cooperatives cannot remain aloof and lest should not take rigid and dogmatic positions
against globalization. Rather cooperatives should reposition themselves both in terms of organization and
strategy to take advantage of the tremendous opportunities thrown up by globalization to benefit their
members, and also to insulate the members from the ill effects of globalization.
 Action on the following step by cooperatives could help in benefiting their members and the larger
community in which they work.
1) Development of Brand names
 Marketing on a global scale requires branding of products so that it becomes easy for the
consumer to identify the product. Since globalization entails the emergence of discerning
and sophisticated customers, cooperatives will have to consciously make attempts to
develop brand names for their products and aggressively sell their brand names to the
customers. For this cooperatives should inevitably try to get necessary certification from

approved agencies. Selling of brand mean selling of the uniqueness of the product and for
these cooperatives in this regard.

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 2) Lobbying with Government and other agencies.
 Cooperatives could play an effective role in Govt. formulating policies friendly to its
members.
 For instance, the policies of Govt. relating to tariff, subsidies, pricing, interest rates,
inflation etc. will increasingly become sensitive with the process of globalization gaining
momentum.
 Cooperatives have to intervene decisively on behalf of their members to get favorable
polices from Govt. for this purpose cooperatives should increase their strength and control
in market place and should cultivate the law makers forming caucus among members of
parliament.
3) Re-structuring the cooperative organization
 For the cooperatives to play their role purposively they should first of all become member
centered organizations.
 Hence all hurdles including legal hurdles should be removed so that cooperatives become
really autonomous and independent to take decisions which will only further the cause of
their members.
 Only when this happens can cooperatives think of restructuring their organization by
eliminating unnecessary tiers which at present are there only for providing comfortable
resting places for pseudo cooperators.
 With the increase in competition cooperatives can survive in the market only if they can
control their cost particularly the transaction cost.
 Unless the organization is made lean (restructure) and the fat reduced it would be
impossible for cooperatives to survive in the globalize market.
4) Educate members on new world
 Cooperatives, once they become genuine member centered organizations can help in educating the
members to understand the intricacies(ins and outs) of the market economy.
 Thus cooperatives can become change agents in reshaping the attitudes of members and
persuade(influence/convince) them to make changes in the production organization, production technology
etc. members could also be persuaded to collectively undertake value addition.
5) Help in targeting the subsidies
 Well intentioned though the system of subsidies at present are not only causing price distortions in the
market but are also grossly misutilised.
 As a result public resources get drained while the poor and needy are left high and dry to fend for them.
 As the country increasingly is compelled to remove all market distorting subsidies, cooperatives could help
the Govt. in reaching out the subsidies to the really poor and the needy.
 Further by undertaking such collective activities like water management, distribution of power etc.
cooperatives can help in controlling the leakages that are taking place at present.
 Control of such leakages will help in optimizing the benefits from the pubic
 support measures undertaken by the Govt.
6) Help in patenting plant varieties
 Cooperatives particularly those working in tribal areas can help in the identification of plants and herbs
having medical qualities through the help their tribal members.
 For this purpose cooperatives should actively work with appropriate bodies including NGOs concerned
with cataloguing with country’s biodiversity.

6. ¨+ NGD

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