• TABLE OF CONTENTS
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 Front Cover
 Half Title
 Title Page
 Front Matter
 Table of Contents
 Abstract
 Introduction
 Conceptualizing agricultural marketing...
 Past research
 Organizing and conducting future...
 Towards a research agenda
 Concluding comments
 Literature cited
 Back Matter






Title: Marketing in developing countries
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Title: Marketing in developing countries
Physical Description: Book
Language: English
Creator: Riley, Harold M.
Weber, Michael T.
Publisher: Department of Agricultural Economics, Michigan State University
Place of Publication: East Lansing, Mich.
Publication Date: 1979
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General Note: MSU working paper no. 6
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Table of Contents
    Front Cover
        Front Cover 1
        Front Cover 2
    Half Title
        Half Title 1
        Half Title 2
    Title Page
        Title Page 1
        Title Page 2
    Front Matter
        Front Matter 1
        Front Matter 2
    Table of Contents
        Table of Contents 1
        Table of Contents 2
    Abstract
        Abstract 1
        Abstract 2
    Introduction
        Page 1
    Conceptualizing agricultural marketing in a development context
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
    Past research
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
    Organizing and conducting future research
        Page 15
        Page 16
        Page 17
        Page 18
    Towards a research agenda
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
    Concluding comments
        Page 25
        Page 26
    Literature cited
        Page 27
        Page 28
        Page 29
    Back Matter
        Page 30
Full Text




MSU RURAL DEVELOPMENT SERIES






WORKING PAPER


Department of Agricultural Economics
Michigan State University
East Lansing, Michigan 48824































MARKETING IN DEVELOPING COUNTRIES

by
Harold M. Riley and Michael T. Weber



Working Paper No. 6 1979














MARKETING IN DEVELOPING COUNTRIES*


by
Harold M. Riley and Michael T. Weber**
















*This paper will be published as a chapter in a book entitled Future
Frontiers in Agricultural Marketing Research. Further reproduction and
dissemination of the contents of this Working Paper are subject to the book
publisher's copyright restrictions. This paper is also part of a broader
project entitled "Alternative Rural Development Strategies," Contract #AID/
ta-CA-3 funded by the U.S. Agency for International Development, Development
Support Bureau, Office of Rural Development and Development Administration.
Obviously, the views expressed herein do not necessarily reflect the views
of the funding agency.

**Professor and Assistant Professor, Department of Agricultural Economics,
Michigan State University.


1979







MSU RURAL DEVELOPMENT WORKING PAPERS


Carl K. Eicher and Carl Liedholm, Co-editors


The MSU Rural Development Working Papers series is designed to
further the comparative analysis of rural development in Africa, Latin
America, Asia, and the Near East. The papers will report research find-
ings on community development and rural development in historical per-
spective as well as on contemporary rural development programs. The
series will include papers on a wide range of topics such as alternative
rural development strategies; off-farm employment and small-scale industry;
marketing problems of small farmers; agricultural extension; interrelation-
ships between technology, employment, and income distribution; and
evaluation of rural development projects. While the papers will convey
the research findings of MSU faculty and visiting scholars, a few papers
will be published by researchers and policy-makers working with MSU
scholars on cooperative research and active programs in the field.


The papers are aimed at teachers, researchers, policy-makers, donor
agencies, and rural development practitioners. Selected papers will be
translated into French, Spanish, and Arabic. Libraries, individuals,
and institutions may obtain single copies of the MSU papers free of charge
and may request their names be placed on a mailing list for periodic
notifications of published papers by writing to:


MSU Rural Development Working Papers
Department of Agricultural Economics
206 International Center
Michigan State University
East Lansing, Michigan 48824
U.S.A.












TABLE OF CONTENTS


ABSTRACT . . . . . . . . .


INTRODUCTION . . . . . . . .


CONCEPTUALIZING AGRICULTURAL MARKETING IN A


PAST RESEARCH . . . . . . . .

Descriptive Studies . . . . .
Feasibility Studies . . . . .
Broader Diagnostic Assessments . . .


ORGANIZING AND CONDUCTING FUTURE RESEARCH .

General Considerations . . . . .
National Goals and Development Planning
Planning and Conducting Research . .


TOWARDS A RESEARCH AGENDA . . . . .


CONCLUDING COMMENTS . . . . . .


LITERATURE CITED . . . . . . .


Page


1


. . . . . . . 1


DEVELOPMENT CONTEXT . . 2


. . . 27








MARKETING IN DEVELOPING COUNTRIES
by

Harold Riley and Michael Weber


ABSTRACT


The U.S. Agricultural Economics profession has become significantly in-

volved in foreign assistance programs directed towards the problems of less

developed countries. In order to be effective in their roles as teachers, re-

searchers and advisors, it has been necessary to adapt conceptual and analytical

tools for use in different political, institutional and social environments.

This chapter provides a conceptual perspective of agricultural marketing as

an important dynamic element in the development process. A review of the past

research indicates that there have been useful descriptive studies of market-

ing activities in several less developed countries, but diagnostic and pre-

scriptive conclusions have often been constrained by the relatively static,

perfectly competitive marketing model of economics. Suggestions are made for

organizing and conducting future research within a more dynamic "food

system" framework with appropriate consideration of other social science

approaches to marketing problems.

A research agenda is suggested through a set of interrelated questions

that address the basic information needs for diagnosing marketing problems

and assessing program needs to achieve desired development goals.








MARKETING IN DEVELOPING COUNTRIES


Harold Riley and Michael Weber*


Introduction

Over the past two decades there has been a significant and growing

involvement of U.S. agricultural economists in foreign assistance programs

directed towards the less developed countries. Through programs financed

by the U.S. Agency for International Development, foundations, foreign

governments and multi-lateral international agencies, agricultural marketing

economists have had opportunities to conduct research and to provide advisory

inputs into the development of programs to improve marketing systems. Con-

currently there has been an expanding flow of students from the less developed

countries (LDCs) through the graduate programs of U.S. universities (1). In

order to be effective in their roles as teachers, researchers and advisors

economists have found it necessary to adapt their conceptual and analytical

tools for use in different institutional, political and social environments.

In some instances marketing problems confronted in the LDCs appear to be

similar to those experienced in the U.S. some 50 to 75 years ago when agri-

cultural and industrial changes began to transform the economy in a relatively

rapid and irreversible manner. However, the economic, political and social

conditions in the LDCs pose problems of market organization that require

solutions carefully tailored to the needs of particular country situations.


*We want to acknowledge valuable comments and suggestions on earlier
drafts of this paper which were made by Emerson Babb at Purdue University,
and Jim Shaffer and Mark Newman of Michigan State University.







2

The paucity of basic information and data about existing LODC market systems

and the lack of trained professionals in the countries have been major

constraints to research and development activities.

This chapter is directed towards a primary audience composed of U.S.

university faculty and students concerned with agricultural marketing pro-

blems in the less developed countries. Marketing specialists with inter-

national agencies and LDC institutions are another audience group. The

chapter begins with a brief conceptual point of view regarding the role of

marketing in the development process. This is followed by an assessment of

past research activities. A major part of the chapter is devoted to the

organization and conduct of future research.


Conceptualizing Agricultural Marketing
in a Development Context

Economic development should be viewed as a long term process that occurs

over decades and generations. Through technological innovation and economic

organization output per person increases and the material well being of the

population is raised to higher levels. Increased specialization of produc-

tive effort, industrialization and urbanization are important elements in the

growth and development process. These forces contribute to a growing demand

for marketing services. In agriculture there is a transformation process as

relatively small scale, predominantly self-sufficient family farming units

become larger, more specialized and increasingly dependent on marketing

arrangements for the sale of their agriculture products and for purchased

inputs. Rural markets emerge as local trading centers hierarchically inter-

connected within a larger regional and national market network.

In most developing countries there is a steady and sometimes relatively

rapid migration of people from the rural areas to urban centers with many






3

of the capital cities growing at rates in excess of 5 percent per year. The

build-up of urban population and rising levels of consumer income place

great pressures on the marketing system to expand and undertake an increasingly

complex set of activities which link the rural and urban sectors of the

economy (2). Marketing services become a larger portion of the consumer food

bill and the composition of the market basket shifts from low cost, starchy

foods towards higher cost livestock products, fruits and vegetables. Major

investments are required for transportation equipment, highways and other

physical facilities. Governmental agencies usually assume leadership in

planning and financing much of the market infrastructure and frequently

perform major roles in facilitating and regulating the development of

marketing institutions and in some instances actually organizing and

managing marketing enterprises.

There are a wide range of viewpoints on the role of agricultural marketing

institutions in economic development and the appropriate function of the

public sector in bringing about desired changes. There are those who hold

the view that marketing is an adaptive set of activities to be given secondary

consideration in development planning strategies with primary consideration

being directed toward the expansion of agricultural and industrial produc-

tion. This view has been challenged by marketing economists who argue that

marketing is a critical and dynamic component of development. Abbott and

others in the FAO marketing group have stressed the incentive role of

effective product marketing systems which can reduce risks and lower costs

for farmers and other market participants (3, 4). The local availability of

reasonably priced agricultural inputs and consumer goods are also seen as

having a stimulating impact on economic activity in both rural and urban areas.






4

Collins and Holton (5) have also challenged the view that marketing

firms and institutions will automatically spring up in response to price

incentives to provide the services most appropriate for new production

situations. They argue that effective planning for economic development

should give a great deal of attention to facilitating the development of

marketing institutions to complement programs for expanding physical

production.

There seems to be a growing consensus among agricultural economists that

aligns with the broader, more dynamic view of marketing as a major element

in the development of the agricultural sector and in coordinating agri-

culture with growth and development in other sectors. Hence, food production,

processing and distribution activities are seen as a closely interrelated set

of activities that operate in a "systems" context. The system includes the

familiar components of farm production, rural assembly, processing, distri-

bution (both rural and urban), and the flow of industrially produced agricul-

tural inputs and consumer goods to rural markets. In the more rural based

economies these activities take place within rural market towns and their

hinterlands but as development progresses the influence of larger urban

centers becomes more important.

A simplified conceptual model was developed by a Michigan State Univer-

sity research team to illustrate a particular application of a "food system"

approach to a marketing development program in Northeast Brazil. See

Figure 1. The left hand column in the figure lists five system components

which are potential points of public sector intervention into a regional

or national food system where the program objective is to stimulate economic

growth and development. The vertical ordering of the system components

gives emphasis to a "demand driven" system but there are important supply and














Figure 1. A Conceptual Model Showing a Series of Interrelated Food System Reforms
and Expected Effects on Economic Growth and Development


Potential Points of Public Sector Possible Actions to Bring Postulated Effects on Economic
Intervention in Regional or about Desired Changes Growth and Development
National Food System Processes

Capital and technical assistance (1) Reduce marketing costs in
to stimulate improvements in urban areas for locally-
URBAN FOOD efficiency of traditional urban produced food products
marketers (2) Lower food prices--increase
DISTRIBUTION Timely introduction of infra- effective income
COMPONENTS structures as a tool to stimu- (3) Increase effective urban demand
late improvement in market channel (3) Increase effective urban demand
performance for food and consumer goods and
rforance related marketing services

More effective public
facilitative and regulatory
programs


Appropriate agricultural production (4) Increased food production
extension efforts and agricultural production
specialization
RURAL FOOD Development of appropriate
packages of inputs (5) Increased rural incomes
PRODUCTION and market participation on
Effective market information both the supply and demand
COMPONENTS and price stabilization programs sides

Supervised credit programs

Promote backward vertical (6) Increased rural and urban
coordination of food market- demand for organization and
ing coordination services of
RURAL ASSEMBLY Capital and technical assistance commodity sub-systems
MARKET COMPONENTS to rural assemblers and (7) Increased rural demand for
transporters improved physical distribu-

Improve public storage, roads, acting servities i.e. assembly
exchange rules, grades

Improve rural distribution (8) Increased rural demand for:
services and lower costs (a) farm inputs
RURAL DISTRIBUTION for: (b) purchased food
(a) farm inputs (c) rural-and urban-
COMPONENTS FOR: (b) purchased food produced consumer
(c) consumer goods goods
(a) Purchased Food (d) marketing services
(b) Farm Inputs related to the above
(c) Consumers Goods three

Use of appropriate technologies (9) Increased demand and employ-
in production processes ment in industry and related
RURAL AND URBAN Develop more appropriate products services sectors
for local market demand character- (10) Increased income leading to
INDUSTRIAL AND istics increased demand for food
Lower costs of mass distribution and consumer goods
SERVICES COMPONENTS to rural and urban areas


Source: Adapted from Figure 1.1. in (6).






6

demand interactions which link the various components into a "semi-closed"

system. It is semi-closed because it does not include an export market

component nor an explicit linkage to the other sectors of the domestic

economy. These components could be added to the model but for the purposes

of this chapter they have been set aside. The middle column in the figure

lists a series of actions that might be taken by the public sector to bring

about desired changes in the food system, giving emphasis to those actions

which will affect market organization and performance. An interrelated set

of impacts on costs, demand and output are summarized in the right hand

column of Figure 1. The model illustrates a particular sequence of actions

that work back from the urban food market toward farm producers. However,

there are many alternative sequences that could begin with any of the system

components as long as there is adequate consideration of the pattern of

repercussions that will likely occur. For example, demand from the rural

purchased food and other basic consumer goods component has a direct pull

effect on rural production and assembly components. And to the extent that

there is regional specialization of agricultural production in a country,

there is a direct linkage between rural demand and urban food distribution

components which serve as concentration and redistribution mechanisms for

the more specialized rural regions.

In the past there has been a strong tendency for agricultural planners

to emphasize farm production expansion without sufficient consideration of

market incentives and constraints, whether these come from rural or urban

demand sources.

Thus, Figure 1 illustrates a more comprehensive, market oriented approach

to agricultural development emphasizing the dynamic interactions between

agriculture and industry and between rural and urban based activities.





7

Past Research
Research by U.S. scholars on agricultural marketing problems in developing

countries can be categorized into three broad groupings as follows: 1) descrip-

tive studies, 2) feasibility studies, 3) broader diagnostic assessments.

Descriptive Studies.

Descriptive studies have been conducted by individuals from various social

science disciplines on existing arrangements for marketing specific commodities

or carrying out selected marketing functions. Most of these studies have been

carried out by professionals in academic institutions and their students. These

studies have provided useful factual information about existing marketing

arrangements but limited accessibility has been a major factor restricting

their use by government agencies and the private sector. In addition, many

of the studies done by economists and agricultural economists are based upon

conceptual perspectives of market organization dominated by the perfectly

competitive theoretical model of economics. And much of the research has been

concerned with issues involving the testing for conditions of structure,

conduct and performance predicted by the perfectly competitive model. A

major problem with this relatively static framework is that it underplays

the potential dynamic impacts of marketing institutions in achieving develop-

ment goals regarding efficiency, equity, growth and employment.

There have also been useful and insightful descriptive studies carried

out by researchers that represent other social science perspectives. Geo-

graphers with their interest in the location of economic activities have

undertaken a large number of descriptive studies of marketplaces, periodic

markets and itinerant traders in rural areas of developing countries. This

research is important for the development process because it provides knowledge








of how these traditional trading institutions function. Unfortunately, by

geographers' own assessments, much of this research suffers from the inability

to offer normative solutions to questions concerning policy and planning of

marketing systems (7,8).

Anthropologists and sociologists have observed and described rural house-

hold behavior relative to combinations of production, consumption, storage and

sales decisions. Anthropologists also have a tradition of conducting individual

village studies. Although these studies provide valuable descriptive informa-

tion about rural populations and economic processes, they rarely contain

analyses which lead directly to policy recommendations. Currently, a group of

economic anthropologists are seeking to use concepts from regional science

and geographical models to put their village studies into a more useful frame-

work for understanding and promoting development. In a review article, Carol

Smith concludes "...without the regional system context that geographical models

can provide, anthropological marketing studies will not tell us a great deal

more than we already know about the economic determinants of peasant behavior" (9).

Feasibility Studies.

Feasibility studies have been done to provide information needed by govern-

ment agencies, international financial institutions and private sector in-

vestors regarding capital investments in marketing infrastructure, e.g. pro-

cessing plants, wholesale markets, grain storage, and transportation facilities.

These studies have varied widely in scope and quality of analysis. Most have

been carried out by private consulting firms or professionals associated with

university-based research institutes. The analyses are typically focused on the

economic feasibility of a proposed project involving a large capital investment.

Due to severe time constraints heavy reliance is usually placed upon the

use of available secondary data, engineering estimation procedures and the






9

qualitative information that can be obtained through interviews with informed

local business leaders and professionals. Looking back at some of these

studies and the recommendations which were subsequently carried out, several

concerns can be identified. First, there has been a tendency towards

unrealistic optimism regarding the transferability of technologies from the

more highly developed to the less developed countries. The analyses have

tended to endorse capital-intensive technologies in situations where labor-

capital costs are such that more labor-intensive technologies would be more

appropriate (10). Secondly, the feasibility type studies have sometimes

misjudged the compatibility of new capital-intensive infrastructure with

existing patterns of production, distribution and consumption. As a

result, there have been examples of serious underutilization of the new

facilities (e.g. grain storage) (11). Third, the lack of a trained labor

force and a local capacity for the continued development of both skilled

labor and management ability is either underplayed in the reports or not

taken seriously by those responsible for local project implementation.

Because of the problems mentioned above, there is a growing demand for

better preparation of professionals who conduct feasibility type studies.

This is reflected in the increased interests in short-term training programs

on project development and evaluation such as those offered by the World

Bank, and similar offerings by USAID, universities and private consulting

firms.


Broader Diagnostic Assessments

Broader diagnostic assessments of food system organization in developing

countries have provided inputs to policy and program development and to an

evolving conceptual and analytical framework for future research and develop-

ment efforts. Several groups of U.S. university researchers have carried out





10

these broader based studies of agricultural marketing processes in less

developed countries (12, 13, 14, 15, 16, 17). Mellor, et al. of Cornell

University have studied marketing in India. On the basis of extensive field

surveys they have challenged the validity of several widely held views

regarding the exploitive and unproductive activities of rural traders (12).

Lele could find little evidence in her field studies to support the view

that the monopolistic nature of private trade leads to excessively high

marketing margins or that wide seasonal price variations were caused by

speculative hoarding and profiteering practices of traders (13). Price

differentials among major wholesale centers were found to be closely related

to expected price patterns based upon transportation cost differences.

Indications are that entry into traditional trade is generally open and that

there is overcrowding and significant competition at each level of marketing.

Even in instances where a few traders are handling a large share of the

market volume it was observed they are unable to influence prices appreciably

through collusive action as long as there is effective market intelligence

and transportation among markets. Lele observes that public sector efforts

to facilitate efficiency in traditional trade is necessary as rural traders

perform a number of important functions that cannot be replaced by government

or cooperative agencies, without incurring substantially greater costs in

administrative manpower and finances than is implicit in allowing the private

sector to operate. A broad based and positive role for public sector

involvement in marketing was outlined by Lele in her paper presented to the

International Association of Agricultural Economists in 1976 (14).

Jones and his colleagues at Stanford University have conducted extensive

studies of agricultural marketing in several African countries (15). The

characteristics of existing marketing systems were compared with the require-

ments of a purely competitive model and actual pricing relationships were






11

checked against what would be expected in a perfect market. Their conclu-

sions were that, "average seasonal price movements correspond rather well

with the cost of storage; that intermarket price correlations were somewhat

less than might be hoped for; that year-to-year price movements were generally

in accord with supply and marketing conditions; but that week-to-week price

changes showed signs of serious random disturbances consistent with the

hypothesis that traders were poorly informed about episodic changes in the

conditions of supply and transport"---"In terms of the tasks that marketing

systems are asked to perform, the African ones that we studied are not

performing badly" (15). Despite this assessment of the existing marketing

system, Jones points out the critical need for attention to marketing in

economic development planning where major technological and institutional

changes are being contemplated. Jones closes his article with the observa-

tion that, "the invisible hand cannot be trusted completely to guide

economies in socially acceptable directions, nor can the state rely on the

marketing system to perform the tasks assigned to it without appropriate

facilitating services best provided by government" (15).

A major problem with the research framework developed in most of these

diagnostic assessments is the lack of concern for the dynamic impacts which

marketing services can have both on production and consumption. The static

focus of the research has been on whether prices and cost relationships over

space and time behave as predicted by the perfectly competitive model.

Relatively little effort had been made to better understand how the effective-

ness of marketing services influences supply and demand functions, especially

for small scale farmers and low income consumers.






12

Harris has recently reviewed the methodology used in the Stanford-Cornell

type approach to the analysis of market performance and makes a similar

observation (18):

In dealing with easily available, even if qualitatively poor, data
on agricultural commodity prices the analysis of market performance
has been diverted away from the consideration of interrelationships -
between the control of commodities and money; between exchange and
production essential for the identification of the role of the marketing
system in economic development. In this sense not only is the
methodology itself usually statistically and interpretatively spurious
but also the fetishism of competition in agricultural commodity markets
(as revealed by price and commodity analysis here) has led agricultural
marketing economists to overnarrow at least a decade of a substantial
part of our research.

Another problem with much of the broader diagnostic research is the

tendency to utilize secondary and usually macro-level data in testing for

conditions of structure, conduct and performance predicted by the perfectly

competitive model. Commodity studies of market flows, margins, elasticities,

concentration, competition and policies are generally based on industry or

regional-level data which do not permit focusing on the micro-level behavior

of marketing agents, including farmers' marketing decisions in the rural

areas. These studies frequently include assumptions of homogenous behavior

on the part of farmers and marketing agents and use data that are averages

of many observations (e.g., monthly price data) and thus obscure important

variations in market behavior. Results are often inadequate for making

specific recommendations for improvements in rural and/or urban markets,

especially if the objective is to extend improved services to specific target

groups such as small-scale farmers, other low income rural residents or low

income urban consumers.

Still another problem of much of the broader diagnostic research for

guiding overall marketing policy stems from its focus on few, if any, of

the levels of interaction in the vertical marketing channels between farmers







and ultimate consumers, whether they be located within rural areas themselves or

in large urban areas. Even in semi-subsistence economies there are interdependencies

in the various stages in the farm production-assembly-processing, distribution and

cons-umption process. And even the current "equity with growth" type of rural

development being advocated in much of the current development literature in-

volves constant structural transformation of the rural and urban economy which

leads to greater interdependencies among agricultural production, distribution

and consumption processes. The most important marketing problems related to

achieving the desired structural transformation are in the design and promotion

of new technologies and new institutional arrangements which may be unprofitable

or unavailable to individual market participants, but if adopted by all par-

ticipants, could yield substantial system improvements.

Some ten years ago, Pritchard stressed the importance of developing a

broad analytical framework for studying and solving agricultural marketing

problems in developing countries (19). He cautioned against using a narrowly

defined market structure framework which limited analysis to "those characteris-

tics of the organization of a market that seems to influence strategically the

nature of competition and pricing within the market." Pritchard outlined an

eclectic set of analytical procedures, bound together into a useful framework

by the concept of agricultural marketing as an organized, operating behavioral

system within the national economy. He emphasized the need to use the framework

to search for basic economic, technological and social constraints in the environ-

ment in which marketing systems function and change.

A number of U.S. university researchers have approached broader diagnostic

assessments from such a perspective. Researchers at Harvard University have

extended their "Agribusiness Commodity Systems" approach to problems of export

market development in Central America and other areas (20). Phillips and his

colleagues in Food and Feed Grain Institute at Kansas State University have







conducted a number of diagnostic assessments of grain marketing systems in less

developed countries using a broad food chain conceptual approach. Physical hand-

ling at all stages in the farm-to-consumer chain has been examined and recom-

mendations for improvement programs have been presented to government agencies.

Pricing, storage and regulatory policies have also been an important part of the

country studies (21).

A group of Michigan State Unviersity researchers have developed a "food

system" approach to conducting diagnostic studies of agriculture and food market-

ing systems linking large urban centers in selected Latin American countries with

their rural supply areas. Field studies in Northeast Brazil, Bolivia, Colombia,

and Costa Rica were carried out collaboratively with local professionals repre-

senting universities and governmental agencies (22). The diagnostic studies

were the basis for the development of broad-based market improvement programs

with specific project recommendations. A modified market structure-conduct-

performance framework of analysis generally guided the organization of these

diagnostic investigations. Such a framework is oriented towards the evaluation

of system performance when judged against broad economic and social goals.

The basic thrust of the MSU research was towards the use of a descriptive-

diagnostic procedure for identifying constraints and unexploited opportunities

as perceived by marketing system participants, local political leaders and

as identified through the use of a wide array of standard economic analysis

tools. The approach is pragmatic and eclectic, and emphasizes the need to

identify managerial, technological and institutional innovations which are

unprofitable or unavailable to individuals within existing marketing channels,

but if adopted across all stages of these interrelated production/marketing

processes, could lead to substantial, channel-wide improvements.






Organizing and Conducting Future Research

General Considerations.

The nature of marketing problems varies widely with the degree to which a

particular economy has been transformed from an agriculturally based rural economy

toward a more urban based, market oriented economy. In countries which are still

predominantly rural, marketing problems center around improvements in the function-

ing of local markets as providers of simple farm inputs, and household necessities

and as trading centers for basic food commodities produced and consumed within

the local area or region. As an economy becomes more urbanized, food production

and distribution takes on a higher priority in development plans with greater

attention to improving physical infrastructure (transportation, processing,

storage) and to policies and programs designed to stimulate production and

facilitate system coordination. As the industrialization process continues, new

technologies for processing and distributing food, more complex logistical and

institutional arrangements and increased participation of government agencies

in planning and carrying out marketing programs usually occur.

In many developing countries there are dual agricultural production-marketing

subsystems, one oriented towards export markets and the other towards domestic

food needs. The export oriented subsystem is typically better organized in terms

of pricing and handling procedures and often involve large scale parastatal

agencies or multi-national corporations with vertically coordinated production-

marketing programs. The export subsystems play an important role in bringing

new technologies and management innovations into less developed country agri-

cultural sectors.

Whatever the level of industrialization and urbanization, there is a need to

approach marketing research in LDCs from a "food systems" perspective where the

interdependencies of the various stages in the farm production-assembly-

processing and distribution process can be taken into consideration. The "food

systems" perspective that has evolved in U. S. agricultural marketing research







provides a useful background especially when viewed in a long-term (50-75 years)

context.

National Goals and Development Planning.

-Nearly all of the less developed countries are continually preparing

general development planning statements and project documentation for consider-

ation by external funding agencies as well as their own domestic government

agencies. The planning documents usually reflect basic underlying goals of

increasing GNP per capital, maintaining full employment of the labor force and

achieving an acceptable degree of equality in the distribution of income and

economic opportunities. In recent years national planning goals have given

increased emphasis to improving the relative well-being of rural people

and to measures that will slow the migration from over-populated rural areas to

the cities. This shift towards greater concern for the rural poor has been

reinforced by the policies and program of international development agencies

(24). As indicated later in this chapter there is need to give serious

attention to research which will give direction to marketing programs that

will benefit small farmers and rural communities. But in a broader context,

agricultural marketing research should support the design and promotion of

new technologies and new institutional arrangements that will contribute to

the achievement of a broad set of economic development goals.

Planning and Conducting Research.

The lack of basic information about the organization and functioning of

the food system and a general distrust of "middlemen" are common characteris-

tics among the less developed countries. However, social and political pressures

dictate that development programs and public policies be made on the basis of

available but usually very inadequate information and analyses of alternative

courses of action. Policy makers and the small contingent of professionals

who staff the planning units and the ministries of agriculture desperately








need applied research to identify the most urgent marketing problems and the

actions that might be taken to improve existing conditions. But there is also

a need for a more comprehensive understanding of marketing processes and a long-

term view of the desired role of market organization and institutions in national

economic development.

Probably the most fundamental issue that has recently captured the

attention of the international development community centers around the

observed ineffectiveness of past development programs to improve the relative, or

in some cases, the actual well being of the poor majority in the LDCs (24,25, 26).

In the poorest countries there is a high concentration of the poor in rural areas

and the rapid migration of the rural poor toward urban centers creates serious

employment and related social and political difficulties. As a result, there

has been a significant policy reorientation in international development assis-

tance agencies and in many of the less developed countries. And while there is

a continuing debate over the appropriate strategy for promoting the desired

rural development, there is general agreement that the fundamental issue is how

to promote both growth and equity.

In this context the question arises as to how changes in marketing in-

stitutions might make greater contributions toward improvements in economic and

social conditions in rural areas while also contributing to broader goals of

holding down food prices to families in rural and urban areas. To support

such an objective, additional field research is needed to identify alternative

opportunities for improving the effectiveness of rural marketing systems within

more comprehensive rural development programs designed for particular country

situations.

The emergence and development of an applied marketing research program will

follow different patterns depending upon the circumstances within individual

countries. The experience of the Michigan State University group in Latin

America suggests that a small task force unit created to carry out applied








research and to assist in the formulation of programs and policies can con-

tribute substantially to the development of a progressive and efficient agri-

cultural marketing system (22). Such a task oriented group can develop a

data base on food marketing and an approach to market system analysis that

will not only help identify opportunities for marketing improvements but will

also examine alternatives and make recommendations to appropriate action

agencies.

In order to develop the broad analytical framework which is needed in a

task force approach to understanding equity and growth concerns of develop-

ment, it is necessary to focus on the operation of the marketing system in

terms of the distribution of wealth and income; access to government services

and political power; social status and organization; geographic considerations;

and technical performance.

There is a growing interest among other social science researchers

(geography, anthropology, sociology and political science) in exploring various

aspects of the rural community that might be relevant to the development of

more realistic and effective development efforts. This suggests an opportunity

for increased collaboration or at least a greater degree of communication and

coordination between marketing economists and other social science researchers

as they attempt to deal with very complex rural development issues which in-

clude marketing institutions.

Whether or not a task force unit is created and institutionalized on a

more permanent basis there is usually a need for broad descriptive-diagnostic

research. Depending upon the size of the country and the available resources

these studies can be organized on a regional or national basis. It is impor-

tant that the geographic area to be studied include both urban and rural areas

so that the rural-urban marketing linkages can be considered in a longer-term








development context.

During the actual conduct of the studies preliminary reports and selected

pieces of information should be transmitted to key individuals in government

and in the private sector. When sufficient research output is available to

support major recommendations for an interrelated set of marketing improvement

programs, a high level seminar can contribute to the further development and

eventual adoption of programs and policies consistent with long-term national

goals.

If resources make it impractical to carry out such a comprehensive study

as a concentrated effort, an alternative is to establish a research agenda

and arrange for contributing studies that might be carried out by local

university students under faculty supervision, by graduate students preparing

theses for foreign universities, or by private consulting firms.



Towards a Research Agenda

A research agenda can be developed around a set of interrelated questions

that address the basic information needs for diagnosing marketing problems

and assessing program needs to achieve desired development goals. A suggested

set of questions and some interspersed comments are as follows:

What is the organizational structure at the farmer,

assembly and processor levels? What services are pro-

vided at these different stages, and what are the pre-

vailing price spreads, costs and investments at each

stage?

What are the procedures for arranging transactions and

coordinating product flow in these stages of the marketing

channels for the major food products?








Is there evidence that market instability and poor

market coordination have resulted in high and costly

levels of risk and uncertainty for farmers, as well as

other market participants? What are the major causes

of market related risks and uncertainties?

Primary emphasis in the above question areas is needed on better under-

standing the micro level relations of both agricultural production and

marketing in rural areas, and to explore the equity and efficiency implications

of alternative marketing arrangements. It is essential to better understand

how the effectiveness of marketing services influences supply response of

different type of farmers. For example, what effect does market information

have on market risk and uncertainty associated with both small and large farmers'

adoption of new agricultural production technology and farm level enterprise

selection? There is the critical question of understanding the role of local

input marketing services in reducing costs, as well as risk and uncertainty,

associated with obtaining and correctly using new agricultural production

inputs. There is also the question of learning how to better coordinate

planned output expansion with market demand potential, even though there is

generally very inadequate information regarding characteristics of demand.

This is particularly important for many of the rural development schemes which

seek to raise small farmer income via high value crop production, such as

fruits and vegetables, and meats. High marketing costs, risky market trans-

action channels, and underspecified quality characteristics for these products

can quickly dampen price and other demand incentives for farmers, especially

for smaller ones who tend to have less individual control over marketing

methods and higher marketing costs due to smaller unit sales.

What will be the trends in population growth, level

and distribution of incomes, and urbanization patterns









in rural towns and large cities over the next 10 to

20 years? What effects will these changes have on de-

mand for food products and food marketing services?

What are the existing characteristics and

problems of the rural as well as urban consumer

market for food with respect to quantities purchased

by different income groups, shopping habits and

attitudes toward existing retailing services?

An area of relative neglect in marketing is the back flow (or within rural

area flow) of food, other consumer goods and agricultural inputs through

a hierarchical set of trading arrangements which link individual farmers and

small villages to larger villages, and ultimately to major urban centers.

The effectiveness of this portion of the agricultural marketing system can

have a major impact on the well-being of rural people and on the growth

and development of economic activity in rural areas. For example, there is a

need to understand how the type and effectiveness of marketing/distribution

services influences the mix and quality of foods marketed in rural areas,

and how these services influence farmers' ability to specialize in fewer

crop and livestock enterprises. Recently, researchers have begun to focus

on understanding rural demand and consumption linkages for nonfood inputs

and consumer goods (27). These are an important source of demand for in-

dustrialized products that are well matched to local, effective demand

characteristics. However, more research is needed to understand how to

promote the organization of lower cost mass distribution of these products

to rural consumers.








Another related area for future research is the exploration of the re-
lationship between nutrition and marketing services, and their combined

effect on the welfare of different consumer and producer groups. Nutrition

studies are increasingly being redefined to include a broader set of variables

instead of the isolated factors of health or total food supply. When sub-

sistence rural households are encouraged to increase their cash incomes by

producing food and/or cash crops for sale, improved nutrition may be achieved

only if necessary foods are available at reasonable costs, and in nutritious

and consumable forms for purchase by these households. If rural food

distribution services are ineffective and high cost, this will reduce the

quantity and quality of products available locally and the real purchasing

power of rural consumers.

What is the organizational structure at the re-

tailing and wholesaling levels? What services are

provided at these stages and what are the prevailing

price spreads, costs, and investments at each stage?

What are the procedures for arranging transactions

and coordinating product flow among the wholesale and

retail stages of the marketing channels for the

major foods consumed?

What are the major problems confronting the more

progressive food marketing entrepreneurs in the finance,

government regulations, competition from other entre-

preneurs (public or private) and market infrastructure?

Past research has shown that the large and rapidly growing group of low

income consumers in major urban centers of less developing countries allocate

high portions of their cash income to purchased food which they tend to procure

from small scale urban retailers located in marketplace stalls and neighborhood









shops (2, 22, 28). Among all urban food retailers, however, these smaller

scale merchants tend to have higher costs of operation and more difficulty

coordinating with urban and rural wholesale suppliers for the provision

of the mix of foods demanded by their customers. Unfortunately, this group

of small urban retailers have not received adequate research and develop-

ment program assistance, while the urban marketing reforms undertaken

have tended to benefit larger scale retailers and wholesalers who serve

middle and high income consumers (1, 29, 30, 31). Therefore, there is

a special need for research to determine how small scale food retailing in

both rural and urban areas can be improved through managerial and technologi-

cal innovations which reflect each countries' labor and capital endowments

and which contribute to more effective vertical market channel coordina-

tion linking small scale merchants and farmers.

In terms of overall evaluation of marketing channels,

What evidence can be cited to indicate poor market

performance with respect to a) costs of providing exist-

ing services, b) effectiveness of vertical coordination

mechanisms in communicating consumer demands to marketing

firms and ultimately to farmers, c) adequancy of variety,

quality and condition of products reaching consumers, d)

effectiveness of product distribution over space and over

time, e) progressiveness of public and private enter-

prises in adopting new marketing practices, and f)

equitability of the system in distributing benefits of

marketing improvements?








Is it possible to identify potential innovators, i.e.,

individuals who have adopted improved management practices

which could be transferred to others?

What are the problems and opportunities for en-

couraging improved distribution channel coordination

through sequential introduction of new management practices

and coordination arrangements?

What are the alternative roles which the public

sector can play in taking leadership to promote improved

performance of marketing practices? What are the

costs and benefits of pursuing these alternative roles.

Public and semi-public enterprises play an important role in the

agricultural marketing systems of many less developed countries. Their

functions often involve the purchase, storage and distribution of large

volumes of domestically produced staple food commodities and the importation

of additional food supplies. In several instances, parastatal enterprises

have a central role in the development of export oriented agricultural

commodity systems. Due to size and nature of these public enterprises, it

is difficult to achieve and maintain high levels of economic performance.

There are the usual internal organization and management problems that

should be attended with a continuing applied research and educational program.

But there are larger, more troublesome problems regarding the appropriate

role of the public agency in relation to the private sector, the distortion

of real price-cost relationships through the use of taxing and subsidy powers

and the ever present possibility of political manipulation and corruption where

large amounts of money and commodities are being handled. This is an area

that needs careful evaluation through a series of case studies from which a

set of guidelines might be derived for the organization and operation of public








sector agencies and enterprises within a more global food system development

strategy.


Concluding Comments

This chapter has outlined a conceptual view of the development process

within which the economic organization of market relationships in the food

system can play a dynamic and critical role in achieving national development

goals. A general approach to the development of a marketing research program

within less developed countries has been proposed. Priority has been directed

toward applied research carried out within a descriptive-diagnostic-prescriptive

framework that is relevant to policy and program development needs in the de-

veloping countries. These procedures seem appropriate for use in a wide range

of political economic systems although the specific forms of public sector

participation in the food system will vary among countries.

U. S. agricultural economists, as well as those from other developed

countries, will have continuing opportunities to assist in the development

of agricultural marketing research programs in the less developed countries.

Past experience indicates that their most important contributions will be in

the development of young professionals who become the indigenous professional

cadre that actually carries out research, teaching, administrative and entre-

preneural roles within their own countries. But effective professional develop-

ment requires a combination of formal training combined with long-term in-

volvement in applied, problem-solving research and related activities. This

pattern of professional development can be facilitated by developed country

Ph.D. level training programs with supervised thesis research back in the

student's own country or region and through assistance in the development

of master's level training programs in LDC institutions with emphasis on

relevant field research experience dealing with marketing problems.








Collaborative task force marketing research projects involving pro-

fessionals from local LDC institutions and more developed country in-

stitutions can contribute to professional development goals while making

timely and important inputs to current planning and program needs. Over

the longer run, the gradual evolvement of professional networks re-

inforced by linkages among LDC institutions and between LDC institutions

and similar institutions in more developed countries can greatly strengthen

the overall effectiveness of marketing research programs in the LDCs.

These kinds of professional development-applied research efforts are

being reinforced and promoted by international agencies such as the FAO

and IICA (Inter-American Institute of Agricultural Sciences), bilateral

foreign assistance agencies and by private foundations.







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Lansing, 1977.




29


(28) Mellor, John, "Food Price Policy and Income Distribution in Low-Income
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Food Policy, May 1977.





MSU RURAL DEVELOPMENT PAPERS


RDP No. I*

RDP No. 2


RDP No. 3*

RDP No. 4

RDP No. 5


RDWP No. 1*

RDWP No. 2*

RDWP No. 3*

RDWP No. 4

RDWP No. 5


RDWP No. 6

RDWP No. 7


RDWP No. 8


Akhter Hameed Khan, "Ten Decades of Rural Development: Lessons
from India," 1978.
Lane E. Holdcroft, "The Rise and Fall of Community Development
in Developing Countries, 1950-1965: A Critical Analysis and an
Annotated Bibliography," 1978.
James E. Kocher and Beverly Fleisher, "A Bibliography on Rural
Development in Tanzania," 1979.
Enyinna Chuta and Carl Liedholm, "Rural Non-Farm Employment: A
Review of the State of the Art," 1979.
David W. Norman, "The Farming System's Approach: Relevancy for
the Small Farmer," 1980.



MSU RURAL DEVELOPMENT WORKING PAPERS

Benedict Stavis, "Turning Point in China's Agricultural Policy,"
1979.
Kathryn M. Kolasa, "The Nutritional Situation in' Sierra Leone,"
1979.
Benedict Stavis, "Agricultural Extension for Small Farmers,"
1979.
Steve Haggblade, Jacques Defay, and Bob Pitman, "Small Manufac-
turing and Repair Enterprises in Haiti: Survey Results," 1979.
Peter Riley and Michael T. Weber, "Food and Agricultural Marketing
in Developing Countries: An Annotated Bibliography of Doctoral
Research in the Social Sciences, 1969-79," 1979.
Harold M. Riley and Michael T. Weber, "Marketing in Developing
Countries," 1979.
Victor E. Smith, Sarah Lynch, William Whelan, John Strauss and
Doyle Baker, "Household Food Consumption in Rural Sierra Leone,"
1979.
Omar Davies, Yacob Fisseha and Claremont Kirton, "The Small-Scale
Non-Farm Sector in Jamaica..Initial Survey Results," 1980.


Single copies of the MSU Rural Development Papers and MSU Rural Development
Working Papers may be obtained free by writing to: MSU Rural Development Program,
Department of Agricultural Economics, 206 International Center, Michigan State
University, East Lansing, Michigan 48824; U.S.A.


*Jut of print.




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