Notes from Uitm Jengka

1. Mohd Zahid Laton, FPP UiTM Pahang
CHAPTER 1
INTRODUCTION
1. The agricultural sector has been one of the most important components of
the economy. The increasing trend of agricultural production has brought new
challenges in terms of finding market for the surplus. There is also a need to
respond to the challenges and opportunities, that the global markets offer in the
liberalised trade. To benefit the farming community from the new global market
access opportunities, the internal agricultural marketing system in the country
needs to be integrated and strengthened. Agriculture and agricultural marketing
need to be re-oriented to respond to the market needs and consumer preferences.
2. Marketing. Marketing means working with markets, which in turn means
attempting to actualize potential exchanges for the satisfying human needs and
wants. Thus we return to our definition of marketing as human activity directed at
satisfying needs and wants through exchange processes.
3. Farm’s marketing. Activities related to the marketing and production of
agricultural products produced by an organization or individual farmer. Such
activities in the process of farm’s marketing include packaging, selection of brands
name, promotional strategies, price policies, marketing channels and other policies.
4. Agricultural marketing. Agricultural marketing generally means the
marketing of agricultural products to the first handler. In macro (social)
perspective, is the performance of all business activities involved in the forward
flow of food and fiber from farm producers to consumers. It includes all the
activities associated with agricultural production and with food, feed, and fiber
assembly, processing, and distribution to final consumers, including analyses of
consumer’s needs, motivations, and purchasing and consumption behavior.
5. Agricultural marketing circle. It consists of;
5.1 First circle. Refers to the final consumer or targeted customer.
5.2 Second circle. Factors that can be controlled known as marketing mix
(product, price, place, and promotion).
5.3 Third circle. Environmental factors that cannot be controlled
(political and legal, economic, law and regulation, social & culture,
technologies, & demographic).
6. Agribusiness marketing. Agribusiness marketing has come to mean the
marketing operations from the first handler to the final consumer-beginning with
suppliers to farmers and covering producing, processing, and marketing to the final
consumer.
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2. Mohd Zahid Laton, FPP UiTM Pahang
7. Marketing utility. Utility will refers to the value of marketing which adds to
goods and services. The marketing function will allow to create utility. There are
five types of utilities, namely;
7.1 Form utility. To change the raw materials to a finished products.
Example, palm oil bunch to edible cooking oil.
7.2 Time utility. Making the products be available during the convenient
hours.
7.3 Place utility. Making the products and services available in
convenience location and place.
7.4 Possession utility. Making the exchange of goods and services
between the buyers and sellers.
7.5 Information utility. To informs the buyers that the products exists,
how to use it, the price and other related information of the products
availability.
8. Marketing concept. This concept has dominated the marketing strategies
for the past 40 years ago;
8.1 The Production Concept. Kotler (1996) has defined the production
concept as a philosophy that holds consumers who will favor those products
that are available and highly affordable and therefore management should
concentrate on improving production and distribution efficiency.
8.2 The Product Concept. The product concept as defined by Kotler
(1996) holds that the consumer will favor those products that offer the most
quality, performance and features and therefore the organization should
devote its strategy to making continuous product improvement.
8.3 The Selling Concept. Kotler (1996) has defined the selling concept,
which says that the consumer will not buy enough of the organization’s
product unless the organization undertakes substantial selling and
promotion efforts.
8.4 The Marketing Concept (1950’s – 1960’s). The marketing concept
as defined by Kotler (1996) is that the key to achieving organizational goal is
for the organization to determine the needs and wants of the target market
and to adapt itself to delivering the desired satisfaction more effectively than
its competitors. The product concept and the selling concept have given way
in many successful firms to the marketing concept.
8.5 The Societal Marketing Concept (1960’s present). Kotler (1996)
has defined that the societal marketing concept holds that the organization’s
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task is to determine the needs, wants, and interest of target markets and to
deliver the desired satisfaction more effectively and efficiently than
competitors in a way that preserves or enhances the consumer’s and
society’s well-being.
9. Importance of marketing. There are several important reasons to study
marketing; marketing plays an important role in society, marketing is important to
business, marketing offers outstanding career opportunities, and marketing affects
our life every day.
9.1 Marketing plays an important role in society. The total population
of Malaysian exceeds 28 million people. Think about how many transactions
are needed each day to feed, cloth, and shelter a population of this size. The
number is huge. And yet it all works quite well, partly because the well-
developed Malaysian economic system efficiently distributes the output of
farms and factories. Marketing makes food available when we want it, in
desired quantities, at accessible locations and in sanitary and convenient
packages and forms (such as instant and frozen foods).
9.2 Marketing is important to business. The fundamental objectives of
most business are survival, profits, and growth. Marketing contributes
directly to achieving these objectives. Marketing includes the following
activities, which are vital to business organizations: assessing the wants and
satisfactions of present and potential customers, designing and managing
product offerings, determining prices and pricing policies, developing
distribution strategies, and communicating with present and potential
customers.
9.3 Marketing offers outstanding career opportunities. Marketing
offers great career opportunities in such areas as professional selling,
marketing research, advertising, retail buying, distribution management,
product management, product development, and wholesaling. Marketing
career opportunities also exist in a variety of non-business organizations,
including hospitals, museums, universities, the armed forces, and various
government and social service agencies.
9.4 Marketing affects our life every day. Marketing plays a major role in
our everyday life. We participate in the marketing process as a consumer of
goods and services. About half of every dollar we spend pays for marketing
costs, such as marketing research, product development, packaging,
transportation, storage, advertising, and sales expenses. By developing a
better understanding of marketing, we will become a better-informed
consumer. We will better understand the buying process and be able to
negotiate more effectively with sellers.
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4. Mohd Zahid Laton, FPP UiTM Pahang
10. The importance and interdependence of the food and fiber system. The
various foods and fibers are the commodities included in agricultural marketing
texts although food usually receives the most attention. It may be helpful to think of
food and fibers as moving to the world consumers through three sectors;
10.1 Food and fiber originate in a farm sector where livestock, poultry,
fruits, vegetables, cotton, tobacco, flax, corn, wheat, other grains, and
specialty crops are produced.
10.2 More than 80% of the gross farm income is typically spent in the
input sector on items such as feed, fuel, and fertilizer. These production
expenses have risen from time to time.
10.3 Food and fiber than move through a marketing sector involving
many marketing functions, such as transportation, processing, and storage,
which are more expensive than the production costs in the farm sector.
11. The marketing bill (the costs in the marketing sector) costs much more to
market most agricultural products than it costs farmers to produce them. Modern
farming is dependent on the market sector. There is no way that farmers in our
highly industrialized and urbanized society could supply world consumers without
the facilities, efforts, and expertise of the market sector.
12. The input sector reminds us that modern farming is highly dependent on
industrial inputs such as tractors, combines, petroleum, pesticides, and fertilizer. In
fact, the purchased inputs of non-farm origin are larger in costs than the inputs
(feed, seed, and livestock) supplied by other farmers. Agricultural marketing focuses
on the market sector, which is a very important part of the entire food and fiber
system. It is also a very interdependent part.
13. The development of agricultural marketing. Marketing is related to the
business activities for the purposes of the consumer satisfaction in exchanges of
goods and monetary value between the producer and the consumer. Scope of
marketing is not only focused to the buying and selling but it also includes activities
such as transportation, storage, grading, financing, risks involvements, products
design, price determination, promotions, distribution and developing the marketing
channels. A brief history of agricultural marketing begins with;
13.1 Trade among tribes. Marketing begin in tribal nomadic cultures.
Different tribes lived in areas that held different fruits, game, and fish; from
these differences came products that could be traded. Supplies beyond a
tribe’s own needs had a low marginal value but were of higher value when
traded for other goods.
13.2 Appearance of market squares. With the advent of village life,
following the development of agriculture, specialized village craftspeople
appeared. Eventually a block of land in each village came to be designed as
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the market square. Here farmers brought products for display and sale to the
villagers, and craftspeople showed their wares for farmers or others to buy.
13.3 Regional and national market centers. The modern counterpart of
the market square is the regional mall shopping center, housing a wide array
of dealers and products under one vast roof. At a wholesale market,
suppliers gather so that retailers may see, in one place, the kinds of
merchandise offered and their prices.
14. The role of marketing in the economy. In any economic system there are
always barriers that prevent producers from efficiently satisfying consumer needs.
These barriers include separations of space, time, information, value, and
ownership. The role of the marketing system is to bridge this gap between
producers and consumers needs and increase the efficiency of the marketing
system.
14.1 The most familiar marketing functions to most of us are the buying
function and the selling function. They must be performed in the marketing
system if any product exchanges are going to occur. They involve overcoming
separations of ownership by transferring legal title of the product from the
seller to the buyer.
14.2 The storage function overcomes the separation of time by
maintaining the product in good condition between production and final sale.
14.3 The transportation function overcomes the separation of space by
moving the product from where it is produced to where the consumer is
willing to purchase it.
14.4 The processing function involves the transformation of a commodity
to a form that has greater value to consumer. Processing is included since
what is produced in a free market economy should be determined by the
needs of consumers. One of the purposes of the marketing system is to
transmit consumer desires to producers so they can provide the products
that consumers want. How the products are produced is a technical matter,
but what to produce is a function of marketing.
14.5 The grades and standards function involves the development of
uniform descriptions of commodities and products. It means that buyers do
not have to physically inspect each shipment of product before they purchase
it. A buyer can be assured that when he orders a certain quantity of a Grade
A product over the telephone, he knows exactly the physical specifications of
the product he will receive.
14.6 The financing function involves providing the funds necessary to
pay for the production and marketing of a product before the money is
received from its sale.
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6. Mohd Zahid Laton, FPP UiTM Pahang
14.7 The risk taking function involves assuming the risk of loss between
the time of purchase and sale. Various forms of insurance are available to
guard against adverse changes in price as well as physical losses arising from
such things as fire, flood, theft, and spoilage. The efficiency of the marketing
system is also greatly enhanced if there is wide dissemination of information
on prices, inventory levels, embargoes, or anything else that could influence
the buying and selling of products.
14.8 The market information function involves the development of any
means to disseminate this type of information.
15. The structure of product in agricultural production. The traditional
structure of farm production and farm market can each be described in terms of a
single identifying characteristic; product and production.
15.1 Characteristics of the products.
a. A raw material. The output of agriculture is largely a raw material
that will be used for further processing. This processing may be
limited, as in converting livestock into meat. It may be highly
complex, as in converting wheat into wheaties. Regardless of the
complexity, however, the product sold by the farmer soon loses its
identity as a farm product becomes simply food.
b. Bulky and perishable products. Compared to most other
products, agricultural products are both bulkier and more
perishable. Bulk affects the marketing functions concerned with
physical handling. Products that occupy a lot of space in relation to
their value almost automatically raise unit transportation and
storage costs. A truckload of drugs would be considerably more
valuable than a truckload of wheat. In this sense, fruits, vegetables,
grain, and meats are all quite bulky. Perishable, too, can be
measured only in relation to other products. All products
ultimately deteriorate. Some agricultural products, like fresh
strawberries or fresh peaches, must move into consumption very
quickly or they completely lose their value. Such products as cattle
or poultry continue to grow and change if storage in the form of
withholding them from market is attempted. Wheat, on the other
hand, can be stored for a considerable length of time without much
deterioration. Even the most storable agricultural products,
however, are usually more perishable than other industrial
products. Perishable products require speedy handling and often
special refrigeration. Quality control often becomes a real and
costly problem. Quality control often becomes a real and costly
problem. From the farmer’s viewpoint, withholding from the
market is extremely difficult; when the products are ready, they
must move.
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7. Mohd Zahid Laton, FPP UiTM Pahang
c. Quality variation. The general quality as well as the total
production of agricultural commodities varies from year to year
and from season to season. During some years the growing
conditions are such that the crop in general is of high quality. In
other years, unfavorable conditions prevail and the crop is of
much lower quality. Such variations in the quantity of production
make it very hard to apply uniform standards for grades from year
to year. If the quality of the apple crop is uniformly high, the
standards for top-grade apples may be strictly adhered to. On the
other hand, if the quality of the apple crop is poor, grading
standards may be relaxed somewhat to permit some apples to be
marketed as top quality. Variations in the quality may also change
marketing patterns. For example, during a year in which corn does
not mature properly, large amounts of ‘soft’ corn are harvested.
The corn will spoil if it is not used before the following years.
Farmers may then buy additional feeder stock in order to utilize
this corn. The marketing pattern of these feeders, however, will be
different from the usual pattern because the feeding period is
adjusted to the condition of the corn.
15.2 Characteristics of production.
a. Total output. The long run trend in food production is upward.
The rising food supply per capita has been a mixed blessing for
farmers. On the one hand, it is dramatic proof of the efficiency of
agriculture and its contribution to the rising standard of living. On
the other hand, this tremendous productive capacity of agriculture
has frequently depressed farm prices and incomes. Maintaining an
acceptable balance of rising food supplies and fair farm prices has
been a difficult task for food policy.
b. Annual variability in production. There are years where the
situation of increasing, decreasing, and stable farm output. These
are caused by farmer responses to prices and other uncontrollable
factors such as weather and disease. Such changes in farm output
influence the food marketing process and the use of the food
marketing system’s capacity. Year to year changes in farm supplies
have a significant impact on the purchase prices, need for storage
facilities, and plant utilization rates of food marketing firms. The
desire to reduce the risks and uncertainties of fluctuating farm
supplies is one of the forces creating closer contractual ties
between marketing agencies and farmers.
c. Seasonal variability in production. In addition to the annual
production variability, much of agricultural production is highly
seasonal. Livestock receipts may vary substantially throughout the
year. The harvest of such crops as paddy, fruits, and vegetables is
crowded into a relatively short period. Egg and poultry production is
larger in seasonal fest and remain stable after the period. To the
extent that the product is storable, storage facilities must be furnished
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to hold the product until it is consumed. This means that during part
of the year, storage will be used at near capacity, at other times it will
be almost empty. If the product cannot be stored it must either be
processed or consumed immediately. This may result in processing
plants running at capacity for some periods and well below capacity,
or even shut down, for other periods. If the product must move
directly into consumption, transportation and refrigeration facilities
must be available immediately. These situations affect the costs of the
marketing process.
d. Geographic concentration of production. Although a variety
of farm products is produced in all states, there is increasing
geographic specialization of farm production. For example in
Malaysia, north area tends to specialize in the production of
commodities for which its resource base is best suited: paddy, fruits,
e.t.c. The marketing system, of course, must adjust to these changing
geographic production patterns.
e. Varying costs of production. There is no single cost of
production for all farmers. Farmers cost of production are affected by
climate, technology, farm size, and individual managerial skills.
Consequently, the cost of producing a farm commodity varies widely
by regions and among farmers. Most studies have found that the
average cost of farm production falls as small farms grow larger, but
there is a point at which average cost do not fall further as farm size
increase.
f. The farm supply industry. The farm supply industry provides
such agricultural inputs as chemicals, seeds, machinery, feeds, capital,
labor, land, and so on. These may be supplied by the farm or
purchased from the industrial or farm supply sectors. The growth and
importance of the farm input sector affects farmers in several ways. It
has added another market for the farmer to operate in. The farm input
markets have also been responsible for much of the dramatic gain in
agricultural efficiency in recent years, especially the chemical and
machinery markets.
16. To ensure the effective of the product and production structure, thus
marketer need to have a proper management practices, proper timing applications
of insecticides, the need of storage facilities, the availability of transportation, and
credit facilities.
17. Strategies of National Agricultural Policy 1992-2010. In 1984, NAP
introduced by Malaysian government because of recession, but agriculture still
plays an important role in the GNP growth of the country even-though it has decline
in its production due to industrialization and urbanization.
18. Problems faced by agriculture;
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9. Mohd Zahid Laton, FPP UiTM Pahang
18.1 Gross domestic product has declined in the contribution even-though
the value-added has increased.
18.2 Land expansion has been hindrance because some of the arable land
has been allocated for industrialization, urbanization and housing projects.
18.3 Market protection less has been taken into consideration as compared
to automobile industries.
18.4 Fiscal incentives did not favor in agriculture so that’s why large
companies did not enjoy as compared to manufacturing industries.
19. Objectives of the NAP (1992-2010);
19.1 To achieved a balanced development between agriculture and other
sectors such hunting & forestry, fishing, mining & quarrying, electricity, gas &
water supply, construction, wholesale & retail trade, hotel and restaurants,
transport, communication, education, financial, public administration, health
and social work in the country.
19.2 To enhance the economics sectors and structural integration in
particular with the manufacturing sectors.
19.3 To achieve a higher level of expansion and development of the food
industry sectors.
19.4 To achieve a wider and effective participation of the Bumiputra
participation in support services in the fields of commercial agricultural,
agribusiness, trade, distribution, selling, extension, institutional development
and marketing.
19.5 To ensure a sustainable development in agriculture.
19.6 To maximize income through efficient utilization of resources and
revitalization of sectors for economic development.
19.7 To developed new land and to enable for farm unit development,
efficient managerial practices for new crops growing.
19.8 To enable development of in-situ land will be carried out to resolve
unproductive, inefficient and low level of productivity of land to be
developed. Example; FELCRA, RISDA, KESEDAR e.t.c.
20. Strategies for achieving the NAP objectives;
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20.1 Optimizing the resources uses. Land, labor, capital and management
has to be use effectively. Idle land should be develop, division of labor
should be analyzed and given the priority for development and usage,
managing farm management through skills, and increased farm sizes and
mechanism while capital such land owned by farmers has to bring together
and fully utilized, thus will reduced the cost of maintenance.
20.2 Human resources development. The use of technologies in the
agricultural sector such as mechanism in planting and harvesting will
improved efficiency in used of labor. Manpower training is required to
handle such cases, efficient agribusiness in marketing, and agro-based
processing should also be included in the development of human resources.
20.3 Enhancement of research & development, and technological
diffusion. This would maintain the competitiveness of the agricultural
sectors especially in research and development. For example; rubber, palm
oil and rice, and other product. It must be market driven, commercially
oriented and environment friendly.
20.4 Greater role of the private sectors. The greater role of the private
sectors in the land development for agricultural purposes, support by
financial strength and investment, incentives, promotion and packages will
enhance the sale of products for export purposes.
20.5 Reformed marketing strategies. The need of reformed in the
marketing strategies of the producers. Now the products should be view as
commodity and plays it role in the export of the products to various
countries like Middle East, African, Latin America and China and other
countries. New product development should be venture into the market and
credit facilities can be extended and provided to the buyers.
20.6 Expanded food production. Producer will look into the expansion of
food products to the needs of the locals and for export purposes. The finished
products should be first caters for the demand of the domestic populations.
The products produced must be competitive in nature.
20.7 Development of viable and self-reliant farmer institution. The
development of institution which caters into the needs of the farmers
especially when supplying the products to the consumers is considers. Some
farmers are unable of doing so because lack of facilities such as financial
strength, marketing, storage and transportation purposes. The need of this
institution is highly required so as to less the burden of the farmers.
21. 3rd National Agricultural Policy ( NAP 3 ). The new NAP3 will focus on new
policy trust, strategies, and implementing mechanisms will be emphasized to
national concern on agricultural development an economy as a whole.
22. Objective of the policy;
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22.1 Enhance food security.
22.2 Increase productivity and competitiveness of the agricultural sector.
22.3 Linkages with other sectors.
22.4 Create new sources of growth for the sector.
22.5 Conserve and utilized natural resources on a sustainable basis.
23. Strategies of the NAP3. This strategy will be focused on the upstream
primary agriculture to enhance the production and marketing of the agricultural
and forestry products. The strategies are;
23.1 Agro-forestry approached. Agriculture and forestry are mutually
compatible and complementary for joint development. This approached will
addressed the increasing scare resources and raw material availability.
23.2 Product based approach. Product based approach address on key
products and market identified based on demand and supply, preferences,
and potential consumers.
24. The institutional bodies comprise the following;
24.1 The establishment of public-private sector coordinating council
comprises of federal agencies state government and private sectors. The
council will steer guide and review the progress of the policy.
24.2 The establishment of a high level planning and implementation
committee and comprises of representatives from state government, federal
agencies and private sectors.
24.3 The committee will undertake a close relationship for the
implementation process.
24.4 A review and rationalization of government institutions to enhance
the effectiveness of development programs.
24.5 An allocation of resources, funds and manpower for the realization of
the policy.
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