AGRO ENTERPRISE DEVELOPMENT

THE MARKET FACTOR

IN

AGRIBUSINESS PROJECT DESIGN

Ashok C. Khosla
Agribusiness Consultancy agrioils@gmail.com
 THE MARKET FACTOR

CONSUMER ANALYSIS

ANALYSIS OF THE COMPETITIVE ENVIRONMENT

THE MARKETING PLAN

BUSINESS DEMAND FORECASTING

 CONSUMER ANALYSIS – 1

WHO ARE THE POTENTIAL CONSUMERS

What are their economic characteristics

(income levels, variability)

What are their socio-cultural characteristics

(ethnicity, language, class, education)

What are their demographic characteristics

(regional location, urban or rural, age, sex)

What are the market segments

What are the possible forms of the processed product

What is the products positioning options amongst the options

What do the various segments imply for the marketing plan

 CONSUMER ANALYSIS – 2

WHY WOULD CONSUMERS BUY THE PRODUCT

What physiological, sociological, psychological needs would the product meet

What are the expressed reasons for purchase that are being met
(sensory appeal, sustenance, status, convenience, necessity)

What is the relative importance of the needs and reasons

What are implications for the reasons for distribution options & marketing plan
 CONSUMER ANALYSIS – 3

HOW WOULD CONSUMERS BUY THE PRODUCT

Which individuals would make the purchase decisions

What are their roles in the decision making unit

What are the appropriate methods for disseminating information within the unit

Would the purchases be impulse or planned

Would the purchases be frequent or seldom

Would the purchases be seasonal

Where would the purchases be made

What is the implication of this buying process on the marketing plan

 CONSUMER ANALYSIS – 4

WHAT ARE THE MARKET INFORMATION & DATA COLLECTION NEEDS

What are the data needs

What are the data sources (primary, secondary)

What methods of data collection were used (formal, informal)

How valid is the research design for data collection

How reliable are the data sources and collection methods

What is the cost of collecting additional data

Do the benefits expected from incremental information outweigh additional cost

Will small scale industries need assistance to conduct market research

COMPETITIVE ENVIRONMENT ANALYSIS – 1

WHAT IS THE PRODUCT’S MARKET STRUCTURE

Who are the competitors

(public, private, regional, national, international, old, new)

What are the likely effects of new entrants & substitute products

What are the chances of raw material suppliers integrating forward

What are the chances of distributors integrating backwards

How many competing firms are there

Where are the competitors located relative to markets and raw materials

What size are the competitors assets and sales

COMPETITIVE ENVIRONMENT ANALYSIS – 2

What is each firm’s market share

How have these shares changed over recent years

How serious are the barriers to entry

What are the barriers to entry

(scale & absolute cost advantages, vertical system control, brand franchises)

What is the basis for competition in the industry

What is the nature of cost advantages

What are the possibilities of controlling costs

Are efficiency gains possible by reconfiguring resources or activities

COMPETITIVE ENVIRONMENT ANALYSIS – 3

What opportunities exist to gain advantage through procurement operations

What are the likely cost reductions by economies of scale, capacity utilization

What are the cost effects of plant location

To what extent can cost advantages make price advantages possible

How sensitive are consumers to price

How prevalent is price discounting

How sensitive are consumers to product quality

How do consumers define quality and value

 COMPETITIVE ENVIRONMENT ANALYSIS – 4

What are the bases for product differentiation

How sensitive are consumers to brand names

What kind of special services are given to distributors or retailers and how often

Can differentiation be achieved through raw material or process ingredients

What are differentiating innovations in design, process technology, packaging

What stage of the life cycle is the product in

What implications does that stage hold for cost advantage

What is the cost of achieving differentiation

COMPETITIVE ENVIRONMENT ANALYSIS – 5

HOW DO POLICY ACTIONS AFFECT THE COMPETITIVE ENVIRONMENT

What effect will import or export duties or quotas have on competition

What effect will an overvalued exchange rate have on competitiveness

(import competition, cheaper imported inputs, export competitiveness hurt)

Will an undervalued exchange rate have the opposite effects

Will an undervalued exchange rate attract foreign investment & new competition

What are the competitive implications of subsidies to consumers, producers, exporters

What are the competitive effects of state-owned enterprises operating in the industry

What are the competitive consequences of regulatory measures

(antitrust, food safety, capacity licensing, patents)
 THE MARKETING PLAN – 1

WAS THE PRODUCT ADEQUATELY DESIGNED

What product characteristics do consumers want

Which characteristics are most important

Will cost of quality upgrades keep the product within consumer’s price range

Have the product concepts and prototype been tested with consumers

Do small-scale industries need government assistance with product design

What were the results of the product design test; were adjustments necessary

Was the final product market tested; what were the results

Does the end product meet consumer needs

 THE MARKETING PLAN – 2

WAS THE APPROPRIATE PRICING STRATEGY ADOPTED

Is cost-plus pricing feasible

Are prices regulated

How is the mark-up calculated

Is penetration pricing needed to overcome entry barriers

Would lower prices expand the market enough to offset the lower profit margins

Would predatory or pre-emptive pricing be legally or socially responsible

Would loss-leader pricing expand sales of other products to offset losses

Is the product sufficiently new, differentiated & singular for price skimming
 THE MARKETING PLAN – 3

Is there an industry price leader

If so, what are the benefits of deviating from the leader’s pattern

What are the effects of controlled or subsidized prices

How do you manage price negotiations with the government

Can the project make products that are not controlled

What are the pricing policy implications as competitive to neighboring countries

Will the pricing strategy work given the competitors strategy

How does the firm expect the pricing strategy to change over time
 THE MARKETING PLAN – 4

WAS THE PROMOTIONAL STRATEGY FORMULATED

What is the market-segment audience

What differences are there amongst members of the decision-making unit

Will promotion be directed towards end consumers as a “pull” strategy

Will promotion be directed towards distributors as a “push” strategy

Is the promotion message consistent with consumer & the competitive analysis

What are the consumer’s informational needs

What does the firm expect the promotional message to do

Will the consumers misinterpret the message or misuse the product

 THE MARKETING PLAN – 5

How will increased consumption affect the nutritional well-being of low-income

consumers

Will the promotion stimulate primary or secondary demand

Would branding increase selective demand

Are quality control procedures in processing & procurement adequate to permit branding

Is the promotional vehicle an indirect communication or direct, personal selling

Are the promotional vehicles consistent with the character of frequency

What is the cost of promotional vehicles relative to their coverage

Would cost benefit ratio of the promotion improve if a combination of vehicles was used
 THE MARKETING PLAN – 6

WILL DISTRIBUTION LINK THE MANUFACTURER TO THE MARKETPLACE

What is the structure of the distribution system (length of the channels)

How many distributors are at each level of the channels

What kinds of distributors are at the wholesale and retail levels

Who performs the logistics (transport, assembly, repacking, storage, inventory)

Who performs the service functions (financing, promotion, info collection)

Should the firm use existing institutions for distribution

Should some functions be performed directly via forward vertical integration

Can small scale industries economically perform these functions collectively

 THE MARKETING PLAN – 7

To what extent will integration permit the firm to realize cost advantages of differentiation

What are the cost, quality and dependability of existing distribution services

Are the distributors capable and willing to meet the consumers’ needs

Where is the power in the distribution channels

Why is the power there

How will the power distribution affect the project

What capital and management services would be needed for forward integration

What are the social, political or legal barriers to integration

Has the distribution system adopted intensive, selective or exclusive retail outlets

Is choice consistent with product characteristics, market segment, consumer buy process
 THE MARKETING PLAN – 8

IS THE MARKETING MIX INTEGRATED INTO A VIABLE BUSINESS PLAN

Are the marketing elements internally consistent

How will the marketing plan for this product affect company’s other line of products

Is marketing plan compatible with finance, organization, production, procurement plans

What does the firm expect the competitive response to the marketing plan to be

How will the marketing effort respond to the competitive response

 DEMAND FORECASTING – 1

ARE THE FORECASTS BASED ON SOUND DATA

Are the data sources consistent

Are the units of measurement standardized

Is the data disaggregated sufficiently to project market segment & total demand

Have the relevant secondary data sources been used

Was market research used to generate primary data

How were the data collected, were they verified and were they representative

What are the underlying assumptions of the data projections

How sensitive are sales and profit estimates to changes in the assumptions
 DEMAND FORECASTING – 2

ARE THE FORECASTING METHODS APPROPRIATE

Who provided the judgmental estimates

What was the basis of their expertise

Can other relevant opinions be garnered

If trend projections were made how representative were the historical series

Are the financial data in real or current terms

Were seasonal, secular, cyclical or random variations in the series considered

Were moving averages or exponential weighting techniques employed

If regression analysis was used was it simple, multiple, arithmetic or logarithmic

 DEMAND FORECASTING – 3

Were estimates made of price and income elasticity of demand

If an econometric model was used what were the variables

What casual relationships are used in the model

Are these assumptions reasonable

Is the accuracy of the projection reasonable given the risk and uncertainty

How much could the accuracy be increased by more sophisticated techniques

Would the incremental accuracy justify the added cost

Is the previously used forecasting method still appropriate

How do the forecasting techniques rank in cost, speed, skill & data requirement
 THE MARKET FACTOR IN REVIEW

WHAT EXACTLY SHOULD THE PROJECT BE DOING?

DOES IT CATER TO EXPECTED CONSUMER BEHAVIOUR?

IS A LASTING ECONOMIC PURSUIT POSSIBLE?

WHAT ARE THE IMPACTING CRITICALITIES ASSOCIATED WITH:

PROCUREMENT
PROCESSING
FINANCING

A CLEARER IDEA OF THE ANTICIPATED OUTCOME OF THE PROJECT