Introduction to Markets

Introduction to Markets
Market any place or process that brings together buyers and sellers with a view to agreeing a price The basis of how an economy operates through production and subsequent exchange

Introduction to Markets
The range of markets:
Organised markets commodities e.g. rubber, oil, sugar, wheat, gold, copper, etc. Financial markets stocks, shares, currencies, financial instruments Goods markets the supply and demand of goods and services in general, food, clothing, leisure, houses, cars, etc. Factor markets the supply and demand of factors of production land, labour and capital

Introduction to Markets
A market does NOT have to be a physical place like a shop The market place consists of all those who have items/services for sale and all those who are interested in buying those items/services Many businesses have global markets because of the developments in technology

Introduction to Markets
Demand the amount Supply the amount consumers desire to producers are willing to purchase at various offer for sale at various alternative prices prices Demand reflects the Supply reflects the degree of value cost of the resources consumers place on used in production and items price and the returns/profits satisfaction gained from required purchase (utility)

Introduction to Markets
Factors affecting the efficiency of markets
The amount of information about the markets held by consumers and producers The ease with which factors of production can be put to alternative uses The extent to which price is an accurate signal of the true utility and true cost in determining the level of demand and supply (externalities) The degree to which firms hold monopoly power The degree to which property rights are clearly defined

Classification of markets
Markets may be classified a: On the basis of area as local, national and world markets; On the basis of time, as market price on any particular date or moment, Short period price, long period price, or secular markets covering a generation and; On the basis of nature of competition obtaining therein as perfect and imperfect markets.

Type of market
Different type of market structures: Perfect competition Monopoly Monopolistic competition Oligopoly

Perfect competition
It is the form of market where there is a large number of buyers and sellers of a commodity. Homogeneous product is sold with no control over price by an individual firm. There is one price that prevail in the market and the firms sell the product at that price. E.g. Wholesale vegetable, fruits market, bicycle parts industry.

Monopoly
It is the form of market in which there is a single seller or producer of a commodity. There are no close subsitutes of the monopoly product and there are legal,technical or natural barriers to the entry of new firms in the monopoly market. A monopolist has complete control over price and can also practise price discrimination. E.g.. Indian railways, Punjab electricity board in Punjab.

Monopolistic competition
It is the form of market Which like perfect competition, has a large number of buyers and sellers and allows the firm the freedom of entry and exit and Which would also allow product differentiation and partial control over price of the product. E.g.. Different brands of toothpastes or different brands of soaps.

Oligopoly
A form of market in which there are a few big sellers of a commodity, like The automobile industry in India.

Factors on which market structure depends

Number of buyers and sellers Nature of commodity Degree of price control Knowledge of market Mobility of factors

Size of the market

Character of commodities Nature of the demand for the commodity Development of the means of communication and transport Peace and security Currency and credit systems Policy of the state Degree of division of labour

Perfect and imperfect markets

Perfect competition It is wider in its scope and it has the following conditions. Large number of buyers and sellers Homogeneous product Free entry or exit Perfect knowledge Degree of control over price

What is rural area ?

Government agencies like IRDA (Insurance Regulatory And Development Agency and NCAER (National Council for applied Economic Research) define Rural as villages with a population <5000 with 75% male population engaged In agriculture etc. In parts of the developed urban sprawl has greatly reduced the areas than can be called rural

Definition of Rural Marketing

As per Thompson
The study of rural marketing comprises of all the operations & the agencies conducting them involved in the movement of farm produced food, raw materials such as textiles, from the farms to the final consumers & the effects of such operations on producers, Middlemen & consumers.

The above definition concentrates on goods from rural to urban. Rural Marketing is a two-way marketing process. Its content now encompasses inflow of products into rural areas for production or consumption purposes & also outflow of products to urban areas.

To Rural 1. Consumable & durable agricultural inputs. 2. Consumables like soaps, detergents, cosmetics, beverages etc From 3. Consumer durables like scooter, television sets, Electrical goods & Urban more. 4. Agricultural inputs like fertilizers, pesticides, seeds, Tractors, Power tillers etc. Rural artisans services & products (bamboo baskets, ropes, small agricultural tools & aluminum utensils. Rural artisans like blacksmiths, carpenters & cobblers cater to the professional & household needs of the rural people.

To Urban

From Rural

1. Agricultural & allied production (Food grains, oil seeds, cotton, sugarcane & others are consumed by urbanites after due processing. 2. Rural artisans & rural industry products. Handloom textiles, cottage industry products like agarbathi, safety matches & others.

Source CIRCA 1998 survey Report

Products
Nail polish Lip stick Demand for Face cream Shampoo Mosquito repellent

Rural India
Rs 270 million Rs 250 million 1099 tonnes 2257 tonnes Rs173million

Urban India
Rs 81 million Rs 131 million 426 tonnes 718 tonnes Rs 79 million

Some Myths about rural markets

Myth 1-Rural Market is a homogeneous mass
In reality it is a heterogeneous market. various tiers present depending on the incomes like big land lords, traders, small farmers, marginal farmers, labours, artisans, state wise variations in rural demographics are present viz literacy (kerala 90%,Bihar 44%) & population below poverty line is (orissa 48% Punjab 6%)

Myth 2-Disposable income is low

In reality nearly 50% of very Rich plus well off households in rural India.

(million)

(million)

(million)

Demographic classification Very Rich greater than10Lakh P/A

Urban 4.84

Rural 1.32

Total 6.16

Well off greater than 5Lakh P/A Total

29.45 34.29

27.36 28.68

56.81 62.97

% of total

54%

46%

100%

What makes Rural Markets attractive ?

Urban Markets are becoming increasingly complex, competitive & saturated A huge untapped Market - 6 lakhs villages with 700mn people. The rise in disposable income of the rural families Impact of Electronic Media satellite channels

Increase in literacy level as a result increase in white collar jobs in nearby towns & cities means more disposable income.
(Airtel ad - Baba, ghabrana mat. Is bheed mein, main khounga nahin ) Revolution in the Information Technology- sanchar dhabas Women empowerment-Project shakthi by HUL

Some impressive facts about the rural India

There are 42,000 rural super markets (haats) in India that exceed the total number of retail chain stores in the united states (35,000) In the year 2001-2002 the LIC sold 55% of its policies in rural India. Of the 20 lakhs BSNL mobile connections 50% are in small towns & villages.

The billing per cell phone in small towns in Andhra Pradesh is higher than the billing in the state capital.

Some impressive facts about the rural India

Of the 2 crore who have signed up for rediffmail, 60% are from small towns. Out of the one lakhs who have transacted on the rediff shopping site 50% are from small towns. Internet access in semi urban & rural areas has increased through the sanchar dhabas of BSNL operating in 3617 out of 6,332 blocks in the country. The 41 million kisan credit cards issued in rural India exceed the 40 million credit plus debit cards issued in urban India.

Classification of Indian Economy

Indian Economy

Rural Sector

Urban Sector

Agricultural Sector

Non Agricultural Sector

1.Crop Cultivation 2.Animal Husbandry 3.Dairying 4.Fisheries 5.Poultry 6.Floriculture 7.Horticulture

1.Industry-Cottage & village industry (khadi, Handloom, Crafts) 2.Business-Small shops, petty traders 3.Services-communication,Banking, Insurance, Education, Tailoring etc

Evolution of Rural Marketing

Phase-1(Before the 1960s) Agricultural produces like food grains & industrial inputs like cotton & sugar cane were the primary products which were marketed During this period, Scope for farm mechanization equipment (Tractors, pump sets) & agricultural inputs like fertilizers, seeds & pesticides were very limited. As the rural economy was in primitive stage, Marketing of products made by skilled workers in rural areas was an important activity.

Phase-II (1960s-1990)
The green revolution changed the face of rural india by using scientific farming practices with the advent of agricultural inputs & implements. During this period apart from conventional agricultural marketing a new area of marketing of agricultural inputs emerged. This period saw the emergence of companies such as M&M, Escorts, Eicher & others. During this period the marketing of rural products received considerable attention through agencies like Khadi & Village industry commission, Bunkar socities & handicrafts emporium.

Phase-III (After-1990s)
As a result of Indias industrial sector gained strength & maturity signifying the transition of agricultural society into an industrial one. The increased efforts of central & state government for rural development & rural reforms witnessed socio economic progress. All these factors resulted in the growth of rural markets for house hold consumables & durables.

Components of Rural Market

Market Difference 1. Diverse in Nature Environmental Difference 1. Small settlements 2. Low infrastructural level 3. Low density of population 4. Poor connectivity between villages Peculiar social relations 1. Individuals are better known & identified. 2. Social norms influences the individual more. 3. Caste influence is direct & strong.

Classification of Rural Markets -1

Rural market can be classified as below.

1.Consumer market - consist of individuals & households.

Products: Consumables - Food products, toiletries, cosmetics, textiles, garments & footwear.

Durables - Watches, Bicycles, television sets, radios, home appliance, two wheeler etc.

Classification of Rural Markets-2

2. Institutional Market Consist of Agricultural & allied activities, food processing, poultry farming, fishery, animal husbandry, cottage industries, health centers, schools, co operatives, NGOs etc. Products: Consumables: Agri inputs (seeds, fertilizers, pesticides) animal feed, fishnets, fuel (Diesel/Petrol) Engine oil, etc. Durables: Agri implements (Tractors, Pump sets & others)

Classification of Rural Markets-3

3. Service Market- consist of individuals, household, production firms. Services- Banking, Insurance, Credit, health care, tution, IT & communication, Power, etc

Needs of rural market

70% of Indias population lives in 627000 villages in rural area. At the highest income level there are 2.3 million urban households as against 1.6 million households in rural areas. Formal market in rural areas play an important role in improving agriculture marketing. They can:

Provide a location at which farmers can meet with traders. Increase retail competition by providing a convenient place where farmers can meet with consumer

Improve hygiene, if existing marketing activities are carried out in an insanitary manner

o Improve agricultural marketing

o Retail facilities. o Improve hygiene

o Reduce post-harvest losses o Provide a rural focal point

Indicators for Rural Market Growth

Scientific methods major impetus to Production of food grains Export on the rise Increase in agriculture and handicrafts Initiatives taken by banks for more branches and Kisan credit card to buy seeds, fertilizers, consumer goods on installment basis Reputed Companies helping in changing lifestyles Microsoft, Britania, Dabur, LG, Honda, Videocon Media creating an impact-creating awareness levels

Indicators for Rural Market Growth

Government Policies White Revolution Milk products
Yellow Revolution (poultry and edible oils) Blue Revolution Aqua culture

Employment Schemes JRY (Jawahar Rojgar Yojna,

PMRY, Small Industries Training, Ruiral Electrification, Spend on Health and Sanitation,

Medical and Health, Primary Education

Credit card for farmers

Waiver of Loans

Initiatives by leading organization in spreading awareness

Low per capita income Low disposable income

PROBLEMS IN RURAL MARKETING

Inadequate fixed income Majority depends on Agricultural Income Acute dependence on monsoon Consumption linked to harvest Low awareness Infrastructure problems Roads, power Too many languages Geographic Spread Communication- difficult & expensive

Needs of urban market

Rural population depends on these urban services. Impact of urbanization on food security Impact of polarization on small and intermediate urban centers.

Challenges of rural market

Most of the products are still sold at the rural haats. There is limited awareness in the global market. The exhibition and melas are not frequent phenomena. Consumers are being cheated at various stages.

difference between rural and urban

1. Rural vs urban consumers (foreign products)
RURAL CONSUMER URBAN CONSUMER a) Consumer behavior: In urban market customer In rural market he thinks of thinks of brand and its in so many ways, such as updates. money, durability, buying capacity and so on.

2. Rural vs urban market

RURAL MARKET a. Infrastructure Facilities like electricity, roads and building, educational institution, etc are easily implemented and are available URBAN MARKET in rural market everything takes a good amount of time.

b. Economy Here the economy means, the The income level are reliable. earning capacity of rural market. Hence they are fixed The income levels cannot be a fixed one c. Lifestyle

d. Socio-culture background
e. Availability or reach h. Competition

3. Product and services.

Product & services a. Technical advantages b. Quality / Performance c. Wide choice of size d. Wide choice of model

How is rural india different from urban india ? 1. Average levels of income in rural area is lower than urban area.
Income bracket
Q5 Q4 Q3 Q2 Q1

urban
100 45 30 20 11

rural
51 22 15 11 7

Rural Income as % of urban

51% 49% 50% 55% 64%

Rural india a. Cosumption the maximum consumption in rural pattern occure around harvesting season.

Urban India the bulk purchase in urban area is concentrated during festivals.

b. Ability to pay back loan because of seasonal nature of earning, the ability of rural consumer pay back loan is lower.
c. Awareness of branded product rural consumers trust domestic product more than international product thus their awareness of branded product is relatively low. d. Channel of communication haats , melas, mandis and mout of word are the channel used for promotion of product.

here it is higher.

consumer in urban area is more bran conscious and because of this they are more aware of branded product.

television advertising and print media are the primary mean of sale promotion in urban area.

Scope of rural markets in india

The rural india market, which accounts for nearly 70% of the total number of households in the country, witnessed a 25% annual growth in consumer durables in 2008, while the urban market reflected an annual rate of 7-10%. with a total population of more than 750 million, and covering around 95% of he country. Rural area have a huge customer base. Due to increase in urbanization the rural population percentage is expected to fall. lets look at some factors that will result in increased purchasing power in rural india.
a) increase in MSP in last couple of years have increased purchasing power in rural and semi urban areas of the country. the primary objective of NREGS is to provide gainful employment to nearly 45 million rural families that live below the poverty line. The scheme guarantees 100 days employment.

52% of the employees who benefited from the sixth pay commission live in C and unclassified cities. Under the pay commission , the average salary has been increased by 21%. - in the last budget the government waived agriculture loans to extent of 100% for around 30 millions small and marginal farmers and 25% to the other farmers

Regional rural banks have become a crucial part of the rural credit structure in India, created in 1975. Kissan credit cards (kcc) aim to provide credit support to farmers in rural areas. Currently, there are 72 million enrolment under kcc in rural area. Co-operative society and schedule commercial bank have also expanded their networks, which currently stands at 11,367 offices in rural area.


Currently, 60% of the villages are connected with road networks. As a part of the Eleventh Five Year Plan, the government plans to construct 130,000 kilometers of new rural roads and has earmarked around 30% of the total public investment for rural infrastructure development. The Pradhan Mantri Gram Sadak Yojana (PMGSY) aims to connect all villages with a population of 500 and above (250 in the case of hilly and desert areas) with allweather roads. The target is to construct 146,000 kilometers of rural roads and upgrade another 196,000 kilometers. Telecom penetration is a fair representation of infrastructure advancement. It has increased significantly in rural areas in the last decade with these markets contributing over 70% to the total growth in the country's subscriber base. In coming years, investments in rural telecom infrastructure are expected to result in More than 250 million subscribers by FY15.