Development of Agribusiness Enterprises - Asian Productivity ...

4. MARKETING PROMOTION OF AGRIBUSINESS
INTRODUCTION
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Dr. Togar A. Napitupulu
Secretary
Directorate General of
Primary Industry and Marketing
Ministry of Agriculture
Jakarta, Indonesia
Agribusiness, “the total sum of all operations involved in the manufacturing of farm
supply, production, operations on the farm, processing and distribution of farm commodities
and items made from them” (David and Goldberg, 1957), is an important sector in the
economy of many Asian countries. It contributes substantially to GNP and rural employment.
Since most agribusiness activities are in the rural areas, the development can be an effective
instrument in slowing down urbanization. Furthermore, the promotion of agribusiness can
become a useful means of alleviating poverty and a major source of foreign exchange
earnings. In some countries, it is considered to be strategically important to national security.
Many activities are involved in bringing products from the farm to consumers. The
performance of these activities is usually called the “marketing process”. To be precise, the
marketing of agricultural products is defined as: “the performance of all business activities
involved in the flow of agricultural products and services from the point of initial agricultural
production until they are in the hands of consumers” (Kohls and Uhl, 1990). In other words,
all the business activities along the chain from the farm to the consumer are marketing
activities. These marketing activities or businesses are basically necessary and productive;
that is, they create form utility, place utility, time utility, and possession utility.
Marketing involves many functions: an exchange function such as buying or
assembling, and selling; a physical function such as storage, transportation and processing;
and facilitating functions such as standardization, financing, risk bearing and market
intelligence. Along the marketing chain many institutions are also involved: merchant
middlemen such as wholesalers and retailers; agent middlemen such as brokers and
commission men; speculative middlemen; processors and manufacturers; and facilitative
organizations. The activities along the marketing chain are, in many cases, necessary.
However, efficiency – both in terms of operational and pricing efficiency – can be improved
at each step. The objective of operational efficiency, in general, is the reduction of marketing
costs while the objective of pricing efficiency is to fully represent consumers’ preferences,
direct resources to their best uses, and coordinate selling and buying activities. Promoting
agribusiness marketing, therefore, is promoting efficiency along the marketing chain.
In an effort to improve marketing efficiency, some important characteristics of
agricultural production and marketing need to be understood. The majority of agricultural
operations in Asia are family-operated and are relatively small. In some countries, corporate
farms can be found. The implication of such a characteristic is the increased cost of
assembling and frequent difficulties in supplying standardized products. Farm products are