Agroindustrial project analysi

THE MARKETING FACTOR 43InstitutionalconstraintsThe competitive environment is also influenced by constraintsfrom economic, health, political, and legal institutions. Tariffs,import quotas, sanitary standards, export incentives, price controls,subsidies, licensing, antitrust statutes, and patent requirementsallare within these categories.Tariffs are commonly used economic constraints. These internationalduties can act as competitive barriers to the agroindustry'spenetration of export markets or, conversely, can shield a domesticmarket from import competition. The level and longevity of tariffsshould be evaluated in terms of their effects on the proposed product'scompetitive position. Some possible ramifications are indicatedby the following case. A flour mill in a Southeast Asian nation wasestablished during a time of high import duties. Because of thetariff, the firm had a large market share and high profits and grewcomplacent in its attitude toward its marketing operation. Whenthe government subsequently reduced the import tariff, the companywas unable to compete effectively with imported flour becauseits marketing system had never been well developed. Import quotasalso control the competitive environment, and, finally, export promotionincentives are often used to increase the exporters' abilityto compete in the foreign market.Sanitary standards administered by governmental health or agriculturalagencies are a further constraint to competition. For example,countries in which aftosa (foot-and-mouth disease) is endemicare not permitted to export fresh meat to the United States-Argentine beef exporters. for instance, cannot compete in this marketunless their beef is cooked.Examples of politically motivated economic constraints are pricecontrols and subsidies. Because many food products are necessities,they become a political concern and are subject to price regulation.In effect, this regulation eliminates price as a competitive factor andcan lower the product's profit margin as raw material and processingcosts increase but the price for finished goods is constrained bythe government. Governments may subsidize both private andstate-owned processors to offset these losses. In some countries(India, Pakistan, and Mexico, for instance), the government operatesretail outlets to provide necessities to consumers at subsidizedprices. This practice tends to affect the private sector outlets by