Agroindustrial project analysi

44 AGROINDUSTRIAL PROJECT ANALYSISalso regulating their prices. If the food-marketing system of theprivate sector is not functioning in a way that permits attainmentof a country's social goals, then the government will, and should,intervene. In fully centrally planned economies, the state obviouslyassumes the price-formulating function of the marketplace. In mostdeveloping countries, however, a mixed economy exists. Industriallicensing is another form of government regulation that affectsentry and operation.Legal constraints such as antitrust legislation are enacted to ensurethat industrial behavior is consistent with perceived nationalgoals. In countries with small markets, cartels are encouraged.Patents on processing techniques or equipment can also affectagroindustrial competition. Although patents are presumed to stimulateinnovation, they are also barriers to market entry. Knowledgeof these various economic, political, and legal constraints willheighten the analyst's understanding of the competitive market.Salient points for project analysisThe analyst should consider the following questions when examiningthe competitive dimension of the market.What is the product's market structure?a Existing competitors?i Role of substitutes?e How many competitors?* Location relative to markets and raw material?e Size of sales, assets, market share?* Changes in market shares?What is the basis of competition in the industry?* Consumer price sensitivity?i Prevalence of price discounting?* Consumer sensitivity to quality?* Importance of branding?* Special services to distributors?* Stage of product life cycle (PLc)?* Extent of entry barriers from economies of scale? absolutecosts? vertical system control? brand franchise? capital requirements?