Agroindustrial project analysi

THE MARKETING FACTOR 55the processor should consider forward integration. With increasedcontrol, however, there are also greater capital and managerialresource requirements. In addition, the relatively fixed investmentin distribution facilities may decrease the firm's flexibility in respondingto the new distribution requirements of a changingmarket.Integration can be precluded if the government has introduceda marketing board as a monopsonistic wholesaler. Marketingboards serve numerous functions, including the provision of technicalassistance, promotion of products or plans, quality control,price stabilization, and the provision of infrastructure." 5Forward vertical integration is also difficult because of thestrength of distributor-retailer relations. This can be illustratedby the Southeast Asian flour mill described in the previous section(under "Institutional constraints") that had neglected its marketingsystem when protected by an import tariff. When the tariff wasremoved, the company had no sales force and relied entirely onwholesalers who gave preference to irnported brands. The mill consideredorganizing a sales force and selling directly to the bakeries,but the bakeries resisted because they had developed loyalties tothe distributors. The wholesalers gave credit to the bakers (oftento meet personal needs), had long-standing friendships, and sometimeswere even related by family ties. These social bonds createdbarriers to forward vertical integration.OUTLET OPTIONS. If the analyst decides to use existing distributionchannels, he or she must then choose wholesalers and retailers. Asdiscussed above, wholesalers can be selected according to cost,quality, dependability, and control. Retail outlets, however, mustreflect the product, the market segment, and the prospective consumers'buying process. This decision is necessary even when processorsvertically integrate through the wholesaling level.The retail options are intensive, selective, or exclusive, and theydiffer in breadth. The intensive strategy maximizes breadth andconsumer coverage and is appropriate for low-priced, undifferen-15. For more details on the functions and operations of marketing boards,see John Abbott and H. C. Creupelandt, Agricultural Marketing Boards: TheirEstablishment and Operation, United Nations Food and Agriculture Organization[FAO] Marketing Guide no. 5 (Rome, 1966), and Edith Whetham, AgriculturalMarketing in Africa (New York: Oxford University Press, 1972).