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RHI 311
The Market System
Three types of markets:
Primary market - centrally located with a strong transportation hub. All products
come to the central market (nationally) to be processed and shipped to
secondary markets.
Secondary market - traditionally received products from the primary market and
ship to local markets. Secondary markets have now become regional primary
markets.
Local markets - distribute products to customers
Functions of the Market
Exchange - transfer of ownership; buying and selling of products and services.
Information - market reports; grading criteria; advertising; labeling.
Supply - transportation and storage.
General Business - finance; credit; insurance' taxes, etc.
Channels of Distribution
Sources:
a) Extractors- growers, farmers, ranchers, etc. of raw food materials.
b)
Manufacturer- produces products from raw material.
c)
Fabricator- creates product from output of other two.
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Agents: facilitates the meeting of buyer & seller.
a)
Broker - promotes products of more than one sources; may represent
many manufacturers' products (mainstream products) ; does not take
title to goods.
b)
Manufacturer's agent - are sales account executives of source
company; specialist in the products he/she represents.
c)
Boutique Sales agent - represents manufacturer of highly specialized,
limited product line.
Merchant Wholesaler: primary function is to buy products from source and re-sell
to retailers.
a)
Full-service wholesaler:
i) large lines of stock;
ii) offers credit;
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iii) carry all lines of products;
iv) one stop shopping available;
v) value added services.
b)
Limited-function wholesaler:
i) sells a limited product line of one type
ii) limited credit or COD
iii) delivery person is also sales rep
c)
Jobber - non-food product wholesaler:
i) sells a limited product line of one type
ii) limited credit or COD
iii) sales rep does in unit merchandising
Broker versus Wholesaler
Broker: best utilized when you need to "source-out" a new or existing product,
though limited to only products they carry;works on commission, has less
overhead costs than wholesaler;may provide some value-added services, but
limited to one product line;
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Wholesaler:protects quality of product by handling, storage and shipping methods
from extractor to retailer;
provides value added services including:
merchandising aids
waitstaff training
nutritional analysis
product education
quality control tasting
shows/seminars
sales rep as consultant
velocity reports
Economic Values in the Market System
TIME value- if you want to buy a product at the time you select (purchase meat
products each day)
FORM value- the specific form you need the product to be (ready to serve rolls
vs. frozen dough)
PLACE value- product delivered to the place of your choice (FOB vs. delivery)
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INFORMATION value- willing to pay for information to operate or use product.
Economic Values in the Market System
Specific Marketplace Values
1)
2)
3)
4)
5)
Partial processing
Packaging
Transportation
Storage and Risk
Financing
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