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Marketing problems of edible oil industry in the state of Tamilnadu Dhinesh babu.S 1 , Venkateshwaran.P.S 2 1­ Professor, JJ College of Engineering and Technology, Tiruchirappalli 2­ Lecturer, PSNA College of Engineering and Technology, Dindigul [email protected] ABSTRACT Edible oil is one of the important consumer items. Consumers use it in the preparation of food items every day. The demand for edible oil is growing because of the increase not only in population but also in their standard of living. The production of edible oil is carried out by both large and small firms. Owing to liberalization, the import of edible oil is also encouraged. The Government supplies edible oil through its Public Distribution Shops. Now­a­days, big oil mills go for large­scale production and reap the economies of scale of production. The profit in large­ scale units attracts many new firms to the market. The existing small firms are unable to compete with the large firms in marketing their products. Now­a­days, the problem in edible oil market is not one of production but is one of marketing. Even though, there have been many previous studies related to production and economics of large­scale production of edible oil, only a few studies have focused on the marketing of edible oil. In these studies, only the channels of distribution, marketing cost, market margin, package and advertisement have been discussed. But no studies focus on the marketing problems among the edible oil owners. Hence the present study focuses only on the aspects of marketing problems in the edible oil market. 1. Introduction The edible oil need in Tamil Nadu is practically met by the branded oil and the remaining part is met by unbranded oil. Since the number of oil mills producing branded oils is growing, there is a hectic competition in the market. The marketers rely much on their marketing strategies and also their competitors’ strategies. The consumers’ awareness, exposure and knowledge of edible oils are also growing because of the level of education, urbanization and also the vast development in communication facilities. Since branded oil is supplied only by large units, they try to capture the market. The business of small oil units is under a cloud. But these small firms focus on their own consumers and they are very weak in analyzing the consumer behaviour in the edible oil market. The small firms do not realize the importance of marketing and market­related activities in the edible oil market. Even though, some small firms have a higher exposure to the marketing of edible oil, their capital is not a supportive element to implement their own marketing strategies. Both the small and large firms face many problems in marketing their products since the consumer behaviour is highly unpredictable. Especially, after globalization, the marketers realize the importance of market orientation, marketing strategies and practices in the edible oil market.
ASIAN JOURNAL OF MANAGEMENT RESEARCH 58 2. Methodology of the Study 2.1 Research Design Descriptive research method has been used in this present study. The survey research method, a branch of descriptive research used for obtaining data from respondents (owners) by asking a variety of questions, was selected. The present study consists of a pre­structured methodology, with limited objectives and data collection forms. Since the study focuses on various marketing aspects of edible oil from the manufacturers’ point of view, it has become descriptive in nature. 2.2 Collection of Data The data related to marketing of edible oils were collected through interview schedules. The variables related to marketing of edible oils, market orientation among the owners, marketing strategies and marketing problems were identified with the help of previous studies, the view of experts and experienced owners in the marketing field. 2.3 Sampling Procedure Since the study focuses on the edible oil manufacturers at various districts in Tamil Nadu, the oil manufacturers from the Southern districts of Tamil Nadu were selected by the application of stratified proportionate random sampling. Out of the total oil manufacturing units in the southern districts (732 units), 50 per cent of the total units are treated as the sample size of the units. The districts in South Tamilnadu are treated as strata. The determined sample size of 366 units is distributed among various districts according to the proportion of total units in each district to the total units. Limitations of the Study 1) 2) 3) The primary data collected from the oil manufacturers is highly based on their records. Many of the manufacturers replied to the questions only from their memory. Hence, it is subjected to memory bias. Only edible oil units in Southern districts of Tamil Nadu were taken into consideration. Units in other areas of Tamil Nadu were excluded since the number is negligible. The applied statistical tools in the present study may be subjected to their own limitations. 3. Marketing Problems The strategic orientation to its environment is of paramount importance for the success of units in industry (Miller and Friensen, 1983). The environments are heterogeneous and are characterized by a range of factors the firm needs to address (Dess and Beard, 1984). Environmental dynamism can be conceptualized as the rate of change and the degree of instability of the environment (Tan and Li, 1996). The marketing strategy is essential to focus on the changing needs of consumers within a firm’s ability to satisfy them. Marketing strategy is the adoption of policy that meets a marketing problem.
ASIAN JOURNAL OF MANAGEMENT RESEARCH 59 4. Analysis and Interpretation Table 1: Marketing Problems Faced by the Units Sl.No. Marketing Problems Mean score in Small Units Large Units 1. Number of intermediaries 3.8197 3.0456 2. Requirements of variety of products 3.7081 2.4183 3. High credit period 3.4547 2.6091 4. Demand for products 3.6818 3.0943 5. Frequent change in taste of customer 2.9603 3.8642 6. Poor security on debts 2.4211 3.3069 7. Consistent searching for agents 2.5617 3.8182 8. Unremunerative price 3.6108 2.4509 9. High switching behavior among 3.9099 2.6712 customers 10. High requirements of working capital 4.0989 2.9098 11. Heavy marketing margin 2.5646 3.8187 12. Unhealthy competition 3.2109 3.9094 13. Customer knowledge on product 2.8081 3.1146 14. Requirement of heavy selling 2.4641 3.8087 Expenses 15. Competitor’s strategy 2.8089 3.9192 16. Price war in wholesale trade 2.5113 4.0243 * Significant at 5 per cent level. ‘t’­statistics 2.0331* 2.8146* 2.3314* 1.6331 ­2.7137* ­2.3031* ­2.9664* 2.3093* 2.7791* 3.1416* ­2.7039* ­1.8081 ­0.4594 ­2.7082* ­2.6143* ­3.6443* The highly viewed marketing problems among the owners in small units are high requirements of working capital, high switching behavior among the consumers and numbers of intermediaries since the respective mean scores are 4.0989, 3.9099 and 3.8197. In large units, these are price wars in wholesale trade, competitor’s strategy and unhealthy competition since its mean scores are 4.0243, 3.9192 and 3.9094 respectively. Regarding the perception on marketing problems, the significant difference among the two groups of owners is identified in the case of number of intermediaries, requirement of variety of products, high credit period, frequent change in taste of customer, poor security on debts, consistent searching for agents, unremunerative price, high switching behavior among customers, high requirement of working capital, requirement of heavy selling expenses, competitor’s strategy and price wars in wholesale trade since their respective ‘F’ statistics are significant at five per cent level. 4.1 Important Marketing Problems The important marketing problems in the edible oil units are analyzed with the help of factor analysis. The score on listed sixteen marketing problems has been included for the factor analysis. Initially, the test of validity of data for factor analyzed has been examined with the help of KMO measures and Bartlett’s test of sphericity.
ASIAN JOURNAL OF MANAGEMENT RESEARCH 60 Both these two tests satisfy the conditions for validity of data for factor analysis. The factor analysis results in four important problems namely finance customer, competitors and intermediaries. The important problems, its eigen value and per cent of variation explain by these important problems are given in Table 2. Table 2: Important Marketing Problems in Edible Oil Market Sl. No. Important Problems Number of Eigen Value Percent Cumulative marketing of per cent of problems variation variation explained explained 1. Finance 5 3.8184 28.43 28.43 2. Customer 5 3.0661 22.21 50.64 3. Competitors 3 2.1949 15.09 65.73 4. Intermediaries 3 1.6842 13.64 79.34 KMO Measure of sampling adequacy: 0.7933 Bartlett’s test of sphericity: Chi­square value: 101.42* * Significant at zero per cent level. The narrated four important problems by the factor analysis explain the marketing problems, to the extent of 79.34 per cent. The important marketing problem is ‘finance’ since its eigen value and the per cent of variation explained by the finance problem are 3.8184 and 28.43 per cent respectively. The next two important marketing problems are ‘customer’ and ‘competitors’ related problems since its eigen values are 3.0661 and 2.1949 respectively. The per cent of variation explained by these two factors are 22.21 and 15.09 per cent respectively. The last important problem identified by the factor analysis is ‘intermediaries’ since its eigen value and the per cent of variation explained are 1.6842 and 13.64 per cent respectively. 4.2 Problems in each Important Marketing Problem The ‘finance’ and ‘customer’ related problems consist of five problems with the reliability coefficient of 0.8342 and 0.7304 respectively. The ‘competitors’ and ‘intermediary’ related problems consist of three problems with the reliability coefficient of 0.6961 and 0.7119 respectively. The detail of problems in each important problem is given in Table 3. Table 3: Problems in each Important Marketing Problem Sl. No. 1. Important marketing problem Finance 1 2 Marketing Problem 3 4 Heavy High credit marketin period g margin (0.7229) (0.8144) Heavy requirement of working capital (0.6804) 5 Requireme nt of heavy selling expenses (0.5968) ASIAN JOURNAL OF MANAGEMENT RESEARCH Reliability Coefficient 0.8342
61 2. Customer Demand for Customer Higher products knowledge switching (0.8146) on
behaviour products among (0.7302) customers (0.6911) Requireme nt of variety of Products (0.6182) Frequent 0.7304 change in taste of consumer (0.5508) 3. Competitors Competitors strategy (0.7943) Price Unhealthy war in competition whole (0.5562) sale trade (0.6454) 0.6961 4. Intermediary Consistent searching of agents (0.8146) Poor Number of security intermediaries on debts (0.6561) (0.7332) 0.7119 Figures in parentheses are factor loadings. The included problems in ‘finance’ explain it to the extent of 83.42 per cent. The important problems in ‘finance’ are unremunerative price and heavy marketing margin since its factor loadings are 0.8969 and 0.8144 respectively. The six problems in ‘customer’ explain it to the extent of 73.04 per cent. The important problems are demand for products and customer knowledge on products. The problems in ‘competitors’ explain it to the extent of 69.61 per cent. The most important problem in ‘competitor’ is competitors’ strategy since its factor loading is 0.7943. The problems in intermediary explain it to the extent of 71.19 per cent. The most important problem in the ‘intermediary’ is ‘consistent searching of agents’ since its factor loading is 0.8146. 4.3 Perception on Important Marketing Problems The respondents’ perception on important marketing problems in edible oil industry is analyzed with the help of the score on the four important problems (factors) in marketing of edible oil. The score of the four factors is drawn from the mean score of the various marketing problems in each factor. In order to analyze the significant difference among the two groups of owners regarding their perception on important marketing problems, the ‘t’ test has been administrated. The resulted mean of score of the four important problems and its respective ‘t’ statistics are exhibited in Table 4.
ASIAN JOURNAL OF MANAGEMENT RESEARCH 62 Table 4: Perceptions on Important Marketing Problems among the Units Sl.No. Promotion Variables Number of owners in ‘t’­Statistics Small Units 3.8386 Large Units 3.1194 2.3081* 1. Finance 2. Customer 3.6136 2.6325 2.7236* 3. Competitors 2.8437 3.9509 ­2.8186* 4. Intermediaries 3.8675 3.0902 2.4141* * Significant at 5 per cent level. The highly perceived problems (factors) among the owners in small units intermediaries and finance since the mean scores are 3.8675 and 3.8386. Among the owners in large units, these are competitors and finance since their respective mean scores are 3.9509 and 3.1194. Regarding the perception on important problems, the significant difference among the two group of owners have been noticed in the perception all four important marketing problems since their respective ‘t’ statistics are significant at five per cent level. 4.4 Association between profile of owners and their perception on important Marketing Problems The profile of the owners and their perception on important marketing problems has been examined with the help of one way analysis of variance. The included profile variables are age, level of education and occupational background of the owners. The resulted ‘F’ statistics is presented in Table 5. Table 5 Association between Profile of Owners and then Perception on Important Marketing Problems Sl.No. Profile Variables F­Statistics Finance Customer Competitors Intermediaries 2.9186* 3.1082* 3.2706* 2.6169* 2.6818* 2.2686* 2.8917* 2.0617 2.0864 2.4541* 1.9392 2.8184* 1. Age 2. Level of education 3. Occupational background * Significant at five per cent level. Regarding the perception on important marketing problem namely ‘Finance’, the significantly associating profile variables are age and level of education since their respective ‘F’ statistics are significant at five per cent level. The significantly associating profile variables regarding the perception on ‘Customer’ related problems are age, level of education and occupational background. The age and level of education of the owners are significantly associating with their perception on ‘competitors’ oriented problems whereas regarding the perception on intermediaries, these profile variables are age and occupational background of the owners.
ASIAN JOURNAL OF MANAGEMENT RESEARCH 63 4.5 Association between organizational variables and the Owners Perception on Problems The association between organizational profile and the owners’ perception on important marketing problems have been analyzed with the help of one way analysis of variance. The included organizational variables are years of experience, nature of ownership, number of products dealt in, number of employees worked, total investment, sources of capital and monthly turnover. The resulted ‘F’ statistics are shown in Table 6. Table 6: Association between Organization variables and Perception on Important Marketing Problems Sl.No . 1. 2. 3. 4. Organisation Variables F­Statistics Finance Customers Competitors Years of experience 3.0141* 2.1132 2.5617* Nature of ownership 2.5022 2.8036* 2.0233 Number of products dealt 2.1144 2.3014 2.8184* Number of employees 2.6146* 2.4508* 2.3663* worked 5. Total investment 2.8661* 1.3384 2.6561* 6. Sources of capital 2.4541* 2.5034* 3.1174* 7. Monthly turnover 3.1403* 2.4509* 2.6691* * Significant at five per cent level. Intermediaries 1.8644 2.1147 2.5641 2.5039* 2.0681 2.5339* 2.4884* Regarding the perception in ‘finance’ the significantly associating organizational profile variables are years of experience, number of exmplyees worked, total investment, sources of capital and monthly turnover whereas regarding the perception on ‘customer’ related problem, these organizational profile variables are nature of ownership, number of employees worked, sources of capital and monthly turnover. The significantly associating profile variables regarding the perception on ‘competitors’ oriented problems are years of experience, number of products dealt, number of employees worked, total investment, sources of capital and monthly turnover whereas regarding the perception on ‘intermediaries’ problem, these are number of employees worked, sources of capital and monthly turnover. 5. Suggestions and Recommendations The owners of the edible oil units should be trained to get more marketing knowledge to market their products. They should think globally and act locally. It implies that their product should be highly qualitative and also suitable to the local consumers. The small units are unable to compete with large units because of their week financial strength. Hence, they are advised to form clusters of small units and produce branded oil with higher quality. Only then they can easily compete with the giants in the edible oil market. Now­a­days, the attractive packaging plays an important role in the marketing of edible oils. All types of manufacturers should realize this fact and try to sell their products in attractive packets. It is not only attractive but also is reachable to all customers’ segments.
ASIAN JOURNAL OF MANAGEMENT RESEARCH 64 Since the profit of the edible oil units highly rests on the number of outlets covered by established marketing system and also logistics management, the owners of small and large units should be properly trained to learn the abovesaid aspects. Only then, they can market their products in a under market. They should realize that they can earn profit through sales maximization. Hence, they are advised to boost their sales through many promotional and advertising techniques. The important marketing problems in the edible oil market are finance, customers, competitors and intermediaries. The owners of the small and large units have to remember that these will occur in their businesses. Since the marketing problems are permanent in the market, they cannot avoid them but they can manage them with the help of application of scientific principles of management. 6. References 1. Achaya K.T., 1990. “Oilseeds and Oil milling in India: A Cultural and Historical Survey”, Oxford and IBH Publishing Co. Pvt. Ltd., New Delhi. 2. Barker C.W. and Anshen M., 1987 “Modern Marketing”, Mac Millan Press Ltd., London. 3. Centre for Monitoring Indian Economy, Agriculture, August 1977, New Delhi. 4. David A. Revzan, 1961. “Marketing Organization through the Channel – Wholesale and a Marketing Organization”, John Wiley and Sons, New York. 5. Kundu Dr. M.K., 2000a. “Edible Oil Scenario”, Oil and Fats Review, January – February 2000, Vol. XII, No. 10 & 11. 6. The American Marketing Association, 1985. “New Marketing Definitions”, Marketing News, March 1, 1985. 7. Thinamani, Tamil Daily, 2001. 2 nd December 2001, Vol.51, No.330, Madurai Edition, pp 1­5. 8. Government of India, 1956. “Oilseeds Crushing Industry Inquiry Committee”, Ministry of Food and Agriculture, New Delhi. 9. Government of Tamil Nadu, 1991. “Status Paper on Edible Oil in Tamil Nadu”, The Committee to Overview the Edible Oil Scenario in Tamil Nadu, Department of Civil Supplies and Consumer Protection.
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