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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. Error! No text of specified style in document. Slide 1 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; Error! No text of specified style in document. Slide 2 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; Error! No text of specified style in document. Slide 3 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) Error! No text of specified style in document. Slide 4 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 Error! No text of specified style in document. Slide 5