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MSU RURAL DEVELOPMENT SERIES
WORKING PAPER
Department of Agricultural Economics
Michigan State University
East Lansing, Michigan 48824
MARKETING IN DEVELOPING COUNTRIES
by
Harold M. Riley and Michael T. Weber
Working Paper No. 6 1979
MARKETING IN DEVELOPING COUNTRIES*
by
Harold M. Riley and Michael T. Weber**
*This paper will be published as a chapter in a book entitled Future
Frontiers in Agricultural Marketing Research. Further reproduction and
dissemination of the contents of this Working Paper are subject to the book
publisher's copyright restrictions. This paper is also part of a broader
project entitled "Alternative Rural Development Strategies," Contract #AID/
ta-CA-3 funded by the U.S. Agency for International Development, Development
Support Bureau, Office of Rural Development and Development Administration.
Obviously, the views expressed herein do not necessarily reflect the views
of the funding agency.
**Professor and Assistant Professor, Department of Agricultural Economics,
Michigan State University.
1979
MSU RURAL DEVELOPMENT WORKING PAPERS
Carl K. Eicher and Carl Liedholm, Co-editors
The MSU Rural Development Working Papers series is designed to
further the comparative analysis of rural development in Africa, Latin
America, Asia, and the Near East. The papers will report research find-
ings on community development and rural development in historical per-
spective as well as on contemporary rural development programs. The
series will include papers on a wide range of topics such as alternative
rural development strategies; off-farm employment and small-scale industry;
marketing problems of small farmers; agricultural extension; interrelation-
ships between technology, employment, and income distribution; and
evaluation of rural development projects. While the papers will convey
the research findings of MSU faculty and visiting scholars, a few papers
will be published by researchers and policy-makers working with MSU
scholars on cooperative research and active programs in the field.
The papers are aimed at teachers, researchers, policy-makers, donor
agencies, and rural development practitioners. Selected papers will be
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notifications of published papers by writing to:
MSU Rural Development Working Papers
Department of Agricultural Economics
206 International Center
Michigan State University
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U.S.A.
TABLE OF CONTENTS
ABSTRACT . . . . . . . . .
INTRODUCTION . . . . . . . .
CONCEPTUALIZING AGRICULTURAL MARKETING IN A
PAST RESEARCH . . . . . . . .
Descriptive Studies . . . . .
Feasibility Studies . . . . .
Broader Diagnostic Assessments . . .
ORGANIZING AND CONDUCTING FUTURE RESEARCH .
General Considerations . . . . .
National Goals and Development Planning
Planning and Conducting Research . .
TOWARDS A RESEARCH AGENDA . . . . .
CONCLUDING COMMENTS . . . . . .
LITERATURE CITED . . . . . . .
Page
1
. . . . . . . 1
DEVELOPMENT CONTEXT . . 2
. . . 27
MARKETING IN DEVELOPING COUNTRIES
by
Harold Riley and Michael Weber
ABSTRACT
The U.S. Agricultural Economics profession has become significantly in-
volved in foreign assistance programs directed towards the problems of less
developed countries. In order to be effective in their roles as teachers, re-
searchers and advisors, it has been necessary to adapt conceptual and analytical
tools for use in different political, institutional and social environments.
This chapter provides a conceptual perspective of agricultural marketing as
an important dynamic element in the development process. A review of the past
research indicates that there have been useful descriptive studies of market-
ing activities in several less developed countries, but diagnostic and pre-
scriptive conclusions have often been constrained by the relatively static,
perfectly competitive marketing model of economics. Suggestions are made for
organizing and conducting future research within a more dynamic "food
system" framework with appropriate consideration of other social science
approaches to marketing problems.
A research agenda is suggested through a set of interrelated questions
that address the basic information needs for diagnosing marketing problems
and assessing program needs to achieve desired development goals.
MARKETING IN DEVELOPING COUNTRIES
Harold Riley and Michael Weber*
Introduction
Over the past two decades there has been a significant and growing
involvement of U.S. agricultural economists in foreign assistance programs
directed towards the less developed countries. Through programs financed
by the U.S. Agency for International Development, foundations, foreign
governments and multi-lateral international agencies, agricultural marketing
economists have had opportunities to conduct research and to provide advisory
inputs into the development of programs to improve marketing systems. Con-
currently there has been an expanding flow of students from the less developed
countries (LDCs) through the graduate programs of U.S. universities (1). In
order to be effective in their roles as teachers, researchers and advisors
economists have found it necessary to adapt their conceptual and analytical
tools for use in different institutional, political and social environments.
In some instances marketing problems confronted in the LDCs appear to be
similar to those experienced in the U.S. some 50 to 75 years ago when agri-
cultural and industrial changes began to transform the economy in a relatively
rapid and irreversible manner. However, the economic, political and social
conditions in the LDCs pose problems of market organization that require
solutions carefully tailored to the needs of particular country situations.
*We want to acknowledge valuable comments and suggestions on earlier
drafts of this paper which were made by Emerson Babb at Purdue University,
and Jim Shaffer and Mark Newman of Michigan State University.
2
The paucity of basic information and data about existing LODC market systems
and the lack of trained professionals in the countries have been major
constraints to research and development activities.
This chapter is directed towards a primary audience composed of U.S.
university faculty and students concerned with agricultural marketing pro-
blems in the less developed countries. Marketing specialists with inter-
national agencies and LDC institutions are another audience group. The
chapter begins with a brief conceptual point of view regarding the role of
marketing in the development process. This is followed by an assessment of
past research activities. A major part of the chapter is devoted to the
organization and conduct of future research.
Conceptualizing Agricultural Marketing
in a Development Context
Economic development should be viewed as a long term process that occurs
over decades and generations. Through technological innovation and economic
organization output per person increases and the material well being of the
population is raised to higher levels. Increased specialization of produc-
tive effort, industrialization and urbanization are important elements in the
growth and development process. These forces contribute to a growing demand
for marketing services. In agriculture there is a transformation process as
relatively small scale, predominantly self-sufficient family farming units
become larger, more specialized and increasingly dependent on marketing
arrangements for the sale of their agriculture products and for purchased
inputs. Rural markets emerge as local trading centers hierarchically inter-
connected within a larger regional and national market network.
In most developing countries there is a steady and sometimes relatively
rapid migration of people from the rural areas to urban centers with many
3
of the capital cities growing at rates in excess of 5 percent per year. The
build-up of urban population and rising levels of consumer income place
great pressures on the marketing system to expand and undertake an increasingly
complex set of activities which link the rural and urban sectors of the
economy (2). Marketing services become a larger portion of the consumer food
bill and the composition of the market basket shifts from low cost, starchy
foods towards higher cost livestock products, fruits and vegetables. Major
investments are required for transportation equipment, highways and other
physical facilities. Governmental agencies usually assume leadership in
planning and financing much of the market infrastructure and frequently
perform major roles in facilitating and regulating the development of
marketing institutions and in some instances actually organizing and
managing marketing enterprises.
There are a wide range of viewpoints on the role of agricultural marketing
institutions in economic development and the appropriate function of the
public sector in bringing about desired changes. There are those who hold
the view that marketing is an adaptive set of activities to be given secondary
consideration in development planning strategies with primary consideration
being directed toward the expansion of agricultural and industrial produc-
tion. This view has been challenged by marketing economists who argue that
marketing is a critical and dynamic component of development. Abbott and
others in the FAO marketing group have stressed the incentive role of
effective product marketing systems which can reduce risks and lower costs
for farmers and other market participants (3, 4). The local availability of
reasonably priced agricultural inputs and consumer goods are also seen as
having a stimulating impact on economic activity in both rural and urban areas.
4
Collins and Holton (5) have also challenged the view that marketing
firms and institutions will automatically spring up in response to price
incentives to provide the services most appropriate for new production
situations. They argue that effective planning for economic development
should give a great deal of attention to facilitating the development of
marketing institutions to complement programs for expanding physical
production.
There seems to be a growing consensus among agricultural economists that
aligns with the broader, more dynamic view of marketing as a major element
in the development of the agricultural sector and in coordinating agri-
culture with growth and development in other sectors. Hence, food production,
processing and distribution activities are seen as a closely interrelated set
of activities that operate in a "systems" context. The system includes the
familiar components of farm production, rural assembly, processing, distri-
bution (both rural and urban), and the flow of industrially produced agricul-
tural inputs and consumer goods to rural markets. In the more rural based
economies these activities take place within rural market towns and their
hinterlands but as development progresses the influence of larger urban
centers becomes more important.
A simplified conceptual model was developed by a Michigan State Univer-
sity research team to illustrate a particular application of a "food system"
approach to a marketing development program in Northeast Brazil. See
Figure 1. The left hand column in the figure lists five system components
which are potential points of public sector intervention into a regional
or national food system where the program objective is to stimulate economic
growth and development. The vertical ordering of the system components
gives emphasis to a "demand driven" system but there are important supply and
Figure 1. A Conceptual Model Showing a Series of Interrelated Food System Reforms
and Expected Effects on Economic Growth and Development
Potential Points of Public Sector Possible Actions to Bring Postulated Effects on Economic
Intervention in Regional or about Desired Changes Growth and Development
National Food System Processes
Capital and technical assistance (1) Reduce marketing costs in
to stimulate improvements in urban areas for locally-
URBAN FOOD efficiency of traditional urban produced food products
marketers (2) Lower food prices--increase
DISTRIBUTION Timely introduction of infra- effective income
COMPONENTS structures as a tool to stimu- (3) Increase effective urban demand
late improvement in market channel (3) Increase effective urban demand
performance for food and consumer goods and
rforance related marketing services
More effective public
facilitative and regulatory
programs
Appropriate agricultural production (4) Increased food production
extension efforts and agricultural production
specialization
RURAL FOOD Development of appropriate
packages of inputs (5) Increased rural incomes
PRODUCTION and market participation on
Effective market information both the supply and demand
COMPONENTS and price stabilization programs sides
Supervised credit programs
Promote backward vertical (6) Increased rural and urban
coordination of food market- demand for organization and
ing coordination services of
RURAL ASSEMBLY Capital and technical assistance commodity sub-systems
MARKET COMPONENTS to rural assemblers and (7) Increased rural demand for
transporters improved physical distribu-
Improve public storage, roads, acting servities i.e. assembly
exchange rules, grades
Improve rural distribution (8) Increased rural demand for:
services and lower costs (a) farm inputs
RURAL DISTRIBUTION for: (b) purchased food
(a) farm inputs (c) rural-and urban-
COMPONENTS FOR: (b) purchased food produced consumer
(c) consumer goods goods
(a) Purchased Food (d) marketing services
(b) Farm Inputs related to the above
(c) Consumers Goods three
Use of appropriate technologies (9) Increased demand and employ-
in production processes ment in industry and related
RURAL AND URBAN Develop more appropriate products services sectors
for local market demand character- (10) Increased income leading to
INDUSTRIAL AND istics increased demand for food
Lower costs of mass distribution and consumer goods
SERVICES COMPONENTS to rural and urban areas
Source: Adapted from Figure 1.1. in (6).
6
demand interactions which link the various components into a "semi-closed"
system. It is semi-closed because it does not include an export market
component nor an explicit linkage to the other sectors of the domestic
economy. These components could be added to the model but for the purposes
of this chapter they have been set aside. The middle column in the figure
lists a series of actions that might be taken by the public sector to bring
about desired changes in the food system, giving emphasis to those actions
which will affect market organization and performance. An interrelated set
of impacts on costs, demand and output are summarized in the right hand
column of Figure 1. The model illustrates a particular sequence of actions
that work back from the urban food market toward farm producers. However,
there are many alternative sequences that could begin with any of the system
components as long as there is adequate consideration of the pattern of
repercussions that will likely occur. For example, demand from the rural
purchased food and other basic consumer goods component has a direct pull
effect on rural production and assembly components. And to the extent that
there is regional specialization of agricultural production in a country,
there is a direct linkage between rural demand and urban food distribution
components which serve as concentration and redistribution mechanisms for
the more specialized rural regions.
In the past there has been a strong tendency for agricultural planners
to emphasize farm production expansion without sufficient consideration of
market incentives and constraints, whether these come from rural or urban
demand sources.
Thus, Figure 1 illustrates a more comprehensive, market oriented approach
to agricultural development emphasizing the dynamic interactions between
agriculture and industry and between rural and urban based activities.
7
Past Research
Research by U.S. scholars on agricultural marketing problems in developing
countries can be categorized into three broad groupings as follows: 1) descrip-
tive studies, 2) feasibility studies, 3) broader diagnostic assessments.
Descriptive Studies.
Descriptive studies have been conducted by individuals from various social
science disciplines on existing arrangements for marketing specific commodities
or carrying out selected marketing functions. Most of these studies have been
carried out by professionals in academic institutions and their students. These
studies have provided useful factual information about existing marketing
arrangements but limited accessibility has been a major factor restricting
their use by government agencies and the private sector. In addition, many
of the studies done by economists and agricultural economists are based upon
conceptual perspectives of market organization dominated by the perfectly
competitive theoretical model of economics. And much of the research has been
concerned with issues involving the testing for conditions of structure,
conduct and performance predicted by the perfectly competitive model. A
major problem with this relatively static framework is that it underplays
the potential dynamic impacts of marketing institutions in achieving develop-
ment goals regarding efficiency, equity, growth and employment.
There have also been useful and insightful descriptive studies carried
out by researchers that represent other social science perspectives. Geo-
graphers with their interest in the location of economic activities have
undertaken a large number of descriptive studies of marketplaces, periodic
markets and itinerant traders in rural areas of developing countries. This
research is important for the development process because it provides knowledge
of how these traditional trading institutions function. Unfortunately, by
geographers' own assessments, much of this research suffers from the inability
to offer normative solutions to questions concerning policy and planning of
marketing systems (7,8).
Anthropologists and sociologists have observed and described rural house-
hold behavior relative to combinations of production, consumption, storage and
sales decisions. Anthropologists also have a tradition of conducting individual
village studies. Although these studies provide valuable descriptive informa-
tion about rural populations and economic processes, they rarely contain
analyses which lead directly to policy recommendations. Currently, a group of
economic anthropologists are seeking to use concepts from regional science
and geographical models to put their village studies into a more useful frame-
work for understanding and promoting development. In a review article, Carol
Smith concludes "...without the regional system context that geographical models
can provide, anthropological marketing studies will not tell us a great deal
more than we already know about the economic determinants of peasant behavior" (9).
Feasibility Studies.
Feasibility studies have been done to provide information needed by govern-
ment agencies, international financial institutions and private sector in-
vestors regarding capital investments in marketing infrastructure, e.g. pro-
cessing plants, wholesale markets, grain storage, and transportation facilities.
These studies have varied widely in scope and quality of analysis. Most have
been carried out by private consulting firms or professionals associated with
university-based research institutes. The analyses are typically focused on the
economic feasibility of a proposed project involving a large capital investment.
Due to severe time constraints heavy reliance is usually placed upon the
use of available secondary data, engineering estimation procedures and the
9
qualitative information that can be obtained through interviews with informed
local business leaders and professionals. Looking back at some of these
studies and the recommendations which were subsequently carried out, several
concerns can be identified. First, there has been a tendency towards
unrealistic optimism regarding the transferability of technologies from the
more highly developed to the less developed countries. The analyses have
tended to endorse capital-intensive technologies in situations where labor-
capital costs are such that more labor-intensive technologies would be more
appropriate (10). Secondly, the feasibility type studies have sometimes
misjudged the compatibility of new capital-intensive infrastructure with
existing patterns of production, distribution and consumption. As a
result, there have been examples of serious underutilization of the new
facilities (e.g. grain storage) (11). Third, the lack of a trained labor
force and a local capacity for the continued development of both skilled
labor and management ability is either underplayed in the reports or not
taken seriously by those responsible for local project implementation.
Because of the problems mentioned above, there is a growing demand for
better preparation of professionals who conduct feasibility type studies.
This is reflected in the increased interests in short-term training programs
on project development and evaluation such as those offered by the World
Bank, and similar offerings by USAID, universities and private consulting
firms.
Broader Diagnostic Assessments
Broader diagnostic assessments of food system organization in developing
countries have provided inputs to policy and program development and to an
evolving conceptual and analytical framework for future research and develop-
ment efforts. Several groups of U.S. university researchers have carried out
10
these broader based studies of agricultural marketing processes in less
developed countries (12, 13, 14, 15, 16, 17). Mellor, et al. of Cornell
University have studied marketing in India. On the basis of extensive field
surveys they have challenged the validity of several widely held views
regarding the exploitive and unproductive activities of rural traders (12).
Lele could find little evidence in her field studies to support the view
that the monopolistic nature of private trade leads to excessively high
marketing margins or that wide seasonal price variations were caused by
speculative hoarding and profiteering practices of traders (13). Price
differentials among major wholesale centers were found to be closely related
to expected price patterns based upon transportation cost differences.
Indications are that entry into traditional trade is generally open and that
there is overcrowding and significant competition at each level of marketing.
Even in instances where a few traders are handling a large share of the
market volume it was observed they are unable to influence prices appreciably
through collusive action as long as there is effective market intelligence
and transportation among markets. Lele observes that public sector efforts
to facilitate efficiency in traditional trade is necessary as rural traders
perform a number of important functions that cannot be replaced by government
or cooperative agencies, without incurring substantially greater costs in
administrative manpower and finances than is implicit in allowing the private
sector to operate. A broad based and positive role for public sector
involvement in marketing was outlined by Lele in her paper presented to the
International Association of Agricultural Economists in 1976 (14).
Jones and his colleagues at Stanford University have conducted extensive
studies of agricultural marketing in several African countries (15). The
characteristics of existing marketing systems were compared with the require-
ments of a purely competitive model and actual pricing relationships were
11
checked against what would be expected in a perfect market. Their conclu-
sions were that, "average seasonal price movements correspond rather well
with the cost of storage; that intermarket price correlations were somewhat
less than might be hoped for; that year-to-year price movements were generally
in accord with supply and marketing conditions; but that week-to-week price
changes showed signs of serious random disturbances consistent with the
hypothesis that traders were poorly informed about episodic changes in the
conditions of supply and transport"---"In terms of the tasks that marketing
systems are asked to perform, the African ones that we studied are not
performing badly" (15). Despite this assessment of the existing marketing
system, Jones points out the critical need for attention to marketing in
economic development planning where major technological and institutional
changes are being contemplated. Jones closes his article with the observa-
tion that, "the invisible hand cannot be trusted completely to guide
economies in socially acceptable directions, nor can the state rely on the
marketing system to perform the tasks assigned to it without appropriate
facilitating services best provided by government" (15).
A major problem with the research framework developed in most of these
diagnostic assessments is the lack of concern for the dynamic impacts which
marketing services can have both on production and consumption. The static
focus of the research has been on whether prices and cost relationships over
space and time behave as predicted by the perfectly competitive model.
Relatively little effort had been made to better understand how the effective-
ness of marketing services influences supply and demand functions, especially
for small scale farmers and low income consumers.
12
Harris has recently reviewed the methodology used in the Stanford-Cornell
type approach to the analysis of market performance and makes a similar
observation (18):
In dealing with easily available, even if qualitatively poor, data
on agricultural commodity prices the analysis of market performance
has been diverted away from the consideration of interrelationships -
between the control of commodities and money; between exchange and
production essential for the identification of the role of the marketing
system in economic development. In this sense not only is the
methodology itself usually statistically and interpretatively spurious
but also the fetishism of competition in agricultural commodity markets
(as revealed by price and commodity analysis here) has led agricultural
marketing economists to overnarrow at least a decade of a substantial
part of our research.
Another problem with much of the broader diagnostic research is the
tendency to utilize secondary and usually macro-level data in testing for
conditions of structure, conduct and performance predicted by the perfectly
competitive model. Commodity studies of market flows, margins, elasticities,
concentration, competition and policies are generally based on industry or
regional-level data which do not permit focusing on the micro-level behavior
of marketing agents, including farmers' marketing decisions in the rural
areas. These studies frequently include assumptions of homogenous behavior
on the part of farmers and marketing agents and use data that are averages
of many observations (e.g., monthly price data) and thus obscure important
variations in market behavior. Results are often inadequate for making
specific recommendations for improvements in rural and/or urban markets,
especially if the objective is to extend improved services to specific target
groups such as small-scale farmers, other low income rural residents or low
income urban consumers.
Still another problem of much of the broader diagnostic research for
guiding overall marketing policy stems from its focus on few, if any, of
the levels of interaction in the vertical marketing channels between farmers
and ultimate consumers, whether they be located within rural areas themselves or
in large urban areas. Even in semi-subsistence economies there are interdependencies
in the various stages in the farm production-assembly-processing, distribution and
cons-umption process. And even the current "equity with growth" type of rural
development being advocated in much of the current development literature in-
volves constant structural transformation of the rural and urban economy which
leads to greater interdependencies among agricultural production, distribution
and consumption processes. The most important marketing problems related to
achieving the desired structural transformation are in the design and promotion
of new technologies and new institutional arrangements which may be unprofitable
or unavailable to individual market participants, but if adopted by all par-
ticipants, could yield substantial system improvements.
Some ten years ago, Pritchard stressed the importance of developing a
broad analytical framework for studying and solving agricultural marketing
problems in developing countries (19). He cautioned against using a narrowly
defined market structure framework which limited analysis to "those characteris-
tics of the organization of a market that seems to influence strategically the
nature of competition and pricing within the market." Pritchard outlined an
eclectic set of analytical procedures, bound together into a useful framework
by the concept of agricultural marketing as an organized, operating behavioral
system within the national economy. He emphasized the need to use the framework
to search for basic economic, technological and social constraints in the environ-
ment in which marketing systems function and change.
A number of U.S. university researchers have approached broader diagnostic
assessments from such a perspective. Researchers at Harvard University have
extended their "Agribusiness Commodity Systems" approach to problems of export
market development in Central America and other areas (20). Phillips and his
colleagues in Food and Feed Grain Institute at Kansas State University have
conducted a number of diagnostic assessments of grain marketing systems in less
developed countries using a broad food chain conceptual approach. Physical hand-
ling at all stages in the farm-to-consumer chain has been examined and recom-
mendations for improvement programs have been presented to government agencies.
Pricing, storage and regulatory policies have also been an important part of the
country studies (21).
A group of Michigan State Unviersity researchers have developed a "food
system" approach to conducting diagnostic studies of agriculture and food market-
ing systems linking large urban centers in selected Latin American countries with
their rural supply areas. Field studies in Northeast Brazil, Bolivia, Colombia,
and Costa Rica were carried out collaboratively with local professionals repre-
senting universities and governmental agencies (22). The diagnostic studies
were the basis for the development of broad-based market improvement programs
with specific project recommendations. A modified market structure-conduct-
performance framework of analysis generally guided the organization of these
diagnostic investigations. Such a framework is oriented towards the evaluation
of system performance when judged against broad economic and social goals.
The basic thrust of the MSU research was towards the use of a descriptive-
diagnostic procedure for identifying constraints and unexploited opportunities
as perceived by marketing system participants, local political leaders and
as identified through the use of a wide array of standard economic analysis
tools. The approach is pragmatic and eclectic, and emphasizes the need to
identify managerial, technological and institutional innovations which are
unprofitable or unavailable to individuals within existing marketing channels,
but if adopted across all stages of these interrelated production/marketing
processes, could lead to substantial, channel-wide improvements.
Organizing and Conducting Future Research
General Considerations.
The nature of marketing problems varies widely with the degree to which a
particular economy has been transformed from an agriculturally based rural economy
toward a more urban based, market oriented economy. In countries which are still
predominantly rural, marketing problems center around improvements in the function-
ing of local markets as providers of simple farm inputs, and household necessities
and as trading centers for basic food commodities produced and consumed within
the local area or region. As an economy becomes more urbanized, food production
and distribution takes on a higher priority in development plans with greater
attention to improving physical infrastructure (transportation, processing,
storage) and to policies and programs designed to stimulate production and
facilitate system coordination. As the industrialization process continues, new
technologies for processing and distributing food, more complex logistical and
institutional arrangements and increased participation of government agencies
in planning and carrying out marketing programs usually occur.
In many developing countries there are dual agricultural production-marketing
subsystems, one oriented towards export markets and the other towards domestic
food needs. The export oriented subsystem is typically better organized in terms
of pricing and handling procedures and often involve large scale parastatal
agencies or multi-national corporations with vertically coordinated production-
marketing programs. The export subsystems play an important role in bringing
new technologies and management innovations into less developed country agri-
cultural sectors.
Whatever the level of industrialization and urbanization, there is a need to
approach marketing research in LDCs from a "food systems" perspective where the
interdependencies of the various stages in the farm production-assembly-
processing and distribution process can be taken into consideration. The "food
systems" perspective that has evolved in U. S. agricultural marketing research
provides a useful background especially when viewed in a long-term (50-75 years)
context.
National Goals and Development Planning.
-Nearly all of the less developed countries are continually preparing
general development planning statements and project documentation for consider-
ation by external funding agencies as well as their own domestic government
agencies. The planning documents usually reflect basic underlying goals of
increasing GNP per capital, maintaining full employment of the labor force and
achieving an acceptable degree of equality in the distribution of income and
economic opportunities. In recent years national planning goals have given
increased emphasis to improving the relative well-being of rural people
and to measures that will slow the migration from over-populated rural areas to
the cities. This shift towards greater concern for the rural poor has been
reinforced by the policies and program of international development agencies
(24). As indicated later in this chapter there is need to give serious
attention to research which will give direction to marketing programs that
will benefit small farmers and rural communities. But in a broader context,
agricultural marketing research should support the design and promotion of
new technologies and new institutional arrangements that will contribute to
the achievement of a broad set of economic development goals.
Planning and Conducting Research.
The lack of basic information about the organization and functioning of
the food system and a general distrust of "middlemen" are common characteris-
tics among the less developed countries. However, social and political pressures
dictate that development programs and public policies be made on the basis of
available but usually very inadequate information and analyses of alternative
courses of action. Policy makers and the small contingent of professionals
who staff the planning units and the ministries of agriculture desperately
need applied research to identify the most urgent marketing problems and the
actions that might be taken to improve existing conditions. But there is also
a need for a more comprehensive understanding of marketing processes and a long-
term view of the desired role of market organization and institutions in national
economic development.
Probably the most fundamental issue that has recently captured the
attention of the international development community centers around the
observed ineffectiveness of past development programs to improve the relative, or
in some cases, the actual well being of the poor majority in the LDCs (24,25, 26).
In the poorest countries there is a high concentration of the poor in rural areas
and the rapid migration of the rural poor toward urban centers creates serious
employment and related social and political difficulties. As a result, there
has been a significant policy reorientation in international development assis-
tance agencies and in many of the less developed countries. And while there is
a continuing debate over the appropriate strategy for promoting the desired
rural development, there is general agreement that the fundamental issue is how
to promote both growth and equity.
In this context the question arises as to how changes in marketing in-
stitutions might make greater contributions toward improvements in economic and
social conditions in rural areas while also contributing to broader goals of
holding down food prices to families in rural and urban areas. To support
such an objective, additional field research is needed to identify alternative
opportunities for improving the effectiveness of rural marketing systems within
more comprehensive rural development programs designed for particular country
situations.
The emergence and development of an applied marketing research program will
follow different patterns depending upon the circumstances within individual
countries. The experience of the Michigan State University group in Latin
America suggests that a small task force unit created to carry out applied
research and to assist in the formulation of programs and policies can con-
tribute substantially to the development of a progressive and efficient agri-
cultural marketing system (22). Such a task oriented group can develop a
data base on food marketing and an approach to market system analysis that
will not only help identify opportunities for marketing improvements but will
also examine alternatives and make recommendations to appropriate action
agencies.
In order to develop the broad analytical framework which is needed in a
task force approach to understanding equity and growth concerns of develop-
ment, it is necessary to focus on the operation of the marketing system in
terms of the distribution of wealth and income; access to government services
and political power; social status and organization; geographic considerations;
and technical performance.
There is a growing interest among other social science researchers
(geography, anthropology, sociology and political science) in exploring various
aspects of the rural community that might be relevant to the development of
more realistic and effective development efforts. This suggests an opportunity
for increased collaboration or at least a greater degree of communication and
coordination between marketing economists and other social science researchers
as they attempt to deal with very complex rural development issues which in-
clude marketing institutions.
Whether or not a task force unit is created and institutionalized on a
more permanent basis there is usually a need for broad descriptive-diagnostic
research. Depending upon the size of the country and the available resources
these studies can be organized on a regional or national basis. It is impor-
tant that the geographic area to be studied include both urban and rural areas
so that the rural-urban marketing linkages can be considered in a longer-term
development context.
During the actual conduct of the studies preliminary reports and selected
pieces of information should be transmitted to key individuals in government
and in the private sector. When sufficient research output is available to
support major recommendations for an interrelated set of marketing improvement
programs, a high level seminar can contribute to the further development and
eventual adoption of programs and policies consistent with long-term national
goals.
If resources make it impractical to carry out such a comprehensive study
as a concentrated effort, an alternative is to establish a research agenda
and arrange for contributing studies that might be carried out by local
university students under faculty supervision, by graduate students preparing
theses for foreign universities, or by private consulting firms.
Towards a Research Agenda
A research agenda can be developed around a set of interrelated questions
that address the basic information needs for diagnosing marketing problems
and assessing program needs to achieve desired development goals. A suggested
set of questions and some interspersed comments are as follows:
What is the organizational structure at the farmer,
assembly and processor levels? What services are pro-
vided at these different stages, and what are the pre-
vailing price spreads, costs and investments at each
stage?
What are the procedures for arranging transactions and
coordinating product flow in these stages of the marketing
channels for the major food products?
Is there evidence that market instability and poor
market coordination have resulted in high and costly
levels of risk and uncertainty for farmers, as well as
other market participants? What are the major causes
of market related risks and uncertainties?
Primary emphasis in the above question areas is needed on better under-
standing the micro level relations of both agricultural production and
marketing in rural areas, and to explore the equity and efficiency implications
of alternative marketing arrangements. It is essential to better understand
how the effectiveness of marketing services influences supply response of
different type of farmers. For example, what effect does market information
have on market risk and uncertainty associated with both small and large farmers'
adoption of new agricultural production technology and farm level enterprise
selection? There is the critical question of understanding the role of local
input marketing services in reducing costs, as well as risk and uncertainty,
associated with obtaining and correctly using new agricultural production
inputs. There is also the question of learning how to better coordinate
planned output expansion with market demand potential, even though there is
generally very inadequate information regarding characteristics of demand.
This is particularly important for many of the rural development schemes which
seek to raise small farmer income via high value crop production, such as
fruits and vegetables, and meats. High marketing costs, risky market trans-
action channels, and underspecified quality characteristics for these products
can quickly dampen price and other demand incentives for farmers, especially
for smaller ones who tend to have less individual control over marketing
methods and higher marketing costs due to smaller unit sales.
What will be the trends in population growth, level
and distribution of incomes, and urbanization patterns
in rural towns and large cities over the next 10 to
20 years? What effects will these changes have on de-
mand for food products and food marketing services?
What are the existing characteristics and
problems of the rural as well as urban consumer
market for food with respect to quantities purchased
by different income groups, shopping habits and
attitudes toward existing retailing services?
An area of relative neglect in marketing is the back flow (or within rural
area flow) of food, other consumer goods and agricultural inputs through
a hierarchical set of trading arrangements which link individual farmers and
small villages to larger villages, and ultimately to major urban centers.
The effectiveness of this portion of the agricultural marketing system can
have a major impact on the well-being of rural people and on the growth
and development of economic activity in rural areas. For example, there is a
need to understand how the type and effectiveness of marketing/distribution
services influences the mix and quality of foods marketed in rural areas,
and how these services influence farmers' ability to specialize in fewer
crop and livestock enterprises. Recently, researchers have begun to focus
on understanding rural demand and consumption linkages for nonfood inputs
and consumer goods (27). These are an important source of demand for in-
dustrialized products that are well matched to local, effective demand
characteristics. However, more research is needed to understand how to
promote the organization of lower cost mass distribution of these products
to rural consumers.
Another related area for future research is the exploration of the re-
lationship between nutrition and marketing services, and their combined
effect on the welfare of different consumer and producer groups. Nutrition
studies are increasingly being redefined to include a broader set of variables
instead of the isolated factors of health or total food supply. When sub-
sistence rural households are encouraged to increase their cash incomes by
producing food and/or cash crops for sale, improved nutrition may be achieved
only if necessary foods are available at reasonable costs, and in nutritious
and consumable forms for purchase by these households. If rural food
distribution services are ineffective and high cost, this will reduce the
quantity and quality of products available locally and the real purchasing
power of rural consumers.
What is the organizational structure at the re-
tailing and wholesaling levels? What services are
provided at these stages and what are the prevailing
price spreads, costs, and investments at each stage?
What are the procedures for arranging transactions
and coordinating product flow among the wholesale and
retail stages of the marketing channels for the
major foods consumed?
What are the major problems confronting the more
progressive food marketing entrepreneurs in the finance,
government regulations, competition from other entre-
preneurs (public or private) and market infrastructure?
Past research has shown that the large and rapidly growing group of low
income consumers in major urban centers of less developing countries allocate
high portions of their cash income to purchased food which they tend to procure
from small scale urban retailers located in marketplace stalls and neighborhood
shops (2, 22, 28). Among all urban food retailers, however, these smaller
scale merchants tend to have higher costs of operation and more difficulty
coordinating with urban and rural wholesale suppliers for the provision
of the mix of foods demanded by their customers. Unfortunately, this group
of small urban retailers have not received adequate research and develop-
ment program assistance, while the urban marketing reforms undertaken
have tended to benefit larger scale retailers and wholesalers who serve
middle and high income consumers (1, 29, 30, 31). Therefore, there is
a special need for research to determine how small scale food retailing in
both rural and urban areas can be improved through managerial and technologi-
cal innovations which reflect each countries' labor and capital endowments
and which contribute to more effective vertical market channel coordina-
tion linking small scale merchants and farmers.
In terms of overall evaluation of marketing channels,
What evidence can be cited to indicate poor market
performance with respect to a) costs of providing exist-
ing services, b) effectiveness of vertical coordination
mechanisms in communicating consumer demands to marketing
firms and ultimately to farmers, c) adequancy of variety,
quality and condition of products reaching consumers, d)
effectiveness of product distribution over space and over
time, e) progressiveness of public and private enter-
prises in adopting new marketing practices, and f)
equitability of the system in distributing benefits of
marketing improvements?
Is it possible to identify potential innovators, i.e.,
individuals who have adopted improved management practices
which could be transferred to others?
What are the problems and opportunities for en-
couraging improved distribution channel coordination
through sequential introduction of new management practices
and coordination arrangements?
What are the alternative roles which the public
sector can play in taking leadership to promote improved
performance of marketing practices? What are the
costs and benefits of pursuing these alternative roles.
Public and semi-public enterprises play an important role in the
agricultural marketing systems of many less developed countries. Their
functions often involve the purchase, storage and distribution of large
volumes of domestically produced staple food commodities and the importation
of additional food supplies. In several instances, parastatal enterprises
have a central role in the development of export oriented agricultural
commodity systems. Due to size and nature of these public enterprises, it
is difficult to achieve and maintain high levels of economic performance.
There are the usual internal organization and management problems that
should be attended with a continuing applied research and educational program.
But there are larger, more troublesome problems regarding the appropriate
role of the public agency in relation to the private sector, the distortion
of real price-cost relationships through the use of taxing and subsidy powers
and the ever present possibility of political manipulation and corruption where
large amounts of money and commodities are being handled. This is an area
that needs careful evaluation through a series of case studies from which a
set of guidelines might be derived for the organization and operation of public
sector agencies and enterprises within a more global food system development
strategy.
Concluding Comments
This chapter has outlined a conceptual view of the development process
within which the economic organization of market relationships in the food
system can play a dynamic and critical role in achieving national development
goals. A general approach to the development of a marketing research program
within less developed countries has been proposed. Priority has been directed
toward applied research carried out within a descriptive-diagnostic-prescriptive
framework that is relevant to policy and program development needs in the de-
veloping countries. These procedures seem appropriate for use in a wide range
of political economic systems although the specific forms of public sector
participation in the food system will vary among countries.
U. S. agricultural economists, as well as those from other developed
countries, will have continuing opportunities to assist in the development
of agricultural marketing research programs in the less developed countries.
Past experience indicates that their most important contributions will be in
the development of young professionals who become the indigenous professional
cadre that actually carries out research, teaching, administrative and entre-
preneural roles within their own countries. But effective professional develop-
ment requires a combination of formal training combined with long-term in-
volvement in applied, problem-solving research and related activities. This
pattern of professional development can be facilitated by developed country
Ph.D. level training programs with supervised thesis research back in the
student's own country or region and through assistance in the development
of master's level training programs in LDC institutions with emphasis on
relevant field research experience dealing with marketing problems.
Collaborative task force marketing research projects involving pro-
fessionals from local LDC institutions and more developed country in-
stitutions can contribute to professional development goals while making
timely and important inputs to current planning and program needs. Over
the longer run, the gradual evolvement of professional networks re-
inforced by linkages among LDC institutions and between LDC institutions
and similar institutions in more developed countries can greatly strengthen
the overall effectiveness of marketing research programs in the LDCs.
These kinds of professional development-applied research efforts are
being reinforced and promoted by international agencies such as the FAO
and IICA (Inter-American Institute of Agricultural Sciences), bilateral
foreign assistance agencies and by private foundations.
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MSU RURAL DEVELOPMENT PAPERS
RDP No. I*
RDP No. 2
RDP No. 3*
RDP No. 4
RDP No. 5
RDWP No. 1*
RDWP No. 2*
RDWP No. 3*
RDWP No. 4
RDWP No. 5
RDWP No. 6
RDWP No. 7
RDWP No. 8
Akhter Hameed Khan, "Ten Decades of Rural Development: Lessons
from India," 1978.
Lane E. Holdcroft, "The Rise and Fall of Community Development
in Developing Countries, 1950-1965: A Critical Analysis and an
Annotated Bibliography," 1978.
James E. Kocher and Beverly Fleisher, "A Bibliography on Rural
Development in Tanzania," 1979.
Enyinna Chuta and Carl Liedholm, "Rural Non-Farm Employment: A
Review of the State of the Art," 1979.
David W. Norman, "The Farming System's Approach: Relevancy for
the Small Farmer," 1980.
MSU RURAL DEVELOPMENT WORKING PAPERS
Benedict Stavis, "Turning Point in China's Agricultural Policy,"
1979.
Kathryn M. Kolasa, "The Nutritional Situation in' Sierra Leone,"
1979.
Benedict Stavis, "Agricultural Extension for Small Farmers,"
1979.
Steve Haggblade, Jacques Defay, and Bob Pitman, "Small Manufac-
turing and Repair Enterprises in Haiti: Survey Results," 1979.
Peter Riley and Michael T. Weber, "Food and Agricultural Marketing
in Developing Countries: An Annotated Bibliography of Doctoral
Research in the Social Sciences, 1969-79," 1979.
Harold M. Riley and Michael T. Weber, "Marketing in Developing
Countries," 1979.
Victor E. Smith, Sarah Lynch, William Whelan, John Strauss and
Doyle Baker, "Household Food Consumption in Rural Sierra Leone,"
1979.
Omar Davies, Yacob Fisseha and Claremont Kirton, "The Small-Scale
Non-Farm Sector in Jamaica..Initial Survey Results," 1980.
Single copies of the MSU Rural Development Papers and MSU Rural Development
Working Papers may be obtained free by writing to: MSU Rural Development Program,
Department of Agricultural Economics, 206 International Center, Michigan State
University, East Lansing, Michigan 48824; U.S.A.
*Jut of print.
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