T7 - Exchange functions & Physical Function.ppt

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1. Exchange functions –buying and
selling;
Physical functions –storage,
transport and processing.

2. Buying and Selling
•Buying and selling are the most important activities in the
marketing process. By this exchange function, possession utility is
added to the commodities.
•Buying: Acquire in exchange for money or its equivalent; purchase
•It involves the purchase of the right goods at the right place, at the
right time, right quantities and the right place.
•It involves the problem of what to buy, when to buy, from where
to buy, how to buy and how to settle the prices and terms of
purchases.

3. •Buying function involves the following
subsidiary functions before the actual buying
function takes place.
•Planning the purchase of goods:
•Contractual function: Determining the sources
of supply and establishing contacts with them
Negotiation of price and terms and conditions
of buying
•Final agreement and transfer of goods.

4. Selling: To exchange or deliver for money or its equivalent.
•It involves the problems of when to sell, where to well, through
whom to sell, and whether to sell in one lot or in parts.
•The objective of selling is to dispose of the goods at a
satisfactory price.
The selling function thus includes the following sub-functions,
•Product planning and development: variety quantity of the
product to be produced, grading it and deciding about the trade
or brand names to be adopted for the product.
•Contractual function: selling the products with which potential
consumers are not familiar.
•Negotiating the prices and selling the terms and conditions of
sale with the buyers.
•Final selling and transfer of the produce.

5. Methods of buying and selling
prevalent in India
•Under cover of a cloth:
•Private negotiation:
•Quotations on samples taken by commission
agents:
•Dara sale method:
•Open auction method:
•Closed tender system:

6. TRANSPORTATION
•Transportation or the movement of products between places
is one of the most important marketing functions at every
stage, i.e., right from the threshing floor to the point of
consumption.
•Transportation adds the place utility to goods.
Advantages of Transport Function:
1. Widening of the Market
2. Narrowing PriceDifference Over Space
3. Creation of Employment
4. Facilitation of SpecializedFarming
5. Transformationof the Economy
6. Mobilityof the Factors of Production

7. •Transportation Cost:
•The transportation cost accounts for about 50 per cent of the
total cost of marketing
•Higher when the produce is transported by bullock carts
•The efficiency of transportation depends on the speed and
the care
•Factors affecting the cost of transportation:
1. Distance
2. Quantityof the Product
3. Modeof Transportation
4. Conditionof Road
5. Natureof Products
6. Availability of Return Journey consignment:
7. RiskAssociated

8. STORAGE AND WAREHOUSING
•Storage is an exercise of human foresight by means of which
commodities are protected from deterioration, and surplus supplies
in times of plenty are carried over to the season of scarcity.
•The storage function therefore adds the time utility to the products.
•The storage, therefore ensures a continuous flow of goods in the
market.
•It protects the quality of perishable and semi-perishable goods
from deterioration.
•Helps in the stabilisation of prices by adjusting demand and supply.
•It is necessary for some periods for performance of other marketing
functions.
•It helps in ripeningfor some farm commodities
•It provides employmentand income through price advantages
•Risks in storage : Price risks: Quantity loss: Quality deterioration:

9. Warehousing
•Warehouses are scientific storage structures
constructed for the protection of the quantity and
quality of the stored products.
•It includes handling and transport, safety and
security, standardisatation and other related aspects.
•Market intelligence
•Financing: Warehousing meet the financial needs of
the person who stores the product.
•Price stabililsation
•Scientific storage

10. Warehousing in India
•All India rural Credit Survey Committee, 1954,
-paved the way for the enactment of the
Agricultural Produce (Development and
Warehousing) Corporations Act, 1956 and
•later replaced by warehousing Corporations
Act, 1962 and establishment of central and
state warehousing corporations.
•Central Warehousing Corporation (CWC)
•State Warehousing Corporations

11. CWC Functions
•To acquire and build godowns and warehouses at
suitable places in India.
•To run warehouses for the storage of agricultural
produce, seeds, fertilizer and notified commodities
for individuals, co-operatives and other institutions.
•To act as an agent of the government for the
purchase, sale, storage and distribution of the above
commodities.
•To arrange facilities for the transport of the above
commodities.
•To subscribe to the share capital of SWCs.

12. Processing and Value Addition
•The term processing may be defined a deliberate
activity which changes the form of a commodity. It
converts farm products into a more usable form.
•It makes possible for us to store perishable and semi-
perishablecommodities and facilitate the use of
surplusin one season or another or another or year.
•It is nearly 7 % for rice and 86 % for tea
•E.g. canning and pickling of fruits and vegetables.
•It generates employment.
•It serves as an adjunct to other marketing functions,
such as transportation, storage and merchandising.

13. Advantages of processing
1. It changes raw food into edible and palatable form
2. By processing, the value addition to farm products is
increased eg: Sugarcane -Sugar, gur, Wheat –Flour,
Mango -Squash, Pulp, Paste and Pickles
3. Processing function makes it possible for us to store
perishable and semi-perishable agricultural
commodities for later use.
4 . It generates employment
5. It widens market
6. Processing serves as adjunct to other marketing
functions such as transportation, storage and
merchandising.