CHAPTER 3 MARKETING FUNCTIONS MEANING OF MARKETING FUNCTIONS The term "marketing functions" is used to refer specifically to the commodity

transformations in time, space, and form that are associated with storage, transportation, and processing. It is an act or service which links the producer to the ultimate consumers. It helps to transfer the ownership of the product from producer to intermediaries and intermediaries to ultimate consumers. It involves a number of operators to be performed while transferring products from producers to consumers. For eg: collection of buying, storing, grading, selling, transporting etc. Similarly, it also involves risk bearing, market information, promotion etc. The most widely accepted classification of marketing function is given by Cundiff and Still. They have classified the marketing function under the following three major head. 1. Merchandising Function : It includes: a) Buying b) Selling 2. Physical Distribution Function: It includes: a) Storage and Warehousing b) Transportation 3. Facilitating Functions: It includes; a) Standardization and grading b) Financing c) Risk Bearing 1. MERCHANDISING FUNCTIONS It is also known as exchange function. This function helps to transfer the goods as well as ownership from one party to other party. This function is done for matching the products with buyers need and making available them in the target market. Its functions can be classified as follows; A. BUYING: : It is one of the important functions of marketing. It is the process to transfer of ownership from seller to buyer. Buying is indeed an art and we need expert buyers to make scientific purchases in modern market. In marketing, the buying and selling are very important. There are some basic objectives of buying. Such as ; to get the right quantity, to get the right quality to get in right time and . to get in right place. Buying is very closely related to production and marketing department. Producers must work in co-operation to

27

Chapter- 3, Marketing Functions

fulfil the needs of marketing set by top management. According to Still and Cundiff : Buying is the procurement of goods or service for eventual resale to the consumers or industrial users. ELEMENTS / FUNCTIONS OF BUYING There are some elements of buying which are also known as functions of buying. They are discussed as follows: 1. Planning to Purchase: It is the first element or functions of buying. The buyers should make the plan to purchase the goods. Their plan may vary and base on their anticipated sales and consumers' demand. It must be depend on customers' demands and needs. Under planning of purchase, three elements, functions are listed below: a. Preparation of budget b. Determining the rate of turnover (It refers to the number of time the average inventory of stock sold) and c. Changes in price. 2. Contact: It is related with the location and determination of sources of supply. The buyers must contact to the number of potential suppliers. While selecting the suppliers, the buyers must consider the efficiency, financial strength, reputation and goodwill of the suppliers. 3. Negotiation: It refers to the process of bargaining between buyers and sellers. Buyers and sellers meet together with a view to discuss the contents of contract such as price, payment, quality, quantity, mode and time of delivery, transportation and discount etc. After the detailed discussion, they agree to make the terms and conditions for buying and selling goods and services. 4. Assembling: It means bringing or collecting a large number of similar goods of many producers or different sources at a proper place at proper time. It is also known as centralization. 5. Contact: It is a written document where all the terms and conditions such as quality, quantity, price, discounts terms of delivery and payment etc. are clearly written. When it becomes finalized, both buyers and sellers activities start. If anyone party violate this contract, another party can appeal to the court for justice and penalty has to be paid as specified in the contract agreement

28

Chapter- 3, Marketing Functions

METHODS/TYPES OF BUYING: Buying methods depend on the nature, size and volume of business. There are some methods to buy the goods. They are discussed below. a. Concentrated buying : If purchases are made from a single or a very few suppliers ,is known as concentrated buying. Under this method, the buyers purchase all the required goods from a single seller or selected a few sellers. Buyers can get reasonable price rate, quantity discount, best services, low handling and transportation cost, and prompt delivery. But if the supplier fairs to maintain regular supply, it will have adverse effect. There is also limited choice to buy the goods due to single or few numbers of suppliers. b. Diversified buying : If purchase are made from a large number of suppliers that is known as diversified buying. The buyers enjoy competitive price and wider selection facilities. The danger of putting all eggs in one basket is removed. But this method can't provide quantity discount to the buyers. Similarly, it also increases transportation cost. c. Reciprocal buying : Reciprocal buying is like barter system where buyers and sellers enter into a contract to buy and sell the products mutually. Under this method, better quality of goods can be obtained at reasonable price. It helps to build the good relation and increases purchasing and selling activities. But it reduces the choice of suppliers. There is limited choice and sometimes prices may be higher too. d. Hand to mouth buying : Hand to mouth buying method also known as conservative buying. Under this method, buyers purchase in small quantities or lots to meet the current or immediate needs. There is no risks of loss and no speculation. Minimum capital is sufficient to purchase the goods and no problem of storage. e. Speculative buying : Speculative buying is also known as forward buying because purchase is made in a big quantity. This method is opposite of hand to mouth buying. By expecting a higher price in the near future, buyers may purchase the goods in large quantities. However, there is high risk of overstocking and fluctuation of price due to imbalance of market. h. Buying by description i. buying by contract j. buying by tender

29

Chapter- 3, Marketing Functions

f. Buying by samples: under the buying by samples method, buying purchase the goods according to sample and price list of the products to the customers. The products and price should be accurate according to the sample and price list. Otherwise, the buyers can return the product. It is very easy for distant places because they can inspect the samples but the best selection of sample is required g. Buying by inspection :. The buyers directly visit different stores to inspect the products. The buyers inspect and examine the products directly with the product, which can purchase the goods. This method is more applicable for wholesalers and retailers. h. Buying by description : If the purchase is made on the basis of detail information about the product feature, price and quality etc. through the booklet or catalogue is known as buying by description. Under this method, seller provides all the detail information such as size, performance and uses of sellers. Advertisement and brand name of the product also sopport to purchase and sale of the goods. i. Buying by contract : Under this method of buying by contract, purchase is made under a contract for a long period with fixed suppliers. The buyers purchase the goods continuously at a fixed price according to the contract. It is mainly suitable when the price is stable and not liable to wide fluctuation but the buyer cannot get the benefit of favourable change in the price. When products are made on the basis of tender is known as buying by tender. Generally, large companies and government offices purchase the goods under this method. All the interested suppliers will send the quotation or submit the form according to the buyers requirement. B. SELLING FUNCTION Selling functions is another side of exchange function. Selling function and buying functions make complete the function of exchange. Selling means exchanging goods for money or transferring ownership of goods and services through the process of exchange. It also includes identifying prospective customers, creating demand, providing information about goods and market and accomplishing exchange.

30

Chapter- 3, Marketing Functions

ELEMENTS OF SELLING/ FUNCTIONS OF SELLING The following activities are including in selling, they are also called subfunctions of selling or elements of selling. 1. PRODUCT PLANNING AND DEVELOPMENT: Product planning means deciding in advance what sort of product is to be produced. It is the process of identifying what to produce for selling more quantity and earning more profit. The product planning includes the activities such as decision on quality, design and quantity of product, necessary technology, knowledge and skill, ascertainment on the stage of life cycle of product etc. This is the starting point of entire marketing program of the company. Whereas product development is concerned with giving practical shape to product planning. Business firm should be attentive towards the needs of the consumers for selling goods in the market. Needs, wants and interest of the customers should be identified and goods should be produced accordingly and taken to market to selling. 2. CONTACT FUNCTIONS: The next step in the process of selling is to established contacts with the prospective buyers. It involves finding and locating buyers by the sellers. The customers can be contracted directly or indirectly and maintain long-time contractual relationship. A seller should keep contact with innumerable customers like final consumers, industrial users, institutional buyers, retailers etc. 3. CREATIONS OF DEMAND: The main job of selling is to convert nondemand into demand and future demand into current demand. Without demand in market, it becomes difficult to sell any product. Several methods are used to create demand or stimulate feeling in customers to buy any new product. Demand is created through personal salesmanship, consumer relation and public relation with the support from advertising, publicity and sales promotion. 4. NEGOTIATION: Negotiation is the bargaining or discussion between the buyers and sellers to finalise the terms and conditions of sales. They discuss about the product, price, quality, quantity, delivery date, mode of payment, provision of discount and mode of transport etc. 5. CONTRACT : The final output of the sales job is to an agreement with the buyer on the terms and conditions and execute sales. It is the written agreement where all the terms and conditions for buying and selling clearly

31

Chapter- 3, Marketing Functions

written. After the receiving the payment, the transfer of ownership of the product is done. 2. PHYSICAL DISTRIBUTION Physical distribution is the process of making the movement of the product to the consumers. It encompasses all the activities involved in the physical flow of products from producers to consumers. Physical distribution makes the product available at the right place and at the right time. It includes: a) Transportation b) Storage and Warehousing A. TRANSPOTATION Transportation is the activity conducted for moving products from the poin Production takes place in a few places but the products have to be delivered and distributed throughout the length and breadth of the country and often even across national boundaries into other countries. Transportation helps in the physical movement of goods from the production centres or point of origin to the consumption centres. As a result, transportation increases the mobility of labour, goods and services and capital. FUNCTIONS OF TRANSPORTATION Transportation helps in performing a number of functions while taking goods and services from the point of production to the point of consumption. Its Functions are as follows: 1. Widens Market: Transportation helps in delivering the products to different places. In doing so, products can be sold in old markets as well as the new markets. Transportation widens the market by bringing the producers, distributors, and consumers closer to one another. 2. Increases Mobility of Labour and Capital :Certain factors of production like labour and capital are to be physically transported from one place to another. Labour becomes mobile with the development of transportation. It also encourages migration of people from place to place in search of job. 3. Creates Time And Place Utility:Transportation facilitates physical movement of goods from one place to another. This results in the creation of place utility. Transportation also includes storage function. This means goods are made available at the time of consumers need. This results in creation of time utility.

32

Chapter- 3, Marketing Functions

4. Price Equalization: Transportation helps in supplying products to the consumers when it is demanded. The excess supply from one location can be transported to places where the demand is high. As a result, scarcity is avoided and price fluctuations are controlled. 5. Employment Opportunities: Transportation uses a lot of people while carrying out its functions. Therefore, it provides employment to millions of people. 6. Transformation Of The Economy: Transportation also develops modern industry as well as production of agricultural products. This leads to increased productivity resulting transformation of the economy. 7. Large Scale Of Production: Transportation helps in distribution of the products on a large scale. As markets continue to widen, production capacity has to be increased. This leads to large-scale production and reduction in cost. 8. Overall Economic Development: The development of transportation is part and parcel of economic development. It stimulates the development of other sectors of the economy like agriculture, industry and tourism. Even perishable products can be delivered to the markets with greater speed using transportation. MODES OF TRANSPORTATION: Transportation plays a very important role in the economic development of a nation. According to Lionel Robbins Transport industries which undertake nothing more than the mere movement of persons and things from one place to another, have constituted one of the most important activities of men in every stage of advanced civilization. Transportation helps the growth and distributions of wealth. There are different modes of transportation. They are as follows: * Road Transportation * Rail Transportation

* Pipeline Transportation * Water Transportation * Air Transportation 1. ROAD TRANSPORTATION: Road transportation is the oldest and best form of transportation. Road transportation is also known as Highway transport. Through road transport, people and goods can be transported to different destinations. Road transportation is convenient and relatively fast. It can be used for door-to-door delivery of the products.

33

Chapter- 3, Marketing Functions

* FEATURES OF ROAD TRANSPORTATION: 1. Small Investment : Road transportation requires relatively small level of investment compared to other modes of transportation. 2. Multipurpose: Road Transportation is multipurpose. Different vehicles like trucks, buses, trolleys, tractors and wagons carry merchandise and people from one place to another. 3. Freedom Of Movement: Road transportation is flexible and can rely on highway or gravelled roads. The owner or the user can take it anywhere according to his/her convenience as long as the roads exist. 4. Door-to-door service: Road transportation provides door-to-door service. Men and materials can be picked up or dropped off anywhere. The goods can be loaded at the sellers' doors and unloaded at the buyers' doors. 5. Economy Of Time: Road transport is generally meant for short distances and this saves a lot of time. It can be done at minimum cost. Roadways are the most preferred mode of transport over short distances. * ADVANTAGES/ STRENGTH OF ROAD TRANSPORTATION 1. Flexibility: Road transportation is flexible and can follow any time schedule according to the convenience of clients or the owner. It can carry any cargo and can follow any route. 2. Economy : Road transportation is cheaper because construction and maintenance of road is cheaper compared to railways. The vehicles are also cheaper. Usually road transportation is for short distance and the cost of transportation is also cheaper. 3. Convenience : Road transportation is more convenient because it can offer door-to-door service. This results in saving of time and money in terms of loading and unloading and the resultant damages or loss of the products. 4. Feeder Services: Road transportation serves as a link to the other modes of transportation. Several feeder roads are connected to a single highway for extensive transportation facilities. Road transportation can be used to deliver goods to the railway station, docks or airport. 5. Safety: The owners and operators of road transport take direct interest in goods transported through them. Road transportation involves minimum loading and unloading. This results in the delivery of goods and services to the destination without much damage or pilferage.

34

Chapter- 3, Marketing Functions

6. Rural Development: Construction of roads in rural areas makes it possible for the development of other activities. People can also get goods delivered at their doors. 7. Suitable For Perishable Products: Road transportation is suitable for perishable products like fruits, vegetables, milk and fishes. Road transportation facilitates quick delivery from rural areas to the cities where they can be immediately marketed and consumed. * DISADVANTAGES/WEAKNESS OF ROAD TRANSPORTATION 1. Unsuitability : Road transportation is not suitable for long distances. Goods cannot be transported by road in case of cross border transportation over long distances. It is also not suitable for heavy or bulky products due to limited carrying capacity. 2. Less Speed: The speed of the road transportation is limited. There is speed limit and some routes do not allow speed greater than the prescribed level. Therefore, quick delivery cannot be made. 3. Unreliable: The road transportation may not meet the time schedule. Therefore, there will be delays in delivery. There might be breakdown during the journey and immediate repair may not be possible. There might also be disruptions due to landslide or flooding. 4. Unstable freight: Freight charges are subject to frequent changes and different transport operators use different rates. The rates are subject to bargain. It may be low for those who can bargain but not for others. 2. RAIL TRANSPORTATION Rail transportation or railways are the cheapest mode of transport around the world. Rail transport is owned and operated by the governments of each country. They are more reliable compared to road or water transportation. Railways are popular and widely used transport system. Railways could be meter gauge or broad gauge depending on the capacity, speed and the traffic. * FEATURES: 1. Monopoly: Rail transportation is the monopoly of the government because no private individuals or parties can operate it. 2. Huge Investment: The railway transport system requires huge capital investment. The cost of laying the lines, building bridges and tunnel, railway

35

Chapter- 3, Marketing Functions

stations, manufacturing engines and wagons require very large financial outlays. 3. Specific Infrastructure: Rail transport requires specific infrastructure and these cannot be used for other purposes. Railways can be used for transportation of passengers and cargo. Railway lines, wagons, stations and platforms are specific infrastructure required for rail transportation. 4. No Uniform Pricing: Rail transport has uniform fares for transportation of people. The fares for commodities are different compared to the passenger fares. Therefore, there is discrimination in the fares of passengers and commodities. 5. Large Carrying Capacity: Railways have large carrying capacity and can carry large quantity of cargo compared to road transport. The number of wagons can be increased or decreased according to the needs for the transportation of the cargo and people. * ADVANTAGES/ STRENGTH OF RAILWAY TRANSPORT 1. Suitable For Bulky Products: Rail transport is suitable for transporting heavy and bulky products over long distances. Large quantities of raw materials for industrial use can be transported at cheaper rates. 2. Greater Speed: Rail transport is faster than road transport. As most trains are operated by electricity, the speed is greater in comparison with different modes of road transport. 3. Cheaper: Railways are cheaper for the transportation of bulky products over long distances. This is because government operates it as public utility services. 4. Dependable and Regular Services: Rail transport is operated round the clock. Time schedules are followed to maintain regularity in service. The materials can reach the destination in time due to fixed time schedules. 5. Safe Carrier Very few accidents occur and this makes rail transport system much safer than road transport. There is less chance of damage to the cargo and loss by theft is rare. 6. Flexible Carrier: The number of wagons are increased or decreased according to the needs for carrying capacity. Therefore, rail transportation is more flexible compared to other modes of transportation.

36

Chapter- 3, Marketing Functions

* DISADVANTAGES/WEAKNESS OF RAILWAY TRANSPORT 1.Heavy Investment:The establishment of railways requires very heavy investment. The railway lines, platforms and stations have to be constructed. The wagons have to be manufactured. Similarly, the maintenance cost is also very heavy. 2. Costly: Rail transport is costly over short distances. Additional cost of loading and unloading increases the overall cost of transport. 3. Inflexible: Rail transport has fixed routes and can be used along those routes only. Door-to-door service is not possible and the time schedules can not be changed. 4. Unsafe For Perishable Products: Rail transport handles large-scale transportation and is not suitable for perishable products. Delay in transportation or carelessness in handling will result in damages to the cargo. 5. Evils Of Monopoly:As rail transport is a monopoly of the government, consumers' needs may not be fulfilled. 3. WATER TRANSPORTATION: Water transport includes river, oceans and canals as a means of transportation. It is the oldest mode of transportation. Water transportation is used for bulky products, which have low unit price. Water transportation is cheaper than other modes of transportation but is extremely slow. Water transport does not require heavy capital investment because the ships and boats can travel over natural waterway. * FEATURES OF WATERWAY TRANSPORTATION : 1.Natural Waterway: Rivers, oceans and seas are free gifts of nature that provide natural way for transportation. The construction cost of route is not required. 2. Little Power Consumption: The steamers and ships do not require costly energy so there is minimum power consumption. In some cases the transportation is directly propelled by river current. There may not be any need for fuel. 3. Low Operational Cost :Because of low power consumption, the operational cost of the water transportation is also low.

37

Chapter- 3, Marketing Functions

4. Flexibility: Water transportation does not require set routes. It can use the surface of water to adjust the voyage according to the needs. There is considerable freedom of movement subject to safety and security. 5. Slow Movement: Water transportation is the slowest of all modes of transportation. 6. Natural Hindrance: Waterway is subject to natural hindrance. The river could change its course; silting and flooding may prevent transportation. * ADVANTAGES/ STRENGTH OF WATER TRANSPORT: 1. Cheapest : Water transport is basically a gift of nature and the cost of maintenance is very little. It also uses very little power. It can be operated with minimum power energy. Even large ships can be operated with little power. 2. Large Carrying Capacity: Water transportation is most suitable for bulky products as the ships have large carrying capacity. The ships will have adequate space to carry products in large volume. 3. Safer: There is no shaking or jerking and therefore brittle and fragile products are safely delivered to their destinations. Products like ceramics glassware, metal wares, can be transported with safety. 4. International Trade: Water transport can be used to reach all nations. Import and export trading of bulky products between countries occurs mainly through water transportation. For international trade water transportation is the most economical means of transport. * DISADVANTAGES/WEAKNESS OF WATER TRANSPORT: 1. Slow Speed: Water transportation is the slowest of all the transportation. It is not suitable for the products that require quick delivery. 2. Limited Area Of Operation: Water transportation can be used only where the route is authorized. The natural surface of the water does not permit construction of new routes. The delivery can be made to the ports, which may be located at distant places from the point of consumption. 3. Seasonal Difficulties: Water transportation is seasonal in nature. Some of the ocean surface freezes in winter and ships cannot travel. In summer, high sea cyclones affect the operation of water transport. These pose serious problems for importers and exporters.

38

Chapter- 3, Marketing Functions

4. Risky: Storms, high tides and cyclones cause damage to the cargo. These natural hazards may cause total damage to the cargo; the vessels may sink during the voyage. 5. Unsuitable: Water transportation is unsuitable for perishable goods and landlocked countries. There will be transit problems for the landlocked countries. 4. AIR TRANSPORTATION Air transportation is the most advanced mode of transport. It has reduced the distance between countries and tourism industry has flourished. Air transportation is the fastest mode of transport and used mainly for travel by people and carrying mails. It is helpful in supplying relief services in time of emergency like floods or earthquakes and war. Air transportation has created time utility in both national and international markets. It links different parts in the country and the cities in different countries. * FEATURES: 1. High Speed: Air transportation is the fastest mode of transport among all modes of transportation. It can cover long distances in a very short period of time. 2. Unbroken Journey: Air transport takes place over land and sea without any broken journey. There is no need to break a journey except for fuelling. There are not much of in-transit formalities. 3. Expensive: Air transportation is the most expensive mode of transportation because of high operational costs and limited carrying capacity. 4. Extensive Network :Air transport network covers the entire world. It is not limited to few cities and countries. * ADVANTAGES/ STRENGTH OF AIR TRANSPORT: 1. Highest Speed: Air transport has the highest speed. Goods and people can reach their destination very quickly. It can transport people and product within the shortest possible time. 2. Boon To Perishable Product : Air transport has provided international market for perishable products. It moves perishable products from one place to another within a short period of time. High valued products like fruits and flowers can be transported from around the world within a very short period.

39

Chapter- 3, Marketing Functions

3. Regular, Comfortable and Punctual : Air transport provides regular and punctual service. All kind of comfort are provided to the passengers. Airplanes arrive and depart in time so that passengers are sure of reaching the destination as per schedule. 4. Shortest Route: Airplanes travel over ocean, land and mountains. There is no physical hindrance. Therefore, it follows the shortest and most direct route. 5. Access To All Areas: Air transport can easily reach all areas. The mountains and oceans do not hinder the journey. In times of emergency situation, food and medical supplies can be provided by means air transport. * DISADVANTAGES/WEAKNESS OF AIR TRANSPORT: 1. Expensive: Air transport is expensive compared to other modes of transportation. The freight rates are higher compared to other modes. 2. Uncertainties and Unreliable: Air transport depends on weather conditions. In summer, the services become unreliable due to heavy rains. In winter, dense fog hinders flights from taking off and landing. 3. Limited Capacity: Air transportation has limited carrying capacity and large-scale bulky products cannot be transported by air. 4. High Construction and Operational Cost: Constructions of airports and facilities cost a lot of money. The repair, maintenance and operation cost is also high. Aircraft also cost very high. 5. Accidents: The probability of accident is very high and hundreds of lives can be lost in a single accident. It also involves a lot of technical complications.t of origin to the point of consumption. It creates place and time utilities and enables the suppliers to supplies goods and service in regular basis. 5. PIPELINES TRANSPORT Pipelines are the lowest-cost method of physical distribution. Pipelines primarily transport petroleum products, such as oil, gasoline, natural gas, and coal. However, some non-liquid products can be moved through pipelines. For example, coal can be ground-up and mixed withwater for transport through a 'slurry' pipeline.

40

Chapter- 3, Marketing Functions

FEATURES OF PIPELINE TRANSPORT 1. Underground: Pipeline transport is underground transport. Pipelines are set underground to carry liquid materials from one place to other. Whether such transport is being operated or not, it cannot be known. 2. Huge Investment: Pipeline needs to set pipes underground. So, it takes huge investment. 3. Liquid Product: Only liquid materials like water, oil, petrol, gas, etc are transported through pipelines. It is unsuitable for solid materials. Strength of Pipeline 1. Less operating cost: Liquid material water, oil, gas etc can be transported at a lower cost through pipeline transport. 2. Less noise and pollution: Transportation of liquid through pipeline is not noisy and does not cause pollution. This operated underground so, dust and smoke does not come from it. 3. Flexible: Pipeline transport is flexible. Liquid materials can be easily transport as required. Weaknesses of pipeline transport 1.Not suitable for all types of goods: Pipeline transport is not suitable for all kind of products, it is suitable only for liquid and gas product. 2. Huge Investment: Pipeline needs to set pipes underground. So, it takes huge investment. 3.Depends on other means of transport: Pipeline only reaches certain places. It does not reach everywhere. So, other means of transportation like tankers or rails are needed to supply liquid product to different part of country. FACTORS AFFECTING IN SELECTING MODE OF TRASPORT There are relative strengths and weaknesses of each transportation mode. The criteria employed to compare transportation modes are those that typically are important to transportation managers for selecting between them: 1. Speed of Delivery: Speed of delivery is the relative door-to-door delivery time. Modes are rated from 'slowest' to 'fastest.' For the perishable goods, quick and speedy means of transport should be selected. Time and nature of goods also affects the decision what means should be selected.

41

Chapter- 3, Marketing Functions

2. Relative Cost: Relative Cost is the consideration to be taken by marketer before selecting different mode of transport. That type of transport should be selected which is comparatively cheaper and economical. Cheaper and economical transport help to reduce production and marketing cost.Bulk commodities, such as coal, lumber, iron ore are usually shipped by rail or by water carrier because of the high shipping costs relative to the unit value of the product. 3. Reliability of Delivery: Reliability of Delivery means how well the transportation mode can be relied upon to meet schedule delivery dates and times. Few customers can afford to have a high degree of variation in the delivery times of their orders. Production is planned around the planned arrival of critical parts and materials. Similarly, manufacturers cannot afford variations in delivery times to their customers. 4. Range of Shipping Capabilities: Some transportation modes are better equipped to handle certain products because they have the proper equipment and provide the proper environments for these products during transport. For example, gasoline must be transported in specially constructed tanks that are provided by rail carriers, motor carriers, and water carriers. Similarly, perishable food products require careful handling and refrigerated conditions during transit. Ensuring products are not damaged, spoiled, or stolen while intransit are key considerations for matching product requirements to the capabilities of the shipping medium. 5. Ability to Reach Geographically Dispersed Markets: Some carriers are better able to reach isolated markets than are others. Trucks can go nearly anywhere these days in order to pick-up and deliver to virtually any customer. In contrast, airlines and water carriers are tied to their respective ports. Similarly, pipelines are very limited in number and have fixed terminal sites for shipping and receiving. 6. Availability : Another factor for considering while selecting modes of transport is whether the mode that the marketer had decided is available or not. The marketer need to select the most appropriate means and mode whichever is available at that time, place and situation according to the quantity , nature and type of product. 7. Safety: Transport should be safe and dependable. So, safe and dependable means of transport should be selected. Safety mode of transport can provide safety and security as a result there is less chances of damages and losses during transporting. B. WAREHOUSE Warehouse is a place where goods are stored for certain period for the distribution of goods to the target market whenever and wherever required.

42

Chapter- 3, Marketing Functions

And warehousing is a specialized system and process of storing surplus goods for use or consumption in future because goods may not have demand immediately after the goods are manufactured. FUNCTION OF WAREHOUSING The functions of warehousing are as follows; 1. Storage Function : Warehousings main function is to store the products. It provides convenient place for surplus stock of goods which supports to make available in the market when it is needed. 2. Regular supply: Warehousing facilitates to regular supply of products in the market and does not allow being shortage. It preserves all the seasonal products and supply throughout the year in order to meet the demand of the people. 3. Price Stability: Warehousing brings stability in product price by maintaining balance in demand and supply. The products are stored and hold until the demand is in the market and the price is satisfactory. 4. Bulk breaking: Warehousing performs bulk-breaking functions. It receives product in bulk and divides them as the needs and demands of customers in small and appropriate amount of quantities. 5. Collateral Security: The warehouse company gives certificate or evidence to the owner of the goods at the time of storage. Such certificate or evidence may be good collateral for taking loan. So, warehousing may be easy for the owners to take loan for further production. IMPORTANT OF WAREHOUSING The need and necessary of warehousing are emerge due to the following reasons; 1. Time Utility: Warehouse stores product for future use. It holds the products until there is demand in the market. Delivery can be made in time to meet production or consumption needs. This creates time utility. 2. Protection from risks: Warehouse protects products from risks of fire, cold, wind, dust, water and theft. They can be properly insured for risks. 3. Seasonal Products: Some products are produced only in a particular season, but they may be in demand throughout the year. Warehousing is necessary for such products, so that they can be available throughout the year to its consumers. 4. Continuous Processing: For the development of large scale production in modern era, it is necessary to store up the raw materials. Thus, warehousing stores raw materials and supplies and makes them available for production

43

Chapter- 3, Marketing Functions

purposes as and when needed. Continuous processing is needed for smooth production of product. 5. Preserve the quality: Warehousing is important to preserve and improve the quality of the products. Some products such as wine, whisky, tobacco, pickle etc stored to improve the quality and value with the passage of the time. 6. Price Stability: Warehousing brings stability in product price by maintaining balance in demand and supply. Plentiful supply of seasonal product may force prices to fall where non-availability of goods during offseason may increase the price. Thus, it necessary to keep surface stock in warehouse and release the same at the time of scarcity. TYPES OF WAREHOSING: A storage warehouse holds products for moderate to long-term periods in an attempt to balance supply and demand for producers and purchasers. A distribution warehouse assembles and redistributes products quickly, keeping them on the move as much as possible. The main and important type of warehouse is discussed below: 1. Private Warehouses: Private warehouses are owned or leased by producers or middlemen to handle their own inventories and physical distribution functions. Private warehouses provide logistics managers with the greatest degree of flexibility in operations and generally offer the highest level of service to customers. However, private warehouses entail substantial capital investments in the building, materials handling equipment, specialized heating and cooling systems, and other systems. 2. Public Warehouses: Public warehouses are owned and operated by independent companies. Public warehouses rent space and provide materials handling, transportation and other services for a fee to customrs. Many producers and middlemen opt to use public warehouses because they pay only for the space and services they use. No capital investment or on going fixed costs will be incurred -- storage costs in public warehouses are treated as variable costs by most firms. This is particularly attractive when the manufacturer doesn't have a regular, on-going need for warehousing space. For example, manufacturers of seasonal products, such as recreational equipment, toys, and gifts may prefer to use public warehouses only during their respective selling seasons. It can be classify into two; i) General merchandise warehouses : These are set up to handle a wide range of goods that do not require specialize storage and handling facilities. It is a simple warehouse and does not provide any additional benefits to the

44

Chapter- 3, Marketing Functions

product. Any kind of product that required protections from the weather, insect, dust etc can be stored. ii) Speciality Commodity Warehouse: The warehousing having separate and special room for each kind of products according to their nature is called a special commodity warehouse. Special structure, special temperature and special care are need for such warehouse. The purpose of this warehouse is to keep the products of intrinsic value in original form. 3. Cold storage warehouses : Cold storage warehouses are designed for products needing dependable refrigeration during storage. It is a refrigerated warehouse for storing perishable products such as fruits, vegetables, meat, fish, milk etc. Products are protected from heat, humidity, air, dust and pollution. It helps to supply of perishable products to the market round the year as per demand. The cost of storage is high. 4. Bonded warehousing: It is used when imported or taxable goods must be stored until the appropriate taxes have been paid. Only then can the goods be released for sale. Bonded warehousing services often are used by firms wishing to avoid paying taxes on goods until their customers are ready to purchase them. They are generally owned and operated by government and are subjected to government rules and regulations. 3. FACILITATING FUNCTIONS There are other functions to facilitate functions of exchange and physical distribution of marketing. Such functions do not have major role but they are important in marketing activities. It is also known as auxiliary functions. Standardization and grading, finance management and risk taking are the important facilitating functions of marketing: a. Standardization And Grading: Standardization refers to the process of setting up basic measures or standards to which the products must conform and taking steps to ensure that the goods actually produced adhere to these standards. Standards reflect desirable features of a product in terms of its design, weight, colour, etc. Standardization means that goods are of a specified and uniform quality. Grading is the process of sorting individual units of a product into welldefined classes or grades of quality. The goods are graded or sorted out into different lots in accordance with the specified standards. Grading involves the division of products into classes made up of units possessing similar characteristics of size, type, weight, performance and quality.

45

Chapter- 3, Marketing Functions

Different between Standardization and Grading: Standardization Grading 1. It is the process to fix the It is the process of separating standard of the product. the goods on the basis of quality. 2. .It is fixed before grading. It is fixed after standardization. 3. It is permanent in nature and It is not fixed in nature. cant be changed. 4. Without grading it is useless Without standardization it is not and meaningless feasible or possible. 5. It is mental process It is physical process. b. Financing: It is very difficult to carry on marketing activities smoothly without the availability of the adequate and cheap finance. Commercial banks, corporative credit societies, and government agencies arrange for short term finance, and long term finance to facilitate marketing. Trade credit is also one of the important sources of the finance. c. Risk- bearing: Risk- bearing is the other important facilitating functions of marketing. Business firms or entrepreneurs should take various risks in the course of marketing. Theft, cheating, strike, lock-up, war, over burden of loan, social help, illness, hurt, accident etc. may create personal inability inviting unexpected events in future. Accident may happen while transporting goods from one place to another. Quality of the goods may decline causing decline in price or prices may change. Such events adversely affect the business firms and entrepreneurs. Manager properly anticipates business uncertainty and risk and should make efforts to prevent them. Market research should be carried out; information and data should be collected and properly analysed. Then policy and strategy should be formulated on the basis of the conclusion of the analysis so that risks can be prevented. Insurance can be made against the risk if theft, robbery, fire etc. They should identify the nature, causes of risks and adopt preventive measures accordingly. d. Market information: The desired success of the marketing depends on correct and timely decision. These decisions are based on the market information or market intelligence. Modern marketing must have information about of size, location, characteristics of the market etc. The customer's wants, habits, purchasing power etc. are to be considered the strength or weakness of competitions trend in market; supply and demand, etc. are also to be taken into account. Marketing conditions are dynamic and affect the industry to any extent. Market information includes all facts, estimates, opinion, and the other information used in making decisions, which affects the marketing of the products or services.

46

Chapter- 3, Marketing Functions

EXERCISE A. Give very short answers; (1marks) 1. What is the function of marketing? 2. Trace out the functions of marketing? 3. What is buying and selling? 4. What do you mean by transportation? 5. Point out two strengths and weakness of air transport? 6. Define Grading. 7. What do you mean by standardization? B. Give brief answers (8 marks) 1. What is buying? Define the element of buying. 2. State and explain the elements of selling? 3. What is transportation? State the functions of transportation? 4. What is air transport? Explain the merits and demerits of air transportation. 5. What factors should be considered to select the mode of transport? 6. What is warehousing? Explain its functions. 7. Why warehousing is required in modern market? C. Give Comprehensive Answer ( 15 marks) 1. State and explain the various type of warehousing? 2. State and explain the various method of buying? ************

47

Chapter- 3, Marketing Functions