Planning Marketing Channels: Case of the Olive Oil Agribusiness in Portugal
-
Rui Manuel de Sousa Fragoso
Abstract
Marketing channels play an important role in the competitiveness of agribusiness value chains. Thus, this paper proposes a model for planning marketing channels in agribusiness that also considers transaction costs. This model is developed in two steps, diagnostic and decision, and is applied to the olive oil agribusiness in Portugal. The diagnostic step includes analysis of the agribusiness chain value, marketing channels, transaction characteristics, and institutional environment. The decision step fits the information from the diagnostic into a qualitative cost–benefit analysis, based on a multi-criteria problem of ordering preferences.
Appendix A Structure interview for applying the model
1st part – firm and market channels identification
Firm identification
| Firm designation | Industry | Workers | Capital | Turnover |
Marketing channels identification
| Channel code | Product | Agent in the channel | Governance transactions | Price (€/ton) | Quantity (ton) |
| mc1 | |||||
| … | … | … | … | … | … |
| mcN |
2nd part – marketing functions
Please evaluate the alternatives of the firm’s marketing channels according to the performance of marketing functions considering the following marketing flows using the scale {0,1, 2, 3, 4, 5}.
Product flows
| Functions | Marketing channels | ||
| mc1 | … | mcN | |
| Inventory management | … | ||
| Product transportation | … | ||
| Product processing | … | ||
| Providing technical services | … | ||
| Maintaining product quality | … | ||
| Procedures returns | … | ||
| Supply information for customers | … | ||
| Providing the product availability to the final customers | … | ||
| Processing the product packaging | … | ||
| After-sales service | … | ||
Note: 0 – the worst performance and 5 – the best performance.
Communication flows
| Functions | Marketing channels | ||
| mc1 | … | mcN | |
| Sales promotion to the final consumer | … | ||
| Supply product information | … | ||
| Performing advertising | … | ||
| Proving appropriate sales force | … | ||
| Providing information in the package | … | ||
| Performing customer loyalty programs | … | ||
Note: 0 – the worst performance and 5 – the best performance.
Information flows from market to the firm
| Functions | Marketing channels | ||||||
| mc1 | … | mcN | |||||
| Assessing customers satisfaction | … | ||||||
| Supplying information about final customers | … | ||||||
| Share market knowledge | … | ||||||
Note: 0 – the worst performance and 5 – the best performance.
Financial flows
| Functions | Marketing channels | ||
| mc1 | … | mcN | |
| Providing credit to the firm | … | ||
| Debt collection of the firm | … | ||
| Guarantee of price | … | ||
Note: 0 – the worst performance and 5 – the best performance.
3rd part – channel power
Please evaluate the alternatives of the firm’s marketing channels according to its power in the channel using the scale {0, 1, 2, 3, 4, 5}.
Channel power
| Type of power | Marketing channels | ||||||
| mc1 | … | mcN | |||||
| Coercive power | … | ||||||
| Reward power | … | ||||||
| Speciality power | … | ||||||
| Legitimacy power | … | ||||||
| Reference power | … | ||||||
Note: 0 – the worst performance and 5 – the best performance.
4th part – direct costs of channels
Please evaluate the direct costs of the alternatives of the firm’s marketing channels using the scale {0, 1, 2, 3, 4, 5}.
Direct costs of channels
| Type of costs | Marketing channels | ||||||
| mc1 | … | mcN | |||||
| Production | … | ||||||
| Promotion | … | ||||||
| Ordering | … | ||||||
| Distribution | … | ||||||
| Dealers’ margins | … | ||||||
Note: 0 – the lowest channel cost and 5 – the highest channel cost.
5th part – institutional environment
Please classify the intensity of negative forces or threats in each one of the firm’s marketing channels considering political and legal, economic, socio-cultural, and technological factors, using the scale {0, 1, 2, 3, 4, 5}.
Political factors
| Marketing channels | |||||||
| mc1 | … | mcN | |||||
| Political stability | … | ||||||
| Market access | … | ||||||
| Price regulation policy | … | ||||||
| Packaging and labeling policies | |||||||
| Customs barriers | |||||||
| Quality and certification policy | |||||||
| Commercial law | |||||||
| Labor law | |||||||
| Fiscal law | … | ||||||
| … | … | … | … | ||||
Note: 0 – the weakest threats and 5 – the strongest threats.
Economic factors
| Marketing channels | |||||||
| mc1 | … | mcN | |||||
| Interest rate | … | ||||||
| People qualification | … | ||||||
| Unemployment rate | … | ||||||
| Buyers concentration | |||||||
| Product cycle life | |||||||
| Trends of growth on Gross Domestic Production | |||||||
| Capital availability | |||||||
| Inflation rate | |||||||
| … | … | … | … | ||||
Note: 0 – the weakest threats and 5 – the strongest threats.
Social factors
| Marketing channels | |||
| mc1 | … | mcN | |
| Demography | … | ||
| Concentration of population in major cities | … | ||
| Consumption behavior | … | ||
| Buying behavior | |||
| … | … | … | … |
Note: 0 – the weakest threats and 5 – the strongest threats.
Technological factors
| Marketing channels | |||
| mc1 | … | mcN | |
| New technical solutions for the product | … | ||
| New technical solutions that promote the substitute products | … | ||
| New technical solutions for product logistics and transportation | … | ||
| … | … | … | … |
Note: 0 – the weakest threats and 5 – the strongest threats.
6th part – asset specificity and transaction costs
Please evaluate the alternatives of the fir {0, 1, 2, 3, 4, 5}.
Asset specificity
| Type of asset specificity | Marketing channels | ||||||
| mc1 | … | mcN | |||||
| Physical specificity | … | ||||||
| Location specificity | … | ||||||
| Temporal specificity | |||||||
| Human resources specificity | … | ||||||
| Technological specificity | |||||||
| Brand specificity | … | ||||||
Note: 0 – very low degree of asset specificity and 5 – the very high degree of asset specificity.
Please suggest alternative governance structures that may reduce transaction costs.
Alternative governance structures
| Marketing channels | ||
| mc1 | … | mcN |
| … | … | … |
Please evaluate the alternatives of the firm’s marketing channels, including those of new governance structures, considering ex-ante and ex-post transaction costs, using the scale {0, 1, 2, 3, 4, 5}.
Ex-ante transaction costs
| Type of transaction costs | Marketing channels | ||
| mc1 | … | mcN | |
| Information research | … | ||
| Uncertainty on product sales | … | ||
| Procurement | |||
| Negotiation time | … | ||
| Drafting contracts | |||
Note: 0 – very low transaction cost and 5 – the very high transaction cost.
Ex-post transaction costs
| Type of transaction costs | Marketing channels | ||
| mc1 | … | mcN | |
| Control and performance of transactions | … | ||
| Correction of contracts | … | ||
| Periodic renegotiations | |||
| Control of property rights | … | ||
| Control of brand use | |||
| Copy control of technology | |||
| Legal deputes | |||
| Risk of non-delivery | |||
| Risk of contract loss | |||
Note: 0 – very low transaction cost and 5 – the very high transaction cost.
Appendix B
Assessment of marketing flows in channels.
Source: Results from the interview with the olive oil producer.
Assessment of the channel power of the firm.
Source: Results from the interview with the olive oil producer.
Assessment of direct costs of marketing channels.
Source: Results from the interview with the olive oil producer.
Appendix C
Assessment of negative institutional factors on marketing channels.
Source: Results from the interview with the olive oil producer.
Appendix D
Assessment of asset specificity in marketing channels.
Source: Results from the interview with the olive oil producer.
Assessment of asset specificity and transaction costs.
Source: Results from the interview with the olive oil producer.
Appendix E
Matrix of credibility indices.
| Marketing channels | Marketing channels | ||||||
| mc1 | mc2 | mc3 | mc4 | mc5 | mc6 | mc7 | |
| mc1 | 1.00 | 0.43 | 0.57 | 0.57 | 0.57 | 0.57 | 0.57 |
| mc2 | 0.57 | 1.00 | 0.43 | 0.57 | 0.71 | 0.86 | 0.71 |
| mc3 | 0.43 | 0.57 | 1.00 | 0.57 | 0.57 | 0.71 | 1.00 |
| mc4 | 0.43 | 0.43 | 0.43 | 1.00 | 0.86 | 0.86 | 0.71 |
| mc5 | 0.43 | 0.43 | 0.43 | 0.57 | 1.00 | 0.86 | 0.71 |
| mc6 | 0.43 | 0.29 | 0.29 | 0.43 | 0.57 | 1.00 | 0.71 |
| mc7 | 0.43 | 0.29 | 0.14 | 0.43 | 0.43 | 0.71 | 1.00 |
Source: Results of ELECTRE III method.
References
Autoridade da Concorrência. 2010. Relatório Final sobre as Relações Comerciais entre a Distribuição Alimentar e os seus Forncedores. Lisboa: Autoridade da Concorrência.Search in Google Scholar
Batalha, Mário O. 2009. Gestão Agro-industrial, Vol. 1–3ª. Brasil: Edição, Editora Atlas.Search in Google Scholar
Bello, D. C., and R. Lohtia. 1995 “Export Channel Design: The Use of Foreign Distributors and Agents.” Journal of Academy of Marketing Science 23(2):83–93.10.1177/0092070395232001Search in Google Scholar
Berman, B. 1996. Marketing Channels. Estados Unidos: John Wiley and Sons.Search in Google Scholar
Buchanan, J., P. Sheppard, and D. Vanderpooten. 1999. “Project Ranking Using ELECTRE III.” Department of Management Systems, Research Report Series, 1999–2001.Search in Google Scholar
Coase, R. H. 1937. The Nature of the Firm. London: Economica, New Series.10.1111/j.1468-0335.1937.tb00002.xSearch in Google Scholar
Corey, E. R., F. V. Céspedes, and V. K. Rangan. 1989. Going to Market: Distribution Systems for Industrial Products. Boston, MA: Harvard Business School Press.Search in Google Scholar
Coughlan, A., E. Anderson, L. W. Stern, and A. El-Ansary. 2001. Marketing Channels. New York: Prentice Hall.Search in Google Scholar
Damaslos, X., and G. Kalfakakou. 2005. “Application of ELECTRE III and DEA Methods in the BPR of a Bank Branch Network.” Yugoslav Journal of Operational Research 2:259–76.10.2298/YJOR0502259DSearch in Google Scholar
David, R. J., and S. K. Han. 2004. “A Systematic Assessment of the Empirical Support for Transaction cost Economics.” Strategic Management Journal 25(1):39–58.10.1002/smj.359Search in Google Scholar
Dias, J. Almeida, J. R. Figueira, and B. Roy. 2010. “ELECTRE Tri-C: A Multiple Criteria Sorting Method Based on Characteristic Reference Actions.” European Journal of Operational Research 204:565–80.10.1016/j.ejor.2009.10.018Search in Google Scholar
Esteves, M. 2009. “Strategic Behavior, Efficiency and Performance: An Empirical Study.” Tese de Doutoramento em Gestão, Universidade de Évora.Search in Google Scholar
GEP – Gabinete de Estratégia e Planeamento. 2008. “Quadros de Pessoal.” Ministério do Trabalho e da Solidariedade Social.Search in Google Scholar
Gereffi, G., J. Humphrey, and T. Sturgeon. 2005. “The Governance of Global Value Chains.” Review of International Political Economy 12(1):78–104.10.1080/09692290500049805Search in Google Scholar
GPP – Gabinete de Planeamento e Políticas. 2007. “Olivicultura: Diagnóstico Sectorial.” Ministério da Agricultura do Desenvolvimento Rural e das Pescas.Search in Google Scholar
Gulati, R., P. Lawrence, and P. Puranam. 2005. “Adaptation in Vertical Relationships: Beyond Incentive Conflict.” Strategic Management Journal 26(3):415–40.10.1002/smj.458Search in Google Scholar
Heide, J. B., and G. John. 1988. “The Role of Dependence Balancing in Safeguarding Transaction-Specific Assets in Conventional Channels.” Journal of Marketing 52:20–35.10.1177/002224298805200103Search in Google Scholar
Hobbs, J. E. 1995. “Evolving Marketing Channels for Beef and Lamb in the United Kingdom – A Transaction Cost Approach.” Journal of International Food … Agribusiness Marketing 7(4):15–39.10.1300/J047v07n04_02Search in Google Scholar
Hobbs, J. E., and L. M. Young. 1999. “Increasing Vertical Linkages in Agrifood Supply Chains: A Conceptual Model and Some Preliminary Evidence.” Research Discussion Papers – University of Saskatchewan 35, Canada.10.1111/j.1744-7976.1999.tb00460.xSearch in Google Scholar
Hoctker, G. 2005. “How Much You Know Versus How Well I Know You: Selecting a Supplier for a Technically Innovative Component.” Strategic Management Journal 26(1):75–97.10.1002/smj.453Search in Google Scholar
INE – Instituto Nacional de Estatística. 2009. Contas Económicas da Agricultura.Search in Google Scholar
INE – Instituto Nacional de Estatística. 2010. Estatísticas Agrícolas.Search in Google Scholar
Jacobines, M. G., and S. G. Winter. 2005. “The Co-evolution of Capabilities and Transaction Costs: Explaining the Institutional Structure of Production.” Strategic Management Journal 25(6):395–414.10.1002/smj.460Search in Google Scholar
Johnson, G., and K. Scholes. 1997. Exploring Corporate Strategy, 4th edn. New York: Prentice-Hall.Search in Google Scholar
Kogut, B. 1985. “Designing Global Strategies: Comparative and Competitive Global Value-Added Chains.” Sloan Management Review 26(4):15–28.10.1002/tie.5060280105Search in Google Scholar
Kotler, P. 2000. Administração de Marketing: Análise. New York: Prentice-Hall.Search in Google Scholar
Lui, S., Y. Wong, an27d W. Liu. 2009. “Asset specificity roles interfirm cooperation: reducing opportunistic behaviour of increasing cooperative behaviour?” Journal of Business Research, 62(11): 1214–1219.10.1016/j.jbusres.2008.08.003Search in Google Scholar
Mintzberg, H. 1994. The Rise and Fall of Strategic Planning. New York: Prentice-Hall.Search in Google Scholar
Modelli, M., and D. Zylbersztajn. 2008. “Determinantes dos arranjos contratuais: o caso da transacção produtor-processador de carne bovina no Uruguai.” Revista de Economia e Sociologia Rural 46(3):831–68.10.1590/S0103-20032008000300010Search in Google Scholar
Neves, M. F., P. Zuurbier, and M. C. Campomar. 2001. “A Model for the Distribution Channels Planning Process.” Journal of Business … Industrial Marketing 16(7):518–39.10.1108/08858620110408757Search in Google Scholar
Nielsen. 2009. Anuário Food 2008. Lisboa: Nielsen.Search in Google Scholar
Pelton, L., D. Strutton, and J. R. Lumpkin. 1997. “Market Channels: A Relationship Management Approach.” Times Mirror Books.Search in Google Scholar
Peterson, H. C., A. Wysocki, and S. B. Harsh. 2001. “Strategic Choice along the Vertical Coordination Continuum.” International Food and Agribusiness Management Review 4:149–66.10.1016/S1096-7508(01)00079-9Search in Google Scholar
Rosembloon, B. 1999. Marketing Channels, 6th Edn. Chicago: The Dryden Press.Search in Google Scholar
Roy, B. 1968. “Classement et choix en présence de critères multiples (la méthode ELECTRE).” RIRO 8:57–75.10.1051/ro/196802V100571Search in Google Scholar
Roy, B. 1991. “The Outranking Approach and the Foundation of ELECTRE Methods.” Theory and Decision 31:49–73.10.1007/BF00134132Search in Google Scholar
Roy, B. 1993. “Decision Science or Decision Aid-Science?” European Journal of Operational Research 66:184–203.10.1016/0377-2217(93)90312-BSearch in Google Scholar
Roy, B. 1996. Multicriteria Methodology for Decision Aiding. Dordrecht, The Netherlands: Kluwer.10.1007/978-1-4757-2500-1Search in Google Scholar
Sartorius, K., and J. Kirsten. 2007. “A Framework to Facilitate Institutional Arrangements for Smallholder Supply in Developing Countries: An Agribusiness Perspective.” Food Policy 32:640–55.10.1016/j.foodpol.2007.03.001Search in Google Scholar
Shervani, T. A., G. Frazier, and G. Challagalla. 2007. “The Moderating Influence of Firm Market Power on the Transaction Cost Economics Model: Empirical Test in a Forward Channel Integration Context.” Strategic Management Journal 28:635–52.10.1002/smj.585Search in Google Scholar
Stern, L., A. I. El Ansary, and A. T. Coughlan. 1996. Marketing Channels, 5th Edn. New York: Prentice-Hall.10.1300/J049v05n01_02Search in Google Scholar
Verhaegen, I., and G. V. Huylenbroeck. 2001. “Costs and Benefits for Farmers Participating in Innovative Marketing Channels for Quality Food Products.” Journal of Rural Studies 17:443–56.10.1016/S0743-0167(01)00017-1Search in Google Scholar
White, S., and S. S. Lui. 2005. “Distinguishing Costs of Cooperation and Control in Alliances.” Strategic Management Journal 26(10):913–929.10.1002/smj.490Search in Google Scholar
Williamson, O. E. 1981., “The Economics of Organization: The Transaction Cost Approach.” American Journal of Sociology 83:539–77.10.1086/227496Search in Google Scholar
Williamson, O. E. 1985. The Economic Institutions of Capitalism. New York: Free Press.Search in Google Scholar
Williamson, O. E. 1996. The Mechanisms of Governance. New York: Oxford University Press.Search in Google Scholar
Wren, B. M. 2007. “Channel Structure and Strategic Choice in Distribution Channel.” Journal of Management Research 7:78–86.Search in Google Scholar
©2013 by Walter de Gruyter Berlin / Boston
Articles in the same Issue
- Masthead
- Masthead
- Identification of Market Power in the Hungarian Dairy Industry: A Plant-Level Analysis
- Cartels and Rent Sharing at the Farmer–Trader Interface: Evidence from Ghana’s Tomato Sector
- Research Article
- Understanding Challenges to Food Security in Dry Arab Micro-States: Evidence from Qatari Micro-Data
- Planning Marketing Channels: Case of the Olive Oil Agribusiness in Portugal
- (A)symmetry, (Non)linearity and Hysteresis of Pricing-To-Market: Evidence from German Sugar Confectionery Exports
- Oligopolistic Market Structure in the Japanese Pistachio Import Market
- Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes
- A Mechanism Design of Dispute Resolution Systems in a Regional-Free Trade Agreement
- Conflict over Cooperation: Why So Much Disagreement over the Proposed Dairy Market Stabilization Program?
- U.S. Brewing Industry Profitability: A Simultaneous Determination of Structure, Conduct, and Performance
- The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors
Articles in the same Issue
- Masthead
- Masthead
- Identification of Market Power in the Hungarian Dairy Industry: A Plant-Level Analysis
- Cartels and Rent Sharing at the Farmer–Trader Interface: Evidence from Ghana’s Tomato Sector
- Research Article
- Understanding Challenges to Food Security in Dry Arab Micro-States: Evidence from Qatari Micro-Data
- Planning Marketing Channels: Case of the Olive Oil Agribusiness in Portugal
- (A)symmetry, (Non)linearity and Hysteresis of Pricing-To-Market: Evidence from German Sugar Confectionery Exports
- Oligopolistic Market Structure in the Japanese Pistachio Import Market
- Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes
- A Mechanism Design of Dispute Resolution Systems in a Regional-Free Trade Agreement
- Conflict over Cooperation: Why So Much Disagreement over the Proposed Dairy Market Stabilization Program?
- U.S. Brewing Industry Profitability: A Simultaneous Determination of Structure, Conduct, and Performance
- The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors
