Aug 5, 2017

HOW TO MAINTAIN THE STABLE PRICE LEVEL AND AVOID ANY GREAT FLUCTUATION IN THE PRICES?



Manufactured goods are the finished products which are meant for either consumption or production. Therefore, manufactured goods may be further divided into two kinds:

Goods which are destined for the use by the final consumers are called manufactured Consumer Goods.

Goods which are first purchased by the businessmen who use them in the process of production and then place them in the hands of final consumers are called Manufactured Industrial Goods.

MANUFACTURED CONSUMER GOODS

NATURAL RAW MATERIALS

They consist of those natural products which are mainly for industrial purposes. They are, therefore, the industrial goods supplied by mines, forests and sea. They undergo processing operations prior to final consumption.

AGRICULTURAL GOODS

They are the products supplied by agriculture which are divided into two groups:

Raw Materials: Such as cotton, jute, wool, grain et., which are used in industries, and….

Consumer Goods: Such as food-grains, fruits, vegetables etc., which are used in final consumption.

These three types of goods have got different characteristics and the method of marketing of each kind of goods also differs to some extent.

MAIN FEATURES OF MANUFACTURED CONSUMER AND INDUSTRIAL GOODS

There are three processes of marketing namely, Concentration, Equalization and Dispersion. In the case of marketing of manufactured goods, the first process of concentration is not important. Because the manufacturer exercises much more control over the marketing of his products. Therefore, the number of middlemen in the distribution of these manufactured goods is less. This makes the marketing structure of manufactured goods less complex, compared with the process of marketing agricultural goods. This is mainly due to two main characteristics of manufactured goods which are:

The manufacturer has a large degree of control over the quality and quantity of his products, and

The production is generally carried on a large scale.

CONTROL OF QUALITY AND QUANTITY

As I have mentioned above, the manufacturer enjoys control over the quality and quantity of his products. He can manufacture that quality and in that quantity as desired by the market. He is, therefore, able to plan in advance his production planning, marketing and financial operations.

By studying that market demand for his products, he can control the quantity to be produced. This advantage of controlling the quantity of production is not available to agriculturalists that have to demand upon the nature for the production. Therefore, a manufacturer can greatly influences the price of his products by adjusting the supply of his products with the demand. If the demand for the products increases, he can increase the supply and conversely if the demand for his products declines, he can reduce the supply. Thus he can maintain the stable price level and avoid any great fluctuations in the prices of his products. Though, it is not always possible for the manufacturer to maintain the price stability, yet it is true that the prices of manufactured goods tend to change less rapidly than those of agricultural goods. This is so because, in the case of agricultural goods, it is not possible for the farmers, to adjust their supply with the changing demand.

The quality of the manufactured goods is subject to close control and therefore, the manufactured goods are usually standardized. Marketing of standardized goods is easy since consumers have great belief in the standardized goods. Therefore the expenses of marketing of the standardized goods will be less. Consumers believe in the integrity of the manufacturers. The manufacturers also control the market by branding their products. Branded products can be readily identified and consumers will a custom themselves with the particular brand with which they are satisfied. Therefore, the manufacturer always attempts to produce goods of uniform quality and maintaining the constituent performance so as to maintain the demand of his products in the market.

LARGE SCALE PRODUCTION

Large scale production is another characteristic feature of the manufactured goods. Now days, most of the manufacturing activities are carried on a large scale in spite of the fact that the number of small units is also increasing. The large scale production helps the manufacturer to exercise control over the marketing methods and market their products efficiently prior to the beginning of dispersion process without a combining them with the products of other firms. Since production is carried on a large scale, concentration process does not take place. Therefore, the marketing of manufactured is concerned more with the dispersion process than with the concentration process.

The development of the large scale production has important effects upon marketing. It has led to mass marketing or selling, so that the whole output of the factories can be disposed of. The desire and efforts of the manufacturers to carry on their production as well as marketing on a large scale have brought important effects of which following three important like:

Effects upon Integration and Combination

Effects upon competition and product differentiation

Effects upon direct marketing

INTEGRATION AND CONCENTRATION

In order to carry on large scale production, the individual firms have tended to integrate and combine their operations. Such integration and combination may be vertical or horizontal in character.

VERTICAL INTEGRATION AND COMBINATION

Under vertical integration and combination, operations in successive stages of production or marketing or even both are undertaken under a single ownership. In the case of marketing, vertical integration means, a manufacturer open his own sales depot to sell his products directly to the retailers or even consumers. Multiple shops are the best examples of such integration. The multiple shops open a large number of selling or purchasing centers.

For example, an automobile manufacturing company may establish or acquire a type manufacturing concern. A steel company may acquire iron ore and coal mines. Multiple shops open a large number of selling points or purchasing or processing centers.

The integration of production and marketing leads to the economies, technical economies, economies in buying and selling, storage and warehousing, research and experiments, transportations etc. This helps the manufacturers to bring down the cost of marketing and strengthen his position by eliminating the marketing risks.

HORIZONTAL INTEGRATION AND COMBINATION

It refers to the combination of firms manufacturing and marketing similar products. The products may be identical or directly competing or complementary. For example, a single automobile company may manufacture different makes of cars which are competitive in price with one another, as well as other makes of cars which are complementary as to price line. Further, it may also manufacture spare parts so that they may also be offered along with cars. Recently, specialized manufacturers have tended to combine horizontally in order to offer a full line of products to distributors. This is found in the case of goods like toilet accessories, stationery articles, garments etc.

But horizontal combination does not offer all kind of economies. Economies in buying, research etc., in case of production are available only if the plant capacity utilized it fully. But, economies in marketing are available on a large scale due to horizontal combination. Costa of transport, storage, warehousing, finance, advertising, sales promotional activities etc will be spread over a large number of articles and therefore, the cost per unit will be very low. But specialized salesmanship is very difficult to obtain.

Thus, the main aims of integration and combination are to remove competition; to obtain economies of scale of production and marketing and to make more profits.

COMPETITION AND PRODUCT DIFFERENTIATION

Competition always exists in the market in one form or the other. It may be directed towards the improvement of production and marketing methods, reduction of costs and lowering of prices. Further, competition is as directed towards the improvement of the products, and the use of selling methods to have a greater control over the market. These 2 types of competition are important for manufactured goods.

Due to the existence of competition in the market, attempts are always being made by the manufacturers to improve their products. Product differentiation is made by the manufacturers by branding their goods. This is so because competition makes more in respect of quality than in price.

DIRECT MARKETING

As there is always a competition to capture more and more market and market share, manufacturers always prefer to control their marketing activities and keep in close touch with the conditions affecting the demand for their products. Therefore, nowadays, there is a tendency for direct marketing of products and for elimination of the middle men in the channel of distribution. But the success of direct marketing depends upon several factors such as size of production, efficiency of personnel, nature of product etc. therefore only a large manufacturer can undertake efficiently direct marketing of his products. But even then, complete elimination of middle men is not feasible. Therefore, many large producers usually combine their marketing activities with those of a few indispensable middlemen. Thus, a big manufacturer may create a demand for his products trough advertisements, and publicity and other sales promotional activities either directly or with the help of a few middle men.

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