MARKET & BARGAINING
POWER
KOHLS & UHL CHAPTER 15
Chapter 14: MKT DEVELOPMENT &
DEMAND EXPANSION
Reviews
1. Market Development Activities Are An Extremely Important
And Expensive Part Of Food Marketing
2. Food Advertising Is More Extensive And Effective Than Ag
Product Advertising.
3. Food Advertising Is Blend Of Informative And Persuasive
Messages Conveying Price & Non-price Info.
4. Typically, Ag Group Engage In Generic Industry Adverting
Instead Of Branded Advertising
Agr Marketing Concepts
Wk 6: Kohls Ch 1o: Food & Farm Prices
Kohls Ch 11: Food Marketing Costs
Wk 7: Kohls Ch 12: Changes In Food Markets
Kohls Ch 13: Coops In Food Industry
Wk 8: Kohls Ch 14: Market Development
KOHLS CH 1 5: MKT & BARG POWER
Wk 9: Kohls Ch 16: Market Information
Kohls Ch 1 7: Standards & Grades
Wk 10: Kohls Ch 18: Transportation
Kohls Ch 19: Storage
Wk 11: Team Presentations
Chapter 14: MKT DEVELOPMENT &
DEMAND EXPANSION
Review
1. Market Development Activities Are An Extremely
Important & Expensive Part Of Food Marketing
2. Food Advertising Is More Extensive & Effective Than
Ag Product Advertising.
3. Food Advertising Is Blend Of Informative &
Persuasive Messages Conveying Price & Non-price
Info.
4. Typically, Ag Group Engage In Generic Industry
Adverting Instead Of Branded Advertising
Kohls & Uhl: Chapter 15
Market & Bargaining Power
Learning Objectives:
After This Lesson, The Student Should Be Able To:
I. Discuss Market Power
II. Discuss Bargaining Power
IIII. Discuss Tools That Farmers Can
Use To Increase Mkt Power
Learning
Objective 15-1 Discuss Market Power
A. Def: Ability To
Influence
1. Markets
2. Market Behavior
3. Market Results
4. Market Demand
5. Quality
6. Product Flows
Learning
Objective 15-1 Discuss Market Power
B. Sources
1. Control Of Supply
“Cooperative Bargaining Pays Off”
Successful Farming Aug. 1999
“Apple & Asparagus Prices In Mich. Top The
Nation Thanks To A Strong Bargaining Co-op.”
The Cooperative Has Clout (Mkt Power) Because
Its 750 Members Control 66% Of The Apples
Grown In Mich.. Likewise, The 250 Asparagus
Growers Raise 85% Of The Mich. Asparagus.
Learning
Objective 15-1 Discuss Market Power
B. Sources
2. Size & No. Of Firms
3. Unequal Information
4. Diversification
5. Product Diversification
6. Control Of Resources
“Cooperative Soybean Processor Smells Like Money”
Successful Farming, January 1999
“We Have The Power. We Have The Power To Increase Our Profits
Because We Are The Ones Who Control The Commodity From The
Beginning. The Sooner We Give Up Control, The More Money That
Someone Else Is Going To Make.
7. Financial Resources
Learning
Objective 15-1 Discuss Market Power
C. Indicators Of Mkt. Power
1. Higher Prices
2. Big Market Share
3. Above Avg. Profits
4. Contract Terms
5. Firm Behavior
Learning
Objective 15-1 Discuss Market Power
D. Evaluation
1. Inferior For Producers
A. Large Numbers
B. Small Size
C. Independent Spirit
D. Geographic Spread
2. Superior For Retailer
A. Shelf Space Control
B. Contact W/ Consumer
C. Private Label Power
3. Solution?
Learning
Objective 15-2 Discuss Bargaining Power
A. Definition:
Relative Strength Of Buyers & Sellers In Influencing
Exchange Terms
B. Levels
1. Horizontal
Labor Unions Vs Management
2. Vertical
Wholesalers Vs Retailers
Learning
Objective 15-2 Discuss Bargaining Power
C. Types
1. Opponent-pain
A. Make Him Worst Off
B. “Sticks’
C. “If You Don’t, I Will…”
2. Opponent-gain
A. Make Him Better Off
B. “Carrots”/”Honey”
Learning
Objective 15-2 Discuss Bargaining Power
D. Problem Of Bargaining Assoc
1. No Control Of Supply
2. Voluntary Nature
3. No Alternative Markets
4. Coop Leadership
5. Group Cohesion
Learning
Objective 15-3 Discuss Tools That Farmers Can Use
To Increase Market Power
III. Market Orders & Agreements
A. Goals
1. Increase Producer Incomes
2. Increase Market Power
3. Increase Bargaining Power
3. Strive For Orderly Mkt
Learning
Objective 15-3 Discuss Tools That Farmers Can Use
To Increase Market Power
B. Legislation
1. Capper-Volstead: 1922
A. Collective Marketing
2. Agricultural Adjustment Act: 1933
A. Established Market Orders
3. Ag Marketing Agreement Act: 1937
4. Ag Fair Practices Act: 1968
A. No Discrimination
Learning
Objective 15-3 Discuss Tools That Farmers Can Use
To Increase Market Power
C. Differences
1. Market Agreements: Voluntary
2. Market Orders: Mandatory
A. Voted In By Majority Of Producers
B. Legally Binding On All
Learning
Objective 15-3 Discuss Tools That Farmers Can Use
To Increase Market Power
D. Provisions
1. Manage Product Flow
2. Regulate Package Size
3. Commodity Advertising
4. Prohibit Unfair Trading
5. Establish Marketing Allotment
6. Set Up R&D Programs
7. Control Surpluses
Learning
Objective 15-3 Discuss Tools That Farmers Can Use
To Increase Market Power
E. Limitations
1. Lack Of Supply Control
2. Not On All Products
3. No Guarantee On Price
Learning
Objective 15-3 Discuss Tools That Farmers Can Use
To Increase Market Power
F. Evaluation
1. More Price Stability
2. Modest Increase In Prices
3. Some Gain In Market Power
4. Considerable Market R&D
5. Morale Gain
6. No Cure: Good Tool
Learning
Objective 15-3 Discuss Tools That Farmers Can Use
To Increase Market Power
IV. Marketing Boards
A. Producer Controlled Monopolies
B. Functions
1. Supp Control: Quotas
2. Sole Marketing Agent
3. Price Negotiation
4. Sponsor Market Research
5. Divide Revenue
Learning
Objective 15-3 Discuss Tools That Farmers Can Use
To Increase Market Power
IV. Marketing Boards
The Canadian Wheat Board (CWB) is a farmer-
controlled agency serving 75,000 farmers who
grow wheat, durum wheat and barley in Western
Canada. Its mandate is to market these grains for
the best possible price both within Canada and
around the world. All sales revenues, less
marketing costs, are paid to western Canadian
farmers
Kohls & Uhl: Chapter 15
Market & Bargaining Power
Summary
A. Mkt Power Is The Ability To Influence Markets
To Your Advantage
B. Bargaining Power Is How Strong Your Market
Power Is Relative To Someone Else.
C. Ag Coops, Market Orders & Agreements, &
Bargaining Associations Are Designed To
Increase Producer’s Market & Bargaining
Power.
SELF ASSESSMENT: KOHLS CHAP 15: MKT POWER
E
___1. Ability to influence mkts a. Bargaining Power
___ 2. Control of supply
I b. Indicator of mkt power
___ 3. Big market share
B c. Independent spirits
___ 4. Opponent pain d. Legalized cooperatives
F
___ 5. Relative strength of
A e. Market power
buyers & sellers f. Make him worst off
C
___ 6. Inferior mkt power cause g. Marketing Boards
H
___ 7. No control of supply h. Prob of bargaining
assoc
D
___ 8. Capper-Volstead Act
i. Source of Market power
G
___ 9. Producer Monopolies
j. Voluntary
J
___ 10. Marketing Agreements
k. None of the above
T
H
E
E
N
D