Livestock Economics, Marketing and Business Management

CLASSIFICATION OF MARKETS

• Markets can be classified on the basis of nature of commodity, time and nature of business, area, nature of competition etc.

On the Basis of Location

• On the basis of the place of location or operation, markets are of the following types:

Village market

• A market which is located in a small village, where major transactions take place among the buyers and sellers of a village, is called a village market.

Primary markets

• These markets are located in big towns near the centres of production of commodities.
• In these markets, a major part of the produce is brought for sale by the producer-farmers themselves.
• Transactions in these markets usually take place between the producers/farmers and traders.

Secondary wholesale markets

• These markets are located generally at district headquarters or important trade centres or near railway junctions.
• Major transactions in commodities take place between the village traders and wholesalers.
• Bulk of the arrivals in these markets is from other markets.
• Produce in these markets is handled in large quantities.
• There are, therefore, specialized marketing agencies performing different marketing functions such as those of commission agents, brokers, weighmen etc.

Terminal market

• A terminal market is one where the produce is either finally disposed of to the consumers or processors or assembled for export.
• Merchants are well organized and use modern methods of marketing.
• Commodity exchanges exist in these markets which provide facilities to forward trading in specific commodities.
• Such markets are located either in metropolitan cities or in sea-ports.
• Delhi, Mumbai, Chennai, Kolkatta and Cochin are terminal markets for many commodities.

Seaboard Markets

• Markets which are located near the seashore and are meant mainly for the import and / or export of goods are known as seaboard markets. These are generally seaport towns.
• Examples of these markets in India are Mumbai, Chennai, Kolkatta and Cochin.

On the Basis of Area/Coverage

• On the basis of the area from which buyers and sellers usually come for transactions, markets may be classified into the following four classes

Local or Village Market

• A market in which the buying and selling activities are confined among the buyers and sellers drawn from the same village or nearby villages.
• The village markets exist mostly for perishable commodities in small lots, e.g., local milk market or vegetable market.

Regional market

• A market in which buyers and sellers for a commodity are drawn from a larger area than the local market.
• Regional markets in India usually exist for foodgrains.

National market

• A market in which buyers and sellers are at the national level.
• National markets are found for durable goods like jute and tea.

World market

• A market in which the buyers and sellers are drawn from the whole world. This is the biggest market from the area point of view.
• This market exists in the commodities which have a world-wide demand and /or supply, such as coffee, machinery, gold, silver, etc.
• In recent years many countries are moving towards a regime of liberal international trade in agricultural produce like raw cotton, sugar, rice and wheat.
• It is expected that the international trade in such commodities will become free from many restrictions as they exist now.

On the Basis of Time Span

• On the basis of time span, markets are of the following types:

Short-period markets

• Markets which are held only for a day or few hours are called short period markets.
• Products dealt within these markets are of a highly perishable nature, such as fish, fresh vegetables, and liquid milk.
• In these markets, the prices of commodities are governed mainly by the extent of demand for, rather than by the supply of, the commodity.

Long-period markets

• These markets are held for a longer period than the short period markets.
• Commodities traded in these markets are less perishable and can be stored for some time; these are foodgrains and oilseeds.
• Prices are governed both by the supply and demand forces.

Secular markets

• These are markets of a permanent nature. Commodities traded in these markets are durable in nature and can be stored for many years.
• Examples are markets for machinery and manufactured goods.

On the Basis of Volumes of Transactions

• There are two types of markets on the basis of volume of transactions at a time.

Wholesale market

• A wholesale market is one in which commodities are bought and sold in large lots or in bulk.
• These markets are generally located in either towns or cities.
• Economic activities in and around these markets are so intense that over time the population tends to get concentrated around these markets.
• These markets occupy an extremely important link in the marketing chain of all the commodities including farm products.
• Apart from balancing the supply and demand and discovery of the prices of a commodity, these markets and functionaries in them serve as a link between the production system and consumption system.

Retail markets

• A retail market is one in which commodities are bought by and sold to the consumers as per their requirements.
• Transactions in these markets take place between retailers and consumers.
• Retailers purchase the goods from wholesale market and sell in small lots to the consumers in retail markets. These markets are very near to the consumers.

On the Basis of Nature of Transactions

• The markets which are based on the types of transactions in which people are engaged are of two types

Spot or Cash markets

• A market in which goods are exchanged for money immediately after the sale is called the spot or cash market.

Forward markets

• A market in which the purchase and sale of a commodity takes place at time t but the exchange of the commodity takes place on some specified date in future i.e., time t+1.
• Sometimes even on the specified date in the future (t+1), there may not be any exchange of the commodity.
• Instead, the differences in the purchase and sale prices are paid or taken.

On the Basis of Number of Commodities in which Transaction takes place

• A market may be general or specialized on the basis of the number of commodities in which transactions are completed.

General markets

• A market in which all types of commodities, such as food grains, oilseeds, fibre crops etc., are bought and sold is known as general market. These markets deal in a large number of commodities.

Specialized markets

• A market in which transactions take place only in one or two commodities is known as a specialized market.
• For every group of commodities, separate markets exist. The examples are foodgrain markets, vegetable markets, wool market and cotton market.

On the Basis of Degree of Competition

• Each market can be placed on a continuous scale, starting from a perfectly competitive point to a pure monopoly or monopsony situation.
• Extreme forms are almost non-existent. Nevertheless, it is useful to know their characteristics.
• In addition to these two extremes, various midpoints of this continuum have been identified.
• On the basis of competition, markets may be classified into the following categories.

Perfect markets

A perfect market is one in which the following conditions hold good

• There is a large number of buyers and sellers;
• All the buyers and sellers in the market have perfect knowledge of demand, supply and prices;
• Prices at any one time are uniform over a geographical area, plus or minus the cost of getting supplies from surplus to deficit areas;
• The prices are uniform at any one place over periods of time, plus or minus the cost of storage from one period to another;
• The prices of different forms of a product are uniform, plus or minus the cost of converting the product from one form to another.

Imperfect market

• Markets in which the conditions of perfect competition are lacking are characterized as imperfect markets.
• The following situations, each based on the degree of imperfection, may be identified.

Monopoly market

• Monopoly is a market situation in which there is only one seller of a commodity. He exercises sole control over the quantity or price of the commodity. In this market, the price of a commodity is generally higher than in other markets.
• Indian farmers operate in monopoly market when purchasing electricity for irrigation (Tamil Nadu Electricity Board). When there is only one buyer of a product the market is termed as a monopsony market.

Duopoly market

• A duopoly market is one which has only two sellers of a commodity. They may mutually agree to charge a common price which is higher than the hypothetical price in a common market (Bus transport -Private and Public sector).
• Market situation in which there are only two buyers of a commodity is known as the duopsony market.

Oligopoly market

• A market in which there are more than two but still a few sellers of a commodity is termed as an oligopoly market. A market having a few (more than two) buyers is known as oligopsony market.

Monopolistic competition

• When a large number of sellers deal in heterogeneous and differentiated form of a commodity, the situation is called monopolistic competition. The difference is made conspicuous by different trade marks on the product.
• Different prices prevail for the same basic product. Examples of monopolistic competition faced by farmers may be drawn from the input markets.
• For examples, they have to chose between various makes of insecticides, pumpsets, fertilizers and equipments.

On the Basis of Nature of Commodities

• On the basis of the type of goods dealt in, market may be classified into the following categories

Commodity markets

• A market which deals in goods and raw materials, such as wheat, barley, cotton, fertilizer, seed, etc., are termed as commodity markets. Specific commodities are bought and sold in these markets.
• These may either be production goods or consumption goods. In such markets, transactions of specialized commodities take place.
• E.g. Mumbai cotton market, Punjab wheat market etc.

Produce exchange

• Produce exchanges are the big and well organized markets for raw produce like wheat, cotton, jute etc. and are found in cities or developed industrial centres of a country.
• One exchange deals in one specialized product.
• Typical examples of such exchanges are the wheat exchange, Cotton exchange and Jute exchange.

Manufactured and semi-manufactured goods market

• In these markets, different types of manufactured and semi-manufactured commodities are bought and sold. E.g. Leather goods market, Kanpur.

Bullion Market

• Bullion markets are concerned with the purchase and sale of gold, silver and other precious stones.
• These are highly specialized and well organized markets of the world and are localized in civilized as well as industrially developed centres of a country.
• Bullion markets of Bombay, Calcutta, Delhi and Chennai etc., are of a few examples of such markets.

Capital markets

• Capital market is responsible for meeting the financial requirements of big industrial and commercial concerns.
• Capital is required at every stage of business which comes from the money market, stock exchange and foreign exchange.

Money market

• It includes a number of agencies providing finance to business and industrial concerns.
• Such markets, on one hand, help the people to invest or deposit their surplus funds either in industrial concerns or in banks and on the other, allow those who are in need of money to take loans through banks for a reasonable remuneration in turn by way of interest.

Stock exchange market

• In this market, shares are purchased and sold in different parts of the country. Ex. BSE, NSE
  
• These markets are highly specialized and command a very wide area of operation.
• Main purpose of such markets is to make investments in public and private sector undertakings.

Foreign exchange market

• It is a market for buying and selling of foreign currencies. It can also be called as an international market concerned with the export and import trade of a country.
• Mumbai, London, New Delhi are examples of such markets.

On the Basis of Stage of Marketing

• On the basis of the stage of marketing, markets may be classified into two categories

Producing markets

• Those markets which mainly assemble the commodity for further distribution to other markets are termed as producing markets.
• Such markets are located in producing areas. Ex. Uthukkuli Butter Market, Rasipuram Ghee Market.
  

Consuming markets

• Markets which collect the produce for final disposal to the consuming population are called consumer markets.
• Such markets are generally located in areas where production is inadequate, or in thickly populated urban centres.

On the Basis of Extent of Public Intervention

• Based on the extent of public intervention, markets may be placed in any one of the following two classes

Regulated markets

• In these markets, business is done in accordance with the rules and regulations framed by the statutory market organization representing different sections involved in markets.
• The marketing costs in such markets are standardized and practices are regulated.

Unregulated markets

• These are the markets in which business is conducted without any set rules and regulations.
• Traders frame the rules for the conduct of the business and run the market.
• These markets suffer from many ills, ranging from unstandardised charges for marketing functions to imperfections in the determination of prices.

On the Basis of Type of Population Served

• On the basis of population served by a market, it can be classified as either urban or rural market

Urban market

• A market which serves mainly the population residing in an urban area is called an urban market.
• Nature and quantum of demand for agricultural products arising from the urban population is characterized as urban market for farm products.

Rural market

• The word rural market usually refers to the demand originating from the rural population.
• There is considerable difference in the nature of embedded services required with a farm product between urban and rural demands.

On the Basis of Visibility

Black Market

• In black markets, scarce commodities are sold at a very high price not openly but in a secret manner.
• The situation arises on account of excess of demand over limited supply.
• Black market is an anti-social activity which gives way to black money.
• Black money, hidden money or unaccounted money then passes into the money market where it is invested in different trades and business activities.
• The interest and profits so earned on the unaccounted money go on accumulating, till it attracts attention of the income tax authorities.

On the Basis of Accrual of Marketing Margins

• Markets can also be classified on the basis of as to whom the marketing margins accrue.
• Over the years, there has been a considerable increase in the producers or consumers co-operatives or other organizations handling marketing of various products.
• Though private trade still handles bulk of the trade in farm products, the co-operative marketing has increased its share in the trade of some agricultural commodities like milk, fertilizers, sugarcane and sugar.
• In the case of marketing activities undertaken by producers or consumers co-operatives, the marketing margins are either negligible or shared amongst their members.