Financing and Marketing Management

Unit 8 - Markets

8.2. Approaches

Functional approach
The functional approach is one of the methods used in classification of activities that occur in the marketing processes by breaking down the processes into functions. A marketing function is defined as a major specialised activity performed in accomplishing the marketing process. A widely acceptable list of marketing functions includes exchange functions, physical functions and facilitative functions. Exchange functions are mainly composed of buying and selling while physical functions are comprised of storage, transportation and processing. However, facilitating functions are composed of standardisation, financing, risk bearing and market intelligence.
Institutional approach
Another method of market analysis is to study the various agencies and business structure which perform the marketing processes. Where the functional approach attempts to answer the “what” in the question “who does what”, the institutional approach to marketing problems focuses attention on the “who”. Marketing institutions are the wide variety of business organisations that have developed to operate the marketing machinery. The institutional approach considers the nature and character of various middlemen and related agencies and also the arrangement and organisation of marketing machinery. In this approach human element receives primary emphasis.
Commodity approach
Increasing attention is being given to the development of theory in marketing. Theorists have used functional, managerial and institutional approaches with relatively little emphasis on the commodity approach during the past decade. In this topic, the role commodities might play in formulating hypothesis which could lead to better theory in marketing is explored. While the commodity approach is perceived as obsolete with few marketing journals or textbooks referring to it as a marketing research method, commodity based papers are still prominent in the market literature this topic expounds sources and conditions of supply, storage, transportation and standardisation and demand of agricultural commodities. It also explains the role of middlemen in commodity marketing. While sources of supply may refer to the geographical location of the agricultural commodity or the different stages of the marketing system, conditions of supply refer to the form of the product which may either be in its raw or processed form. Storage refers to the logistical, technical and economic consideration during the process of storing agricultural commodities. Transportation and standardization refers to the process of ensuring requisite quantitative and qualitative standards are met as well as the physical movement of the commodity from point of purchase to point of sale. Demand of agricultural commodity tries to capture the preferences of the middlemen in the movement of agricultural commodities from the point of purchase to the point of sale is also explained.


The fact is that modern economies operate on the principle of division of labor where each person specializes in the production of something, receives payment, and buys needed things with this money. Thus modern economies abound in markets. The basic kinds of markets and the flows connecting them are shown in fig. Essentially, manufactures go to resource markets (raw-material markets, labor markets, money markets, and so on) buy resources, turn them into goods and services, sell them to middlemen, who sell them to consumers. The consumers sell their labor, for which they receive money income to pay for the goods and services they buy. The government is another market that plays several roles. It buys goods from resource, manufacturer, and middlemen markets; it pays them; it taxes these markets (including consumer markets); and it returns needed public services. Thus each nation’s economy and the whole world economy consist of complex interacting sets of markets that are linked through exchange processes.