The document is a project report submitted by students of the Institute of Technology and Management (ITM) on the market channel and price spread of vegetables in Chennai. It includes an introduction outlining the objectives of studying the efficiency of vegetable marketing in India. It then describes the objectives, scope, research methodology used which involved collecting primary data from wholesalers, sub-wholesalers, retailers and customers through questionnaires. The analysis section examines the data collected from these groups to understand factors like qualifications, income levels, buying sources, cost components and price setting strategies across the vegetable supply chain in Chennai.

1. MARKET CHANNEL AND PRICE SPREAD OF
VEGETABLES
A PROJECT REPORT
Submitted by
Athul. V. Ramasamy
Akul Gupta
Chandra Jeevan
Immanuel
Eshwar
Reenesh.M.K
Ram kumar
Mohamad Yonus
Balaji.R
Rahila.K
Kirthika
Swetha
PGDM iConnect Batch 2012-2014
GROUP 4
SECTION B
INSTITUTE FOR TECHNOLOGY AND MANAGEMENT
SIPCOT IT Park, OMR,
Siruseri
CHENNAI 603103
JULY 2012

2. ACKNOWLEDGEMENT
We students of ITM (Institute Technology of management) Did a detail
study of Market channel and Price spread of fruits and vegetables in
Chennai, we first thank our institute for giving us the opportunity to
undergo a study on this channel as a part of our PGDM course. Our
mentor Prof Mrs.Sarada was extremely supportive and directed us in the
right path with her overwhelming advice for doing the project, we would
thank her for this support.
We are also grateful to the wholesaler’s, sub-
wholesalers, retailers and customers for giving us the information we
wanted. This was a learning experience for us as the road to this project
was tough with a lot of ups and downs. This helped us to know how to
approach people in the right way. Nevertheless it was a good gesture of
the ITM institute in providing the students the opportunity to undergo
such practical studies while preparing the project report. Finally we
would thank all the blessed souls who were directly or indirectly
responsible in making this project possible.

3. INTRODUCTION
The efficiency of marketing for fruits and vegetables in India has been
of significant concern in the recent years. Poor efficiency in the
marketing channels and inadequate marketing infrastructure are believed
to be the cause of not only high and fluctuating consumer prices, but
also too little of the consumer rupee reaching the Indian farmers
typically depend heavily on middlemen particularly in fruits and
vegetable marketing. The producers and the consumers often get a poor
deal and the middlemen control the market, but do not add much value.
There is also massive wastage, deterioration in quality as well as
frequent mismatch between demand and supply both spatially and over
time. In the light of these concerns, studies were taken-up by us, the
students of ITM in wholesale markets, under the coordination of
Prof.Sarada.
This project consolidates the results from Chennai
markets. Fruits and vegetables typically constitute an essential part of
the daily diet in India and they are in great demand round the year from
most sections of the population. The commercial value of fruits and
vegetables in terms of direct consumption, processing as well as trade
has risen substantially in recent years. Their economic importance has
also increased and high labor intensity in the production of most fruits
and vegetables production also makes them important from the
employment angle as well.

4. OBJECTIVES
Primary Objective:-
To study the market channel and price spread of vegetables/fruits in
Chennai.
Secondary Objective:-
 To study the components of cost involved for retailers and
wholesalers of vegetables/fruits in Chennai.

5. Scope of the study
The project mainly covers the price spread and market channel of
vegetables/fruits in Chennai. However, it gives some insights on the
pricing strategies, profit policies, customer preferences, buying
behaviors, consumption patterns, cost components etc. The study is
beneficial as today the food inflation is very high and a study like this on
the market channel and price spread of vegetable/fruits (in Chennai) can
help us to understand how the different agents in the market act, the
market dynamism, and help us understand the different market forces
responsible for the high rate of inflation in the particular market in
question.

6. Research Methodology
?
Population study - The wholesalers, sub wholesalers, retailers and
customers in the vegetable/fruit market in Chennai made the population
of the research.
Sampling – In our research we used the random sampling method.
Sample Size - The sample size chosen was 100 keeping into account the
scope of the study and ensuring that it gives us insights into the
vegetable and fruits market channel as well as the price spread of
vegetables/fruits in Chennai.
The sample size of 100 was subdivided into 25 wholesalers, 25 sub
wholesalers, 25 retailers and 25 customers so as to cover all four pivots
of vegetable market (farmers were excluded considering the scope of
study).
Data Collection – Only primary data collection was done using a
questionnaire.
Period of study – The period of study was ten days i.e. from 16th July
2012 to 26th July 2012.
Method of data analysis – After data collection we used percentage
analysis and averages method to analyze the data.

7. Analysis
In this section we are going to analyze the primary data collected through a structured
questionnaire using bar-graphs, exploded pie charts, averages and percentage calculations. Then
we will try to find inferences and implications of the statistical findings using these charts and
graphs and the experience of the interviewers (gathered while collecting the primary data).
Firstly we will be analyzing the data for wholesalers, then the retailers and lastly for customers.
After that we will try to link the findings at the three levels and reach a conclusion for the study.
WHOLESALERS
Qualification
35.00%
High School
65.00%
professional
From this pie-chart we can infer that 65% of the correspondents have a professional degree and
the remaining 25% have High school degree

8. Age
30.00%
35.00%
18-29
30-40
41-60
35.00%
From this pie-chart we can infer that 30% of the correspondents were falling in the age group of
18-29years, 35% of the correspondents were falling in the age group of 30-40yars and the
remaining 35% fell in the age group of 41-60 years which shows almost an equal mix of young,
and middle aged men involved in the trade.
Revenue per month (Rs)
22.22%
33.33%
≤ 50,000
50,000-1,00,000
27.78% 1,00,000-2,00,000
16.67% 2,00,000-4,00,000
From this pie-chart we can infer that wholesalers fall under different income groups. The
revenue of wholesalers might be differing due to:-
 Product they deal in.
 Scale of operation.

9. Byuing source
100.00%
Farmer
From this pie-chart we can infer that all the correspondents purchased directly from the farmers.
This data is from the Koyambedu Market of wholesalers which is the main wholesale market in
Chennai. Being the main wholesale market in the region it purchases directly from the farmers.
Some of the wholesalers purchased from the farmers of nearby states like Andhra, Kerala etc.
Components of Cost
120
100
80
60
40
20 Components of Cost
0
The bar-graph shows the percentage of correspondents among the wholesalers who said that the
concerned factor was a part of their total cost. Accordingly it shows the cost-mix of the
wholesalers operating in the market. Hence, shows where more cost is incurred (like
transportation) and if investment is made in high cost areas to bring efficient practices into use
then per unit cost can be reduced and hence it can be transferred to the customer in terms of
lower price.

10. Frequency of Purchasing
5.00%
30.00%
Daily
60.00% Every three days
Weekly
Fortnightly
5.00%
From the pie-chart we can infer 60% of the correspondents bought vegetables every day whereas
around 5% of them bought once in every three days. Another 30% of them purchased once a
week and 5% of them purchased once every fortnight. By experience of the interviewers it can
be said that this difference of purchasing frequency can be attributed to:-
 Warehousing facilities
 Scale of operations
 Dealing good
 Demand
 Supply
 Fund flow available
 Inventory management
 High lead-time

11. Setting of the selling price
120
100
80
60
Setting of the selling price
40
20
0
Competitively Maximizing Differential Consesus in the
Profit Pricing market
From this bar-graph we can infer that no correspondent said that they fix selling price with a
consensus among the various wholesalers, this shows that there is no existence of a union of the
wholesalers in the wholesale market or even if the union exists it doesn`t decide the selling price
for the whole market. Many wholesalers set the price competitively with a profit maximizing
view. Some others follow differential pricing strategy.
which commodities in your experience will
have price fluctuations
5.00% 5.00%
10.00% Apple
30.00%
Tomato
10.00%
Onion
15.00% 20.00%
Cabbage
Coconut
Potato
Banana
From this pie-chart we can infer that apple will experience the highest price fluctuation
according to the majority of wholesalers.

12. The table below represents:-
 Average quantity of the vegetables purchased by a wholesaler every day.
 Average cost incurred by a wholesaler to buy 1 Kg of vegetables.
 Profit margin added by the wholesalers on an average.
 Sales made per day by the wholesalers on an average.
Average purchase per day 8178.06 Kg`s
Average Cost per Kg Rs. 53.87
Average Profit Margin added by the wholesalers 40%
Average sales per day 7500.80 Kg`s

13. RETAILERS
In this section we are going to analyze the retailer’s data by using pie-charts, bar-graphs and
averages and percentage method. Then we are going to infer findings from these.
Qualification
7.69%
7.69%
7.69%
Management
Arts
76.92% Science
Multimedia
From this pie-chart we can infer that among the retailers approx. 77% of the correspondents were
management graduates and by the field experience of the interviewers many among them ran
either organized retail shops like Sarvana stores or their own local shops.
Age
13.04%
30.43%
18-29
30-40
56.52% 41-60
From this pie-chart we can infer that 57% of the correspondents who worked as retailers fell in
the age group of 30-40 which justifies the fact that most of them join the business after
completing their studies and try to make their retail outlets more competitive. It shows a young
force of retailers working in the city. This can be considered positive.

14. Income per month(Rs)
17.39%
≤ 50,000
39.13%
50,000-1,00,000
17.39% 1,00,000-2,00,000
2,00,000-4,00,000
≥ 5,00,000
8.70%
17.39%
From the graph we can infer that approx. 40% of the retailers earn a nominal income of up to Rs.
50,000. This is because:-
 Many retailers work on small scale i.e. serving families in the street or sometimes only in
one building.
 Some retailers keep their operating on small scale due to lack of capital.
 This is also because the consumption of vegetables is less among the customers. As we
see in the analysis of the customers that a customer buys 4.5Kg once a week for the
whole family.
But some famous stores like Saravana earn more because of sales generated by marketing efforts
i.e. various schemes etc. earn a high income of 5lakh per month. This shows that organized retail
can generate more revenue and income because of the integrated business effort and better
supply chain as well as inventory management.

15. Buying source
Wholesalers
100.00%
Surprisingly, all the retailer correspondents we interacted to bought from wholesalers and none
from farmers. This maybe one of the reasons people are indifferent to retailers i.e. they buy
according to proximity of retailers and it doesn’t matter to them if they are buying from an
organized retailer or an unorganized retailer as the prices didn’t vary much to effect the buying
behavior of the consumers.
Also, it shows that none of the retailers are working to cut-short the supply chain and supply
their customers with the benefits in the form of lesser prices.

16. Components of Cost
120
100
80
60
40
20
0 Components of Cost
Transportation- All the correspondents said that transportation was a part of their cost which
shows that all the retailers have to procure raw material from distant places which adds to the
cost of the vegetables and hence increases their price.
Bribes- Surprisingly, all the correspondents said that they had to bribe the government officials
for the smooth running of their business. It included bribing for permits.
Inventory Costs- All the correspondents said that they maintained some level of inventory which
added to their costs.
Helpers- All the correspondents said that they needed helpers to attend the customers timely
which in turn helped them build some customer loyalty.
Shop Maintenance- All the correspondents said that they had to maintain the shop well so that
the customers feel good while buying and they could maintain some hygiene as it’s a must in this
business.
Wastage- All the correspondents said that they incurred losses due to wastage this shows lack
of:-
 Storage facilities
 Technology
 Awareness
 Inventory management
Credit Buying/Selling- Approx. 57% of the correspondents said that credit buying/selling was a
part of their cost. This shows that almost half of the retailers trade in cash only. The other half
trade on credit. It also shows that:-
 Some traders lack liquidity and hence they have to purchase on credit which adds to their
cost.
 Some traders who maintain good liquidity & trade on cash which can help them in
enhancing their profits and even providing their customers the benefit of vegetables at
lower prices.

17. Frequency of Purchasing
100.00%
Daily
All the corresponding retailers were buying on daily basis In spite of the fact that many of them
maintained inventory. This show:-
 Poor inventory management
 Poor supply chain management
 Lack of planning and forecasting
 Inefficient use of resources and facilities

18. Setting the selling price
90
80
70
60
50
40
Setting the selling price
30
20
10
0
Maximum Profit Consesus in the Competitive
market
This shows a market which has a mix of retailers operating under a union & retailers operating
independently without being a part of any union.
This can also be interpreted as a market showing the presence of organized as well as
unorganized retailers (vegetables). The organized retailers have to do pricing competitively to
stay ahead of the other players in the organized retail markets as well as local vendors. Whereas,
the unorganized retailers depending upon the area they are follow different strategies.
Also, some retailers will give good quality but will not compromise on price i.e. they will try to
retain their maximum profit possible. Some others will give inferior quality and try to generate
large sales volume by selling at lower price. Though such a retailer will compromise on his
maximum profit but by generating large sales volume he will compensate.

19. High price fluctuation
4.35% 4.35%
8.70%
Mangoes
8.70% 47.83% onion
tomato
8.70%
Apple
Lichi
17.40% Bitterguards
Banana
From the pie-chart we can infer that in the experience of retailers the commodity that can
experience high price fluctuations is mango.
The table below represents:-
 Average quantity of the vegetables purchased by a retailer every day.
 Average cost incurred by a retailer to buy 1 Kg of the vegetables.
 Profit margin added by the retailers on an average.
 Sales made per day by the retailers on an average.
Volume of purchase per day 137.5 Kg`s
Average cost per Kg Rs. 75.91
Average Margin profit added over cost 20.87%
Volume of sales per day 100.2 Kg`s

20. CUSTOMERS
Qualification
0.1666
0.25
0.125 Science
Commerce
0.0833 Management
Arts
Multimedia
0.375 High School
From this pie-chart we can infer that approx. 38% of the respondents were from science
background and all the correspondents were graduates.
Age
17.39%
34.78%
18-29
30-40
47.82% 41-60
From the pie-chart we can infer that approx. 48% of the correspondents fall in the age group of
41-60. It shows that the large chunk i.e. 48% of the target market of vegetable vendors is the
people in their middle age/old age people.

21. Income per month
7.41% 4.54%
36.36% ≤ 50,000
22.72%
50,000-1,00,000
1,00,000-2,00,000
2,00,000-4,00,000
27.27%
≥ 5,00,000
In the pie-chart the range of income in rupees is given on the right hand side. The correspondents
falling in the range are demonstrated percentage wise in the pie-chart. More than half of the
correspondents had a monthly income of up to Rs. 1, 00,000.
Frequency of Purchasing
9.09%
18.18%
Weekly
50.00%
Daily
Every three days
22.72%
Fortnightly
The general buying frequency of a correspondent was once in a week. But most of them who
bought once a week did not buy large quantities. They bought 4kg on an average which is less
than those who bought once in every three days. The ones who bought once in every three days
bought on an average 6.5 kg`s.
This shows a wide variation of consumption among correspondents which can be interpreted as
due to:-
 Difference in tastes and preferences
 Pure vegetarians might be consuming more vegetables
 People consuming more of fast food will consume less of vegetables
 People consuming more of South-Indian cuisines will be consuming less of vegetables

22. Buying Source
3.70%
18.51%
Retailers
51.85%
Wholesalers
25.92% Sub-Wholesalers
Farmer
A very large portion of the sample correspondents i.e. 52% (approx.) buy from retailers. This
includes organized retailers as well as unorganized retailers. So, the development of the retail
business through involvement of technology and advanced supply chain management the
difference of price between retailers and wholesalers can be diminished.
Also, it shows that people are ready to pay a bit extra but they are not willing to go to wholesale
markets (explicitly stated by correspondents) because:-
 Distance
 Unsafe to go there
 One has to go to different shops to buy all the required vegetables
 Lack of personal attention in the wholesale markets
 Climate hostility
 Time consuming
 Tiring commute
The people who do not care about all the above factors are the ones who really go to the
wholesalers, sub-wholesalers or in some cases even the farmers.
People who buy from farmers directly are generally the ones who have either some business
links or some relatives into farming.

23. Factors effecting the buying decisions of the
cutomers(1-7 Ranking Based)
8
7
6
5
4
3
2 Factors effecting the buying
1 decisions of the cutomers(1-7
0 Ranking Based)
The most preferred factor was given a rank of 1 and so on by the correspondent. The factors are
represented as they effect the buying decision of the customers in decreasing order.
Do the customers go a long way to buy at
wholesale prices
41.67%
58.33% Yes
NO
Almost 60% of the correspondents did not prefer to go to wholesale markets, if they had to travel
a long distance. Only the correspondents who had easy access to wholesale markets or sub-
wholesaler markets were the ones who preferred to go to these markets instead of buying from
retailers.

24. Do the customers bargain
30.43%
Yes
69.56% No
Almost 70% of the correspondents try to bargain. However, these correspondents also said that
it’s no use of bargaining as like the organized retail unorganized retail shops are also now fixed
price shops. They just bargain because:-
 It gives them self satisfaction
 Sometimes it does make a difference of 5%-10%
High price fluctuation
25
20
15
10 which commodities in your
experience have high price
fluctuations
5
0
It’s expressed as percentage E.g.:- Mangoes will experience high price fluctuation according to
20.51% of the correspondents.

25. The table represents:-
 The average cost incurred by a customer to buy one Kg of vegetables.
 Average amount of vegetables bought by the customer whenever he/she buys (excluding
special occasions).
Avg. Cost/Kg Rs 97.1
Volume of purchase 4.53 Kg

26. FINDINGS
The survey was conducted between wholesalers, retailers and customers. And among customers
the findings that we acquired are based on the response from the survey.
Customers
Most customers we surveyed prefer buying from retailers than wholesalers due to the various problems
that should be faced if one wants to buy from a retailer.
Also, 50% of customers buy both vegetables and fruits at one go and once in a week to avoid frequent
visits to the market.
The factor that most affects the customers while buying fruits or vegetables is their budget.
70% of the customers who were surveyed said that they bargain. This sometimes gives them a 5 to 10% of
cost benefit.
According to them, Mangoes and onions are the two top most products that experience price fluctuations.
Retailers
Almost every retailer we surveyed bought goods from a wholesaler.
The components of cost that every retailer had to deal with were transportation, bribes, inventory, wages,
and maintenance and wastage charges.
Every retailer that we surveyed said that goods were bought every morning from the wholesaler which
shows poor inventory management.
Almost 80% of the retailers set their selling price to gauge maximum profit.
According to them, mangoes experience highest price fluctuations.
The average volume of sales per day are 100kgs
Wholesalers
Every wholesaler we came across bought goods from a farmer.
The components of cost every wholesaler dealt with on frequent basis were transportation and bribes.
60% of wholesalers bought goods from a farmer everyday and the rest bought weekly twice or once
Selling price is set based on the competition and maximum profit.
According to the wholesalers, apple, onion and tomatoes are the three top most products that experience
high fluctuations in the market.
The average sales made per day by a wholesaler is 7500kgs.
The salient features of the KFVWM market which is situated on the Chennai-Thirupathy
highway, are stalls equipped with telephone facilities, stalls run by self-help groups, vehicle
parking facility, canteen facilities and facilities for waste disposals. Services of weighing
machines have been provided to the farmer sellers free of cost.

27. SUGGESTIONS
Several measures are recommended for improving the market of fruits and
Vegetables in Chennai which are as follows:-
First, it is important to bring more markets under regulation and put them under the
supervision of a well represented market committee. Second it is important to promote, and
perhaps even enforce through rules or laws, the practice of open auction in the markets. Third,
it is important to bring more number of buyers and sellers to the wholesale markets so as to
encourage healthy competition close to perfect market conditions and better price realization
to the producer farmers.
Besides above measures, improvements in market infrastructure such as storage (godown)
facilities, cold storage, better loading and weighing facilities, proper stalls, better road links
etc. would also be helpful in improving the market efficiency.
Generally, traders are capable of sourcing price information from different sources whereas
poor farmers rely on minimum support price (MSP) from the government. Therefore, there is
a great need to make information available to farmers at the right time and right place in
response to this challenge. It is also good to develop an integrated agricultural market
information system that will be linked to World information center, and to link them to
government’s program.
Changing the attitudes of farmers is a crucial factor in improving the market performance. If
farmers have awareness about the benefit of the specialty market, they do not need only
immediate economic advantages from the sale of their product. In case of production,
household heads with very limited education encounter in successfully managing, fertilizer
and pesticide applications, and also what to produce in line with taste and preference of
consumers demand, especially in the presence of ineffective extension services. So
stakeholders’ and Agricultural and Rural Development Offices have to create awareness about
the specialty of market. Continuous education and training on production and marketing will
have a positive impact on their attitudes.
Efforts to improve the transparency in the market operations through better supervision by the
market committee would be another important factor in improving the marketing efficiency.
Finally there is substantial scope for improving the marketing efficiency by improving the
market information system by making available latest and extensive market information to all
market participants through the use of internet facilities and other means of communications.

28. CONCLUSION
Fruits and vegetables constitute an important part of daily diet and are in great demand round the
year. India now ranks first in the world in the combined production of fruits and vegetables. At
present the horticultural crops in the country covers 13.6 million hectares of land, i.e. 7 per cent
of the gross cropped area and contributes to about 18-20 per cent of the gross value of
agricultural output. India's share in World fruit production is very significant, the largest
producer of mango and banana in the world and fifth position in the production of pineapple and
sixth in the production of orange, tenth in the production of apple. Similarly India's presence in
the production of vegetables is also very significant. Among the production of major vegetables,
India occupies the first position in cauliflower, second in onion, third in cabbage, and sixth in
potato in the world. The diverse soil and climatic conditions in the country gives great promise to
cultivate a wide variety of fruits and vegetables.
This study consolidates the major findings of the studies that are conducted at Chennai. These
studies mainly address issues such as present marketing practices of fruits and vegetables, the
seasonal phenomenon in terms of their market arrival/sale, the physical market infrastructure at
the selected markets, existing major marketing channel and lastly the price spread in fruits and
vegetable marketing and the share of producers in consumer rupee.
In Chennai market share of farmers range from 15 to 69 percent. The high percentage of margin
to farmer-consumer price difference is indicative of large inefficiencies and relatively poor
marketing efficiency. There is great need to improve the marketing of fruits and vegetables.
Finally there is substantial scope for improving the marketing efficiency by improving the
market information system by making available latest and extensive market information to all
market participants through the use of internet facilities and other means of communication.

29. LITERATURE OF REVIEW
MARKETING
AUTHOR: Marcia Mogelonsky
Meet the Inner-City Shopper. American Demographics, 20 (December 1998), pp. 38–41.
[Survey, Underserved market segments, Minorities, Demographic characteristics,
Expenditures, Retailers, Market strategy, Apparel stores, Brand names, Sales people, Statistical
data.
PRICE
AUTHOR:GuillemLópez-Casasnova
This paper reviews the literature on reference pricing (RP) in pharmaceutical markets.
The RP strategy for cost containment of expenditure on drugs is analyzed as part of the
procurement mechanism. We review the existing literature and the state-of-the-art
regarding RP by focusing on its economic effects. In particular, we consider: (1) the
institutional context and problem-related factors which appear to underline the need to
implement an RP strategy; i.e., its nature, characteristics and the sort of health care
problems commonly addressed.
MARKETING COST
AUTHOR: svenA.haugland
Why do firms that make specific downstream investments as they start international operations,
sometimes turn to more market-like arrangements as they gain international experience and their
international sales increase? This paradox in international marketing is the key question to be
addressed in this article. We use the concept of dynamic or temporary governance costs to
examine the paradox. The pattern of internationalization in the Norwegian farmed salmon
industry provides an example whereby Norwegian exporters established their own sales offices
in several international markets in the early stages of internationalization, but subsequently
disintegrated vertically and came to rely on more market-like arrangements. An analysis of the
internationalization of this industrysuggests that, over time, the market provided better
capabilities than vertical integration. This reduced the transaction costs, thus making vertical
disintegration an efficient strategy.
PRICE SPREAD
AUTHOR:Michael K. Wohlgenant and John D. Mullen
A new model for the farm-retail price spread, which accounts for both farm supply
and retail demand changes, is introduced. This model is applied to beef, and its
empirical performance relative to the mark up pricing formulation is evaluated using
Non nested testing procedures. The results are consistent with theory and indicate the
Mark up pricing model is misspecified.

30. MARKETING MARGIN
AUTHOR: Charles C.layon andgaryD.thompson
The effects of temporal and spatial data aggregation on the performance of alternative marketing
margin models is assessed using monthly, quarterly, and semiannual fluid milk prices from three
U.S. cities. Nonnested tests for multivariate and single equation models with serial correlation
are used to choose among alternative models at each aggregation level. While model choice is
affected by temporal and spatial aggregation, model choice becomes more difficult as data are
temporally or spatially aggregated.
MARKETING EFFICIENCY
AUTHOR: singfatchu
How can a service firm right-size marketing expenses and yet strive to maximize revenue? This
paper represents the first attempt to model these efficiency and effectiveness issues using a 49-
unit Asia–Pacific hotel chain as illustration. We employ a triangular DEA model with total
expenses (controlling for number of rooms) as the raw input, marketing expenses as intermediate
output/input and revenues from room rentals and F&B as final outputs. We infer
that efficiency tails off when more than 12% of the budget is expended onmarketing activities. In
terms of effectiveness, we find that all the units rated as relatively inefficient can accrue
increasing returns to scale in revenues from marketing activities. By contrast, in the productivity
stage linking the raw inputs to the revenues, we observe mostly decreasing returns to scale. Our
results highlight the crucial role of marketing in service organizations.
SUPPLY CHAIN
AUTHOR: simoncroom
There can be little dispute that supplychain management is an area of importance in the field of
management research, yet there have been few literature views on this topic (Bechtel and
Mulumudi, 1996, Proceedings of the 1996 NAPM Annual Academic Conference; Harland, 1996,
British Journal of Management 7 (special issue), 63–80; Cooper et al., 1997). This paper sets out
not to review thesupplychainliterature per se, but rather to contribute to a critical theory debate
through the presentation and use of a framework for the categorisation of literature linked
to supplychain management. The study is based on the analysis of a large number of publications
on supplychain management (books, journal articles, and conference papers) using a
Procite© database from which the literature has been classified according to two criteria: a
content- and a methodologyoriented criterion.

31. PRICING TECHNIQUES
AUTHOR: carstenrohde
This paper addresses how overhead cost allocation system design in multinational enterprises
(MNEs) is affected by transfer pricing tax regulation. Using a case study research strategy we
find that the implementation of a transfer pricing tax compliance strategy gives rise to a number
of changes to the overhead cost allocation system design. Findings suggests that a contingent
relationship exists between overhead cost allocation and transfer pricing tax compliance. We
argue that when seeking to understand and explain MNEs’ overhead cost allocation system
design for intra-company services, the MNEs’ response to its tax regulatory environment is a
significant explanatory variable.
MARKET STUCTURE
AUTHOR: A.laincz
Conclusions about optimal R&D policies in existing endogenous growth models rely on strong
assumptions regarding marketstructure. In particular, each industry is dominated by a single
monopoly in most models or firms are cast as oligopolistic or monopolistic competitors. A model
which combines the endogenous growth framework with the Ericson and Pakesmodel of
industrial dynamics is proposed to allow for direct market competition between multiple firms in
each industry. Thus key features of competition through R&D typically missing in most
endogenous growth models are introduced, including: (1) non-degenerate entry and exit; (2)
distribution of firm sizes; and (3) more complex marketstructures that vary across industries and
over time. This paper presents the partial equilibrium for a single industry demonstrating how
growth-promoting R&D subsidies alter the endogenously determined marketstructure. Subsidies
to R&D ‘stretch’ the distribution of market shares with an increased number of firms in
the marketbut a higher variance in the market shares across firms.
MARKETING INTEGRATION
AUTHOR: benitoE.flores
Research in the areas of both manufacturing and marketing/sales have advocated
the integration of several important interrelated decisions between the two functions (i.e. product
development, process development,marketing/sales planning, and manufacturing planning
decisions). The process of managing the strategic alignment between a firm’s business strategy,
external environment, and the integration of manufacturing and marketing/sales decisions is very
complex phenomenon that requires a level of analysis that has not occurred previously. This
study examined the moderating effects of business strategy and demand uncertainty on the
relationship between the integration of manufacturing and marketing/sales-based decisions and
organizational performance. The study found general support for the proposed model, suggesting
that the impact of the integration of manufacturing and marketing/sales decision on
organizational performance is moderated by a firm’s business strategy and demand uncertainty.