Advantage of Using Sample Clauses

Advantage of Using the Direct System The efficiency of most marketing systems is improved by the presence of effective intermediaries. An intermediary between a number of producers and consumers reduces the number of transactions and thereby procurement and selling costs and time are all reduced (see the figure 3.2 below). This can be explained as long as they perform marketing functions which others cannot or will not, or can perform his/her marketing functions more efficiently than can the producer and/or alternative intermediaries. Gaedeke and Xxxxxxxxx, (1991) suggest the reasons why middlemen/ brokers are commonly employed by producers are that, intermediaries provide wider market exposure, few producers have sufficient capital to market directly and producers can usually earn a higher return on investments by employing available capital in activities other than those of direct marketing. Thus, middlemen/brokers are needed in several parts of the supply chain to transfer information of the quantities and prices supplied and demanded and acting as guarantors of the two parties for a small commission. Long supply chains are costly in terms of time and money. In the Tanzanian context, the frequent use of brokers is often the only viable way to trade in the absence of enforceable and foreseeable contracts. The use of brokers to reduce transaction costs has also been found in the country context of Ethiopia (Xxxxx-Xxxxxx 2001). The commission charged by each of the market actors in the chain varies according to the personal relationship between the traders, time of the year, type of good, and competition at the market. Thus the exact description of the marketing margins varies with each transaction (Xxxxxx, 2005).