Rural Market Environment and

Structure of Indian Agriculture

Module 3

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Rural Market Environment
▪ Environment means the surroundings, influences or circumstances under which someone
or something exists

▪ The environment of any organization is "the aggregate of all conditions, events, and
influences that surround and affect it”

▪ Environment has been divided into two major categories followed by sub-categories

▪ Some of the different types of environment relevant to the study of rural marketing are on
the following slides

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External environment
▪ Cultural and Economic

▪ Economical

▪ Technological

▪ Political & Legal

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Internal environment
▪ Internal Environment refers to the culture, members, events and factors within an
organization that influences the decisions of the organization especially of its human
resources

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Socio-Cultural
▪ Social customs are the behaviours which are expected of a particular culture

▪ The cultural diversity in the Indian society means the existence of cultural and ethnic
groups in a society

▪ The socio cultural factors have a strong influence on the behaviour of the particular society.

▪ In such societies the reference groups plays an important role which have a strong influence
on the purchase behaviours

▪ The Indian socio cultural societies are also decided by religious beliefs which are the belief
in the reality of the mythological aspects of a religion like poojas and rituals specific to socio
cultural settings

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Economical environment
▪ Economic environment is concerned with all the external economic factors that affects
the buying behaviour of the customers therefore affect the overall performance of a
company

▪ These are uncontrollable factors which are beyond the control of the company the
economic factors may be macro or micro for example GDP, purchasing power of the
consumer

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Technological environment
▪ Technological environment is the external factors in technology that impact business
operation

▪ Changes in technology affect the business operations

▪ Due to this the business may have to dramatically change their operating strategy

▪ This technological environment can help in increasing the reach of the product

▪ The technological environment is responsible for two main revolutions:

1. Green revolution
2. White revolution

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Political and legal environment
▪ The Governments of a country want economic development of their country because of
which they pass several rules and regulations to encourage business activity, the laws are
put in place to control business activity and avoid undesirable outcomes

▪ The regulations may be of different types and for different purpose, like fiscal policy,
taxation policy, GST, and demonetization

▪ The legal environment can be divided into different areas like:

✓ Employment legislation
✓ Environmental legislation
✓ Consumer law
✓ Competition law
✓ Information /reporting law
✓ Social legislation

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Components of consumer markets
▪ A market is a place where both the sellers and buyers meet

▪ Certain conditions need to be fulfilled for the categorization of a place to be market

▪ These conditions are both necessary and sufficient

▪ These conditions may also be termed as the components of a market

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Components of consumer markets
These components as given by Payne (1991) are as follows:

▪ Availability of quality products for transactions the physical existence of a product is not
necessary for some situations

▪ Existence of buyers and sellers. There should be a business relationship between buyers
and sellers

▪ Demarcation of the area such as place, region, country or the whole world in the case of
multinational corporations

▪ The existence of perfect competition or uniform pricing is not necessary

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Classification of urban markets
▪ The Indian urban market has emerged as one of the most promising segments in terms of
consumption across all industries

▪ All the industries rural or urban are modifying their products to satisfy the needs of the
urban consumer

▪ All the marketing efforts are being made to influence their buying behaviour and
consumption patterns

▪ According to the World Economic Forum report, India is poised to become the third-
largest consumer market behind only the US and China and consumer spending is
expected to grow to nearly USD 6 trillion by 2030

▪ Thus, this market offers massive opportunities for marketers in terms of sheer value or
purchases
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Classification of urban markets
▪ The rural marketers should exploit this opportunity and invest and increase their
presence in the urban markets with their products

▪ The urban markets are predominantly comprised of youths which consist of a major
chunk of the urban population

▪ The Indian consumers are more exposed to developments in the market due to advances in
technology

▪ Due to increased awareness the expectations of the consumer from the products are
high, they look for better quality products for which the consumers are willing to pay
extra price

▪ The apparel industry has the maximum demand in the urban areas especially the branded
apparel due to the youths who are more brand conscious
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Classification of urban markets
▪ The Indian apparel industry is estimated at US$ 50 billion, and it is expected to grow
annually at a rate of 13-15% as per Clothing Manufacturers Association of India (CMAI)

▪ The economic reforms brought by the liberalization in 1991 brought substantial investment
in the Indian market

▪ Therefore, the urban markets provide immense opportunities for the marketers particularly
in the areas of FMCG, apparel, household products, personal care and consumer durables

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Classification of markets
▪ A market is a physical place where buyers and sellers meet to buy and sell the goods

▪ Traditionally markets can be classified on different bases like area, time, transactions,
regulation, and volume of business, nature of goods, and nature of competition and
demand and supply conditions

▪ Economists describe a market as a collection buyers and sellers who transact over a
particular product or product class

▪ The following figure diagrammatically represents the classification of consumer markets

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Classification of urban markets

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Recent market scenario in India
In the recent market scenario there are three major factors that are pertinent for the Indian
companies’ growth in the international market
▪ High cost of delivery and the transportation costs from farm to the markets eat away the
profits of the producer. For example: The transportation of grapes from India to
Netherlands is three times more than from Chile although the distance is twice than India.
▪ India’s transport costs are higher due to fragmented Supply Chain due to policies
inhibiting investment, integration and competition in transport sector, storage and
distributions. That is why the largest buyers of Indian horticulture exports are middle and
south Asian countries
▪ As per the World Bank survey there exists a huge disparity in health, safety, and quality
standards as required by foreign governments and buyers, especially from developed
countries. It has to be seen when Indian companies will be making for such stringent quality
standards demands otherwise the Indian companies will not be able to compete even in
domestic market

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Recent market scenario in India
▪ These three factors have greater effect on the performance of the Indian companies

▪ Along with these factors global politics, government policies and insufficient
infrastructure and poor logistics creates delays and wastage and takes away the profits of
the farmers for improving quality of their produce

▪ When a domestic market is protected by the government it increases the transport costs
for exporters because low imports mean that exporters not only, bear the cost of outward
journeys but also of the unutilized capacity on the way into the country

▪ High delivery costs increase the burden of foreign tariff because they are imposed on the
final product price

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Recent market scenario in India
▪ The World Bank report has proposed two major reforms to raise the farmers’ incomes,
lower retail prices and improve the international competitiveness of rural producers

▪ These are

1. Create an integrated and competitive domestic agriculture market

2. Improve communication, transport, storage, distribution and agriculture support

services

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Recent market scenario in India
The following are the aspects of a changing scenario in the twenty-first century for India:

▪ Opening of country’s economy

▪ Global competition
▪ Better quality products
▪ A large variety of same products
▪ Technology advanced products
▪ New and better channels of distribution
▪ New and innovative channels of advertising
▪ Well informed customers
▪ Complaint redressal forums

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