Analysis of Organic Products Marketing Channels in Kenya: A Transaction Costs Approach
Loading...
Date
2012-10-04
Authors
Kyalo, Daniel
Eric, Bett
Bernhard, Freyer
Rhoda, Birech
Ngetich, Kibet
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The nature of marketing of high value agricultural products such as Organic products
has evolved over time, resulting into well coordinated physical, exchange and facilitating
functions. However, the degree of market efficiency and effectiveness of these functions is
highly influenced by the nature of interactions between the actors and their attributes. The
current study aimed at offering policy options for improving marketing of organic products
in Kenya through an analysis of the marketing channels. First, the study identified the
actors and activities involved in marketing of organic products in Nairobi urban area.
Secondly, the commodity (organic fruits and vegetables) attributes, the actors and the
activities were analysed with view of determining how they influence two key outcomes:
transaction costs and profitability. Primary data for the study was collected through a
survey among 31 traders dealing in organic fruits and vegetables within Nairobi city. The
data were analysed within the Institutions Analysis and Development (IAD) Framework.
Results indicate that although transaction costs exist in the three channels identified,
the nature and magnitude of such costs greatly varies across the channels depending on
the number of players and their attributes. Traders incur transaction costs while searching
and screening for reliable suppliers and customers, transporting the product and enforcing
contracts. Furthermore, the type of transaction costs incurred within each marketing
channel highly depends on the level of information asymmetry between actors, the actors’
attributes and existing institutional arrangements that are necessary to maintain transactions
and counter opportunistic behaviour. The nature of activities and actors within each
channel was also found to influence the transaction costs. The study draws imperative policy
implications that can be used to reduce the transaction costs incurred in the business
of marketing organic products. Some suggested policy options include: improving market
information transmission, reforms in legal framework to facilitate contract farming and
improved transport infrastructure.
Description
Keywords
Organic food products, organic marketing channels, transaction costs