Function # 5. Packing and Packaging:

Packing refers to the wrapping and crating necessary for the transport or storage of goods. Many goods must be packed in order to be preserved or delivered to the buyers. Liquids must be placed in barrels, bottles or cans. Bulky fabrics are compressed into bales. Heavy goods are often crated for handling or protection during transportation.

Goods must be placed in boxes for delivery to dealers, while the retailers often wrap goods or place them in bags for delivery to ultimate consumers. Fragile goods must often be packed in special containers.

Packaging means placing the product in small packages – boxes, cartoons, bottles or cans – for sale to the ultimate consumers. It is axiomatic that the job of packaging is to sell; and the major purpose of any package is to influence or control the location of product storage within the marketing channel right to the ultimate consumer.

The Functions of the Product’s Package are:

a. Protecting the product.

b. Adapting to production line speeds.

c. Promoting the product.

d. Increasing product density, i.e., increasing the ratio of product volume to package volume.

e. Facilitating the use of the product.

f. Having re-use value for the consumer.

The successful package is not the one with an intriguing shape or design, but the one whose over-all design, shape, colour, and printed message delivered an impact that resulted in a personal relationship between the consumer and the package on the shelf. Today the package must come alive at the point of the purchase. The salesman has now stepped inside the package. The manufacturer can create and control the salesman in the package.

A poorly designed package tells the consumer that the maker of the product does not care. Like an impatient salesman at five minutes before closing time, he is saying “take it or leave it”. But a well-designed package is proof that the manufacturer really cares about both the customer and the product and is willing to make an extra effort to please. He is employing a friendly, interested salesman.

Function # 6. Warehousing:

Warehousing or storage creates time utility. Many goods are not produced regularly at the point where they are wanted for consumption, and they must be stored from the time of production until they are wanted by the consumer, if they are to be used in satisfying human wants. Goods produced at a distance from the consumer must be transported to the consumers.

In order to ensure an even supply, a stock of such goods must be maintained near the consumers as protection against delays and uncertainties of transport and to permit transport in economical units. Many agricultural goods produced seasonally are supplied to consumers more or less evenly throughout the year.

Grains, cotton, tobacco and sugar furnish examples. They can be stored for a fairly long time without any deterioration. Cold storage further enables many perishables such as butter, eggs and fruits, to be stored for regular supplies.

Again, demand for some products is irregular. In such cases storage can be called into use so that production can be more regular. Most jewellery, fancy goods, utensils, toys are bought at special occasions, such as Diwali or Christmas. Such goods produced in “off months” must be stored until they are wanted by the consumers.

Storage Facilities:

In order that goods can be marketed efficiently, it is important that adequate storing facilities should be available. Suffi­cient space, proper location, adequate equipment to give protection to goods against heat, cold, moisture, dryness, vermin, fire and thieves should be available. A warehouse should be so located and constructed that goods can be received and shipped at minimum expense.

It is generally desirable that a warehouse, where large quantities of goods are stored, should be located on railway siding or on the harbour according to need. It should have adequate space for the trucks to load and unload and should be situated near the arterial streets or highways. Facilities for handling goods are important.

Function # 7. Insurance:

In business, as in private life, there are risks of every kind. Fortunately, most business risks are comparatively remote, but that does not lessen the loss they involve when they do occur. All prudent men will always catalogue most carefully every possible risk which the business they own or control may be running and consider how best they can prevent each risk materialising, or minimise and provide against its effects.

The word “risk”, as used here, means uncertainty of loss where the loss is caused by accidental and unexpected circumstances beyond the control of the management. Such risks have to be guarded against, and one of the ways to cover them is to take insurance. Every prudent businessman resorts to insurance. Insurance is really an element of business; without it no vehicle of transport on sea or land or in the air is allowed to move, nothing is built, and no wheel turns.

Insurance may be described as the provision which a prudent man makes against fortuitous or inevitable loss or misfortune. It is a commercialised form of spreading risk. The risk of loss is spread over a number of persons, each of whom is prepared to bear a fraction of the loss should the eventuality against which the owner of the property wishes to protect himself actually take place.

The person who assumes this risk is called the insurer, and he does so in consideration of the payment of a sum of money called premium, so that those entering into contracts of insurance called the assured, who suffered damage, are compensated from a common fund to which they and others have contributed. Insurance is, therefore, sometimes described as a coopera­tive way of spreading risk.

Function # 8. Financing of Trade:

Methods of financing internal trade in different countries are different. Bulk of the Indian trade is financed by the indigenous system, and a little by the modern or Western system of banking.

The financing agents or the constituents of the money market in India are:

a. The numerous and heterogeneous group of indigenous bankers and brokers, called by different names in different parts of the country, such as Shroffs, Banias, Mahajans. Sahukars, Marwaris and Chettis, whose operations are almost entirely confined to the interior of India;

b. The co-operative banks, which advance mainly to member-cultivators;

c. The Indian joint-stock banks run on European lines; which advance for a short-term on collateral securities, by discounting trade bills, and against commodity security;

d. The exchange banks, which mainly finance external trade;

e. The State Bank of India; and

f. The Reserve Bank of India.

In the import trade the source of finance for the merchant is the Commission Agent, who functions as an intermediary to the buyers and sellers of goods in an up-country market. He advances money to several merchants. The purpose of this agent in advancing money is to secure substantial business for his own loan. He advances loans to cultivators also so that the cultivators are under obligation to sell their commodities through this agent.

In this way commission agents act as financing agencies for getting business for themselves. It is no exaggeration to say that 80 to 90 per cent of the total business is done by the native Shroffs or Mahajans; and Hundi is the instrument in the hands of these indigenous bankers. Hundis are drawn for three purposes – (a) for raising loan (hand bill) ; (b) for financing trade (bill of exchange) ; and (c) for remittance of money from place to place (draft or cheque).

The joint-stock banks follow different methods of financing trade. The most common method of short-term lending is through discounting the concern’s promissory note or hundi. There are unsecured time loans with a definite date of maturity ranging from one month to six months. A small concern would borrow from local banks, for they can render frequent advice, and can be relied upon to take a personal interest in the concern’s welfare.

Another method is bankers’ acceptances, although they are used primarily in financing export and import trade and in financing domestic shipments where the buyers and sellers are unknown to each other, when because of distance or other reasons the seller finds it difficult to investigate the credit-standing of the buyer. Another method is commodity loans. Business concerns often obtain their short-term funds by borrowing from banks against commodity collateral.

By this means the business concern can obtain a relatively greater advance than its own financial standing and credit rating would entitle it to obtain on unsecured hundis. Borrowing on bills of lading against shipments is another means of securing funds for short periods of time. Specific merchandise in the concern’s profession at times may be used as security for loans. A floating charge may be created on the stock. The banks allow overdrafts and open cash credit accounts against suitable security.

Occasionally, in order to secure the necessary funds with which to postpone or forestall financial insolvency, companies sell their open book accounts. This is referred to as- “assigning”, “hypothecating” or “pledg­ing” accounts receivable. Loans of this type can seldom be obtained from the ordinary commercial banks but must be .secured from finance companies at a higher charge than the customary rate of interest.

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