Expansion of Market for a Commodity: 2 Factors

The following points highlight the two main factors affecting the expansion of market for a commodity.

The factors are: 1. Quality of the Commodity 2. Internal Conditions of the Country.

Expansion of Market Factor # 1. Quality of the Commodity:

Conditions which make for a wide market for a commodity mostly depends on the quality which a commodity possesses.

The important conditions of the quality are as follows:

(1) Durability:

Commodities like gold and silver which are very durable have got a very wide market. They can be transported to distant places or countries without being damaged in transit. On the other-hand, commodities of perishable in nature like fresh milk and fruits soon deteriorate and cannot bear long carriage. Market for them will be limited.

(2) Portability:

Commodities should be portable, i.e., they should possess large value in small bulk. Gold and silver are examples of commodities which are portable and have considerable value in some bulk and hence possess wide markets. While bricks have small value in proportion to their bulk and cannot therefore, be carried to a long distance. Hence their market is confined to local areas.

(3) Universal or Extent of Demand:

Larger the demand, the wider will be the market for the commodity. That means, if the demand for a commodity is strictly limited, the market for it will be narrow. On the other hand, if a commodity is in universal demand, like wheat, sugar etc. it must have a wide market. The size of the market depends on the extent of the demand.

(4) Suitability for Grading:

The commodity which could be graded i.e., if the standards of quality are fixed by a competent authority, then the purchaser could buy without even seeing the samples. Hence, the commodity could be exchange over a far wider area.

For example:

The quality of coal produced in India is certified as first class coal, second class coal etc. by the Coal Grading Board, and the purchaser in the Far East could send order for first class coal, without seeing the sample.

(5) Suitability for Sampling:

If exact samples of commodity can be sent to purchasers at a distance they can buy it, being confident that it will come up to a given standard. If the commodity is such that its samples cannot be taken, then the purchaser must be on the spot to buy it. The market for it will be small in area whereas if samples could be sent it could be bought and sold over a wide area.

(6) Stability of Price:

The goods which possesses stability in price have wide market. On the other hand the goods which have not got stability in price cannot have wide market. Because, if the price of the goods is stable then only a businessman can plan its sale and purchase. Otherwise in unstable price he may have to suffer loss.

(7) Supply of the Commodity:

The commodity in which an alteration in supply can be made according to its demand, the market for that commodity will be wide. On the other hand, the commodity, supply of which cannot be made in sufficient quantity and the production of which is done in small number, then the market of that commodity will not be wide. For example—Supply of vegetables, milk etc.

(8) Goodwill of the Commodity:

The commodity which has acquired good name and fame and has earned better goodwill in the market will have wide market.

For example:

Swiss watches, Indian tea etc.

Expansion of Market Factor # 2. Internal Conditions of the Country:

Internal conditions of the country also plays an important role in having wide market of a commodity.

Important among them are as follows:

(1) Peace and Security:

In a country where there is security of life and property, traders will be encouraged to enter into dealings with people living at distant places. They know that the contracts into which they might enter will be fully enforced by the state. Hence, the extent of demand will depend on the fact whether the political conditions are peaceful or disturbed.

(2) Means of Transport and Communication:

This is the most essential and important condition for the market being wide. The extent of the market is very largely determined by the nature of the means of transport and communication. When cheap and efficient means of transport will be available then the markets are obviously widened.

(3) Nature and Large Supply of Commodity:

In order to have a wide market, it is essential that a commodity should have a large supply. It should be of such nature that if need be, its supply can be increased as and when required. In case the supply is limited or it is uncertain, it cannot have a wide market.

(4) Scientific Methods of Doing Business is Essential:

For having wide market scientific methods of doing business are taken into consideration. Scientific methods in sale of goods, advertisement, exhibition efficient management and modern system of doing business are adopted.

(5) Sound Banking and Credit Facilities be Available:

If the banking and credit facilities in the country is sound and reliable then bill transactions, issue of cheque facilities, draft will be prevalent. Business transactions will be done easily.

(6) Tariff Policy of the Government:

The Tariff Policy e.g., import duties of the government also affects the extent of the market. In case the Government feels that the home industries need protection from foreign competition they will levy import duties or fix certain quotas. Policy of the Government must be favourable to the industry.

(7) Honesty and Integrity of the Traders:

If the business class of the country will be honest, dependable and of storing character then the purchaser of commodities will be attracted and traders of long distance will come for business transactions. This will help in widening the market. Above written are some of the factors which determine the expansion and size of the market for different commodities.