An accessement of economic efficiency of safe vegetable production of farm households at kim dinh commune, kim thanh district, hai duong province

LIST OF ABBREVIATIONS

SVP
CV
CVP
FSQM
PPC
IPM
ADDA
VNFU
VIETGAP
GLOBALGAP
MARD
DARD
ANOVA
SPSS

Safe Vegetable Production
Common Vegetable
Common Vegetable Production
Food Safety and Quality Management
Plant Protection Practices
Integrated pest management ( IPM)
Agricultural Development Denmark Asia
Vietnamese National Farmers Union
Vietnamese Good Agricultural Practice
Global Good Agriculture Practice
Ministry of Agriculture and Rural Development
Department of Agriculture and Rural
Development
Analysis of Variance

Statistical Package for the Social Sciences

1


BACK GROUND OF REPORT
Kim Dinh commune belongs to Kim Thanh district, Hai Duong
Province and is famous for being the land with lush agriculture. Long time
ago, famers in the commune have known to take advantage of favorable
conditions of geographic for

crop rotation and

livestock- agriculture .

Moreover, they also know how to handle crop improvement, bring advanced
varieties in production yield as planting flowers, some kind of perennial
plants such as: mango, guava, longan, lychi, jujube….
In particular, from 2010 onwards, due to possible accessibility of the
advanced production technology, a lot of farmer at Kim Dinh have boldly
abandoned traditional cultivation methods to start converting to produce
safety vegetables.

Ever since, literally, the economic efficiency of the

households has improved significantly
Actually, how economic efficiency of safe vegetable production at
Kim Dinh commune is ? What villagers have met detrimental difficulties or
convenientcet in the production process and expanded safe vegetable
production model? These questions need to be studied in detail, required us

have suitable and advanced solutions to enhance economic efficiency for
producers there.
By the same token, I have conducted to research the topic “An
accessement of economic efficiency of safe vegetable production of farm
households at Kim Dinh commune, Kim Thanh District, Hai Duong
Province”


CONTEND

Acknowlegdement.............................................................................................................. i
List of abbreviations........................................................................................................ ii
Back ground of report................................................................................................... iii
Contend................................................................................................................................. iv
List of table.......................................................................................................................... vi
List of fingures and charts........................................................................................ viii
CHAPTER 1 INTRODUCTION..........................................................................1
1.1

Rationale of the study....................................................................................... 1

1.2

Objectives of research......................................................................................... 2

1.2.1 General objectives................................................................................................ 3
1.2.2 Specific objectives................................................................................................ 3
1.3

Scope and objective of research.....................................................................3

1.3.1 Object......................................................................................................................... 3
1.3.2 The scope of research......................................................................................... 3
CHAPTER 2 THEORETICAL AND PRACTICAL

REVIEW ON

ASSESSMENT OF ECONOMIC EFFICIENCY OF

SAFE

VEGETABLE PRODUCTION IN FARM HOUSEHOLDS..................4
2.1

Theoretical basis on assessment of economic efficiency of
safe vegetable production in farm households........................................5

2.1.1 Rationale economic efficiency of safe vegetable production.............5
2.1.2 The concept and role of safe vegetable production...............................9
2.1.3 How to get certification of Safe Vegetable.............................................13
2.1.4 The concept of product consumption and market...............................14
2.2

Practical basis...................................................................................................... 17


2.2.1 The situation of vegetable production in the world...........................17
2.2.2 The situation of farmland production safe vegetables in
Vietnam.................................................................................................................. 19
2.2.3 The general situation of safe vegetable consumption in our

country................................................................................................................... 22
CHAPTER 3 RESEARCH METHODOLOGY.................................................26
3.1

Select of the study site..................................................................................... 26

3.2

Data collection.................................................................................................... 26

3.2.1 Secondary data collection..............................................................................26
3.2.2 Primary data collection................................................................................... 27
3.2.3 Analytical methods for data processing...................................................28
CHAPTER 4: FINDING AND DISCUSSION.................................................31
4.1

Overview the researched location..............................................................31

4.1.1 Natural conditions............................................................................................. 31
4.1.1.1 Geographical location, topography.............................................................31
4.1.2 Socioeconomic Characteristics.....................................................................34
4.2

An overview of the production and consumption of safe
vegetables at Kim Dinh commune..............................................................45

4.2.1 The situation of production of vegetables in

Kim Dinh

commune............................................................................................................... 45
4.2.2 Reality of safe vegetable consumption Kim Dinh Commune...........47
4.3

Accessing economic efficiency of the SV production process at
Kim Dinh................................................................................................................ 48

4.3.1 General information on surveyed households.......................................48
4.3.2 Production costs compared to between common vegetable
and safe vegetables.......................................................................................... 51
4.3.3 Results safe vegetable production of farmer households.................57


4.3.4 Consumption of vegetable safety of surveyed households...............58
4.3.5 Economic efficiency of safe vegetable production of the
surveyed households........................................................................................ 61
4.3.6 Social effect and environmental efficiency of safe vegetables
production............................................................................................................ 66
4.4

Factors affacting to economic efficiency of safe vegetable
production of farmers at Kim Dinh commune......................................67

4.4.1 Economic condition of the farm households..........................................67
4.4.2 Production scale of surveyed farm households....................................71
4.4.3 Educational level of surveyed household-heads..................................74
4.4

Implication for improving economic efficiecy of SVP of farm
households at Kim Dinh commune............................................................76

4.4.1 Analysis SWOT.................................................................................................... 76
4.4.2 Solutions to improve the economic efficiency of

safe

vegetable production (SVP) for farm households at Kim Dinh
commune............................................................................................................... 81
CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS.....................85
5.2

Conclusions.......................................................................................................... 85

5.2

Recommendations............................................................................................. 86

5.2.1 Recommendations for the State...................................................................86
5.2.2 For the Commune People's Committee Kim Dinh................................87
5.2.3

Recommendations to farmers those who growing by safe
vegetables method............................................................................................ 87

REFERENCES.....................................................................................................89


LIST OF TABLE

Table 2.1: The situation of farmland in Vietnam from 2007-2009..................20

Table 4.1 .Mean monthly climate data for Kim Dinh.....................................33
Table 4.3 : The existing condition of land use in Kim Dinh commune...........37
Table 4.4. Administrative Unit of Kim Dinh commune.................................39
Table 4.5 : Situation of labor force of Kim Dinh commune in 2013-2015
.......................................................................................................40
Table 4.6: Value socioeconomic Kim Dinh the commune 2013-2015............44
Table 4.7. Productivity of safe vegetable production of Kim Dinh from
2013-2015.....................................................................................46
Table 4.8: Comparison of indicators between SV and common vegetable
households at Kim Dinh 2015.......................................................49
Table 4.9: Property and equipment for production of surveyed
households vegetables...................................................................50
Table 4.10. Production cost of Safe vegetable ( SV) production and
Common vegetables ( CV) production at Kim Dinh.................52
Table 4.11 Volume inputs in common vegetable production (CV) and
safe vegetables (SV) averaged 1 sao / year...................................55
Table 4.12: Origins plant seeds of households in Kim Dinh...........................56
Table 4.13. Situation of acreage, yield and production of the three main
vegetables......................................................................................57
Table 4.14. : Consumption of safe vegetable farmers.....................................59
Table 4.15: Consumption of vegetable production as standard SV of
households (HH) at KD.................................................................60
Table 4.16: Economic results of SV production in the surveyed
households in Kim Dinh...............................................................62
6


Table 4:17.

Economic efficiency of safe vegetable production by

economic condition of the farm househodes.................................68
Table 4.18 Assessment of economic efficiency of SVP scale.........................71
Table 4.20: SWOT analysis

matrix in the

SV production of farm

households at Kim Dinh commune..............................................77

7


LIST OF FINGURES AND CHARTS
Figure 2.1 : Direct Distribution Channel.................................................................15
Figure 2.2: Indirect Distribution Channel..............................................................16
Picture 4.1: Image of Kim Đinh commune............................................................32
Chart 4.1:The Total Cost of each types of vegetables........................................53
Figure 4.2: Marketing channel of SV.........................................................................58
Chart 4.3: Consumption place of SV......................................................................60
Chart 4.4: Tomato efficiency economic of surveyed households..................63
Chart 4.5 : Radish efficiency economic of surveyed households..................64
Chart 4.6: Tomato efficiency economic of surveyed households..................66
.

8


CHAPTER 1

INTRODUCTION
1.1. Rationale of the study
The Vietnamese economy has been through a period of strong growth
following economic reforms in the late 1980s. These reforms put production
decisions back in the hands on farmers and gave them the opportunity to
produce directly for market ( Luong 2003, Quinn-Judge 2006).
As a result, the use of agrochemicals has increased substantially since
the early 1990a ( FAOSTAT 2004). The increased use and misuse of pesticide
in particularly worry for human and environmental healthy. Further, is was
found that even if farmers can read the pesticide labels, they do not always
follow the instructions or use protective clothing, resulting in pesticide
exposure and poisonings. It has also been found that poorer farmers apply
lesser amounts of pesticides than better – off farmers, but they use more toxic
pesticides ( Meisner, 2003)
Vegetable farmers across Vietnam received training on safe vegetable
production and integrated pest management ( IPM) in an attempt to reduce
pesticide residue in vegetables and improve food safety. The protection of
human health appears to be the primary driver behind safe vegetable
production.
In developed countries such as the Netherlands, France, America, ...
vegetable production technologies have reach at advanced level as: vegetable
production on greenhouse, and hydroponic technology that achieve high
productivity and quality.
Safe vegetable production in Vietnam is more and more pay attention,
some of the typically examples have to mention to Hanoi and Ho Chi Minh
city , then the safe vegetable program was extended to a number of other

1

provinces such as Vinh Phuc, Hai Phong, Dong Nai.....
Kim Dinh is locally where has favorable conditions for the
development of safe vegetable production such as: soil condition, irrigation,
crop rotation and intensive that permit to expand area of safe vegetabel. In
addition, Kim Dinh commune has advantageous position near to some of
large and potential markets like: Hai Phong , Ha Noi, or Quang Ninh market.
Foreseeing market demand, farmers at Kim Dinh commune

has

strongly restructured to focuse on producing safe vegetable. In these current
years, SV production has brought high economic efficiency for the producers,
on average , SV production culticated 1 sao bring an income of 13-15 million
VND per year. Produced, semi-processed and processed vegetables also
attract a large of labor who are unemployees in rural areas at present,
Therefore, perceiving the urgency issue, the communal farmers at
Kim Dinhm has approached safe vegetable method in farming to meet market.
However, a problem is posed that the output of safe vegetable products does
not truly stable, as brand of safe vegetables that have not been built, the
product of the farmer were mingled with unknown original vegetables or
China vegetables by traders makes the consumer couldn’t distinguish how
exactly quality vegetables is?
Nevertheless, economic efficiency from cultivating safe vegetable
of farmers in Kim Dinh commune, Kim Thanh District, Hai Duong province
is not high, and safe vegetable production does not really help them to
become the rich . From this perspective, I have started to conduct researching
the topic “ An acessement of g economic efficiency of safe
vegetable production in farm households in Kim Dinh commune, Kim
Thanh district, Hai Duong province
1.2 Objectives of research

2


1.2.1 General objectives
The overall objecive of the study is to assess the economic efficiency of
safe vegetable production in farm households in Kim Dinh commune, Kim
Thanh district, Hai Duong province, then to propose the implication for
improving the economic efficiency of safe vegetable production in the
commune in the future.
1.2.2 Specific objectives
The specific objectives of the study are as follows:
- To systematize the theoretical and practical base of economic
effiiciency of safe vegetable production of the farm households
- To assess the economic efficiency of safe vegetable production in
farm households in Kim Dinh commune, Kim Thanh district, Hai Duong
province
- To analyze the factors affecting the economics efficiency of safe
vegetable production of farm households at Kim Dinh commue, Kim Thanh
district , Hai Duong province.
- To propose the implication for improving the economic efficiency of
safe vegetable production in the commune in the future.
1.3 Scope and objective of research
1.3.1. Object
- Researched objects are farmers who producing safe vegetables in Kim
Dinh commune, Kim Thanh district Hai Duong province.
- The subjects related to the productive process, selling and
consumption, as well of the farmers group Kim Dinh commune, Kim Thanh
district, Hai Duong province
1.3.2 The scope of research



Scope of contend

3


- The thesis concentrates on researching economic efficiency of safe
vegetable production of farmers in Kim Dinh, after that, analysis factors
affecting the economic efficiency of the process of growing safe vegetables of
the producers. Finally, this report offer useful solutions in order to improve
economic efficiency of SVP at Kim Dinh commune.
 Scope of space
- The research is conducted in whole of area at Kim Dinh commune,
Kim Thanh district Hai Duong province. Nevertheless, I mainly focus on
three typical hamlets( or team): Hamlet 4, hamlet 5, hamlet 5 belongs to
region Phu Tai II Village, Kim Dinh commune.
 Scope of time
-

Time for working the thesis : From January , 2015 to August, 2016

-

Used data in the thesis: the research uses the database from 2000 to

2015, for instance focuses on the period from 2013- 2015.

CHAPTER 2
THEORETICAL AND PRACTICAL REVIEW ON ASSESSMENT

4


OF ECONOMIC EFFICIENCY OF SAFE VEGETABLE
PRODUCTION IN FARM HOUSEHOLDS
2.1. Theoretical basis on assessment of economic efficiency of safe
vegetable production in farm households
2.1.1. Rationale economic efficiency of safe vegetable production
2.1.1.1. Concept of relating economic efficiency
a. The concept of economic efficiency
Generally speaking, economic efficiency refers to a market outcome
that is optimal for society. From past to now, having a lot of concepts of
economic, and economic efficiency:
- In the context of welfare economics, an outcome that is economically
efficient is one what maximizes the size of the economic value pie that a
market creates for society. In an economically efficient market outcome,
there are no available Pareto improvements to be made, and the outcome
satisfies (Kaldor-Hicks criterion.)
- Economic efficiency is the hightest of every economic selection of
each enterprises on the market that is managed by the Government (Ph.D Ngo
Dinh Giao, 1997)
In the other word, economic efficiency is a term typically used in
microeconomics when discussing production. Production of a unit of good is
considered to be economically efficient when that unit of good is produced at
the lowest possible cost
b. The essence of economic efficiency
The essence of economic efficiency derived from the purpose of
manufacturing and the development of the national economy that is growing
satisfying about the physical and mental of all members of society

When discussing the content economic efficiency of economists

5


agreed that a clear distinction 3 fundamental concepts about efficiency. It's
technical

efficiency,

productive

efficiency

and

allocative

efficiency

(Podlipskij, A.I. Gorki, 2011)
c. The indicators reflecting outcome


Productivity

Productivity: Agricultural productivity is accessing as the ratio of
agricultural outputs to agricultural inputs. While individual products are
usually accessing by weight, their varying densities make measuring overall
agricultural output difficult.(.(Boundless Economics. Boundless, 2016)

Formula:
Productivity = Output/ acreage


Production

Production: Crop production depends on the availability of arable land
and is affected in particular by yields, macroeconomic uncertainty, as well as
consumption patterns; it also has a great incidence on agricultural
commodities' prices. The importance of crop production is related to
harvested areas, returns per hectare (yields) and quantities produced
.
Formula: Q = Q1+ Q2 + … + Qn
In there: Q: Total quantity of Vegetable production
Q1: quantity of Vegetable production of the first arable land
Q2: quantity of Vegetable production of the second arable land
Qn: quantity of Vegetable production of the n arable land
 Labor costs
Labor Costs: are the total amount of money paid to employees for a
period, such as a day, a week or a month. In producing agriculture, people often
split labor cost into 2 types: Farmer’s labor cost and hired people’s labor cost . .

6


Formula:

Total Cost of labor:

LC= CP*P

In there: CP: Cost of Labor
P: The number of labor who take part farming works
 The gross output (GO)
GO: of farming includes all the products of field
crop cultivation, cultivation of meadows, vegetable growing,and orchard and
vineyard cultivation; moreover, the growth in value is added (or the decrease s
ubtracted) of the unfinishedproduction for the year, and the value of young m
ultiyear plantings is added.
This method is applied for the calculation of the agricultural
sector GO.
The calculation formula is as follows: GO = Qi x Pi
In there: GO: Gross Output
Qi: Output of products i
Pi: the average production unit price . Intermediate cost:
Intermediate cost : is an accounting flow which consists of the total
monetary value of goods and services consumed or used up as inputs in
production by enterprises, including raw materials, services and various other
operating expenses.
Formula:

IC = Σ Ci x Pi

Where: Ci is the volume of the product or service costs
production.
Pi is the cost of the product or service produced vegetables.


Value Added- VA

7

of crop


In general, adding value is the process of changing or transforming a
product from its original state to a more valuable state. Many raw
commodities have intrinsic value in their original state.
Value added (VA) is worth the increased production in the
manufacturing process of the first vegetables or 1 year crop
Formula:

VA = GO – IC

In there: VA: Value Added
GO: Gross Out put
IC: Intermediate Consumption


Total cost:

Total cost: Cost generally refers to the expenses incurred on inputs
required for production of commodities- crops, live-stock etc. Inputs required
are labor, seeds, manures and fertilizers, land, pesticides, diesel, electricity,
irrigation water, feeds, fodders, medicines etc. Management of costs is very
important to decide both the level of production and profit
Total production costs (TVC) is the full cost of material and services
and depreciation that households have used in one year.
Formula:


TC = IC + Depreciation + L*100

Depreciation cost

Depreciation cost is an invisible cost which it is easy to neglect. It is,
however, a crucial expense item in assessing your farming performance. For
the smooth renewal of farm capital such as farm machinery, buildings and
facilities, the depreciation cost should be assessed each year. This sum should
be kept in reserve to be used in future.
Formula: Straight-line Method

8


Depreciation Expense =

Depreciable Amount
Useful Life



Mixed Income (MI)

MI : are the rest of the added value after depreciation, taxes, don’t
includes all amounts that are actually producing units have been, without
distinction it is profitable or portion of revenues from the difference.
Formula:

MI = VA – (D+T + L)

Where: A is the depreciation of fixed assets and attributable
costs
T is the agricultural tax;
L: Labor is outsourced (if any)
d. Indicators to assess economic efficiency:
- Production value: GO / IC
- Miniature mixed: MI / IC
- Intermediate cost: IC
- Value Added: VA
- Production value GO
 Effective use of cost: VA / IC, VA / TC, MI / TC, MI / IC, GO / IC
 Effective Employers: GO / L, VA / L, MI / L
 The value of production per acreage unit on the one volume
(million / ha)
 Added value on a per acreage unit (million / ha).
2.1.2. The concept and role of safe vegetable production
2.1.2.1.The concept of production
In view of the material and the production can be defined as purposeful
activities of human beings to create physical products to meet individual and
social ( Ngo Thi Thuan and Colleagues, 2006)

9


Production of material goods is operating mainly in the economic
activities of man. Manufacturing is the process of making products to use or
trade. Production decisions based on the following issues: what to produce?
Production to whom? Produce like? ? Production costs and how to optimize
the use and exploitation of the resources needed to make the product? (Do Ha

Van, 2013)
Inputs are essential elements used in production such as capital and
investment ... also for vegetable production inputs include: nitrogen
phosphorus, potassium, breeds, and other factors
The output is the result of the production process including the goods
and services not available in nature, but it is essential for human life. In
production of vegetables, the main output is the production of vegetables by
which to to serve the needs of society and the family
Inputs and outputs never separated, they always have a dialectical
relationship with each other and expressed through the production function :
Q = f (X)
Where: Q is the quantity of product produced
Xi: is the input factors to produce Q products
In bottom line, Crop production is a branch of agriculture that deals
with growing crops for use as food and fiber. Degree programs in crop
production are available at undergraduate and graduate levels. Graduates are
eligible for a variety of agricultural careers
2.1.2.2. The concept of safe vegetables
Safe vegetables (SV) is the fresh vegetable products (including all
kinds of vegetables: leaves, stems, roots, flowers, fruits, nuts, mushrooms,
food ...) are produced, harvested , processing, packaging and storage
techniques prescribed ensure residues of microorganisms, toxic chemicals
below the maximum allowable restricted (MARD).

10


Safe vegetable production is a sectors of farming. Currently, in the
world as well as Vietnam has two conceptions of safe agriculture are: organic
farming and relatively safe farming (FAO, 1996)

As agriculture is the combination of modern intensive farming
techniques, especially the achievements of biotech tech with organic methods,
biology to minimize to the lowest level using the fertilizers and plant protection
medicines of chemical to minimize the adverse impact of production on the
environment. (FAO/WHO Codex Alimentarius Commission, 1999).
In addition, with the above concepts, some scientists have suggested
that vegetable safety, they must meet the following requirements:
(1)Safe vegetables must be clean, attractive in form: fresh, pure, proper
collection of ripe, while the highest quality vegetables, no symptoms, packing
material standards
(2)At the same time, safe vegetables to ensure the quality: residues
pesticide, nitrate residues, residues of heavy metals and residues of harmful
microorganisms in vegetables do not exceed the permitted level the world
health organization (WHO)
2.1.2.3. The standards and process of safe vegetables
Depending on the specific conditions of each country in which the
construction of safe vegetable production processes such that reasonable . In
Vietnam, Ministry of Agricultural and Rural Development has launched laws
in producing safe vegetable production process.
1.

Prepare soil

Soil for culturing get to be proper drainage for the growth of
vegetables. Decoupling with areas of industrial waste and the hospital at least
2 km, the city municipal waste at least 200 m. It also should be free of
residues of toxic chemicals.(MARD, 2007)
2.

Source of water

11


Using of irrigation water from the river is not polluted and must be
underwent treatment. Using drilled well water (for lettuce and herbs). Use
fresh water to mix foliar fertilizers and pesticides.( MARD, 2007)
3. Seeding
Must know that breeding history. Moreover, exotic breeds must go
through epidemiology control. Only cultivating possible seeds and healthy
seedlings which non-diseased source. In addition, seeds which before be
sowed should be treated with chemical or heat in order remove diseased
source and insect.(MARD,2007)
4. Fertilizer
Increased use decomposed organic manure to fertilize vegetables.
Besides, absolutely no less fertilizer types composted manure, do not use
fresh manure diluted with water for plants. Had better do use of chemical
fertilizer top dressing just enough at the request of each vegetable.
Furthermore, fertilizer should be finished before harvesting at least 15 days.
(MARD,2007)
5. Pest prevention
Pest control refers to the regulation or management of a species defined
as a pest, and can be perceived to be detrimental to a person's health,
the ecology or the economy. A practitioner of pest control is called
an exterminator.(Colorado State University. Retrieved, 2010-06-02.)


Natural pest control methods

Natural pest control methods are employed to effectively reduce or

eliminate infestation without harming humans, crops and other organisms.
This method often utilizes other organisms such as plants or insects to control
pests in an agricultural environment.


Chemical pest control methods

12


Chemical pest control methods have been used in an agricultural setting
and within the household for a very long time. This often employs harsh
pesticides that instantly eliminate pests upon application. These can either be
applied systematically (targeting where plants are commonly ingested by
pests) or to the entire crops as in the case of aerial spraying.
6. Other accesses
Using greenhouse effects of limiting pests and diseases, weeds, frost,
drought, shortening the growth of vegetables, less use of plant protection
chemicals . Use plastic film to cover will restrict pests and diseases, weeds,
water-saving irrigation, restricting the use of plant protection products.
7. Harvest
Proper harvesting ripeness, in accordance with the requirements of each
type of vegetable, remove old leaves wilt, left diseased and deformed. Wash
vegetables thoroughly with fresh water, use a clean bag to contain.
(MARD,2007)
8. Pre-processing and inspection
After harvest, vegetables are placed in the Selection room. Here will
vegetables be sorted, cleaned. Wash vegetables thoroughly with fresh water,
use a clean bag to contain.(MARD,2007)
9. Transportation.

After packing, vegetables will be sealed and shipped to the store or
directly to users within 2 hours to ensure sanitary conditions and safety.
10. Storage and use
Vegetables are stored at 20 ° C and retention period should not exceed 2
days. Safe vegetables can be used immediately without having to brine or
other cleaning substances.
2.1.3. How to get certification of Safe Vegetable
In order to certificate agro products of producers get standard of SV, the

13


producers must to conduct follow by regulation of Regulation and Law which
issued by MARD. Moreover, to received SV certification of MARD, producer
have to go over the under regulations.
-

Pursuant to the Government's Decree No. 86/CP of July 18, 2003,

defining the functions, tasks, powers and organizational structure of the
Ministry of Agriculture and Rural Development;
-

Pursuant to Goods Quality Ordinance No. 18/1999/PL-UBTVQH10

of December 24, 1999 of the National Assembly Standing Committee;
-

Pursuant to Food Hygiene and Safety Ordinance No. 12/2003/PL-

UBTVQH11 of July 26, 2003 of the National Assembly Standing Committee;
-

Pursuant to the Government's Decree No. 163/2004/ND-CP of

September 7, 2004, detailing the implementation of a number of articles of the
Food Hygiene and Safety Ordinance;
-

Pursuant to the Government's Decree No. 179/2004/ND-CP of

October 21, 2004, providing for the state management of quality of goods and
products;
At the proposals of the director of the Cultivation Department, the
director of the Plant Protection Department and the director of the Science
and Technology Department
2.1.4. The concept of product consumption and market
2.1.4.1. The concept of product consumption
a. Consumption
Consumption is a major concept in economics and is also studied by

14


many other social sciences. Economists are particularly interested in the
relationship

between

consumption

and

income,

as

modeled

with

the consumption function ( Lincoln London, 1984)
The elasticity of demand for consumption goods is also a function of
who performs chores in households and how their spouses compensate them
for opportunity costs of home production.
b. Distribution channels
A distribution channel is the network of individuals and organizations
involved in getting a product or service from the producer to the customer.
Distribution channels are also known as marketing channels or marketing
distribution channels.( Kotler, Keller and Burton, 2009.) Role of Distribution
Channels
Produced goods and services have to find a way to reach consumers.
The role of the distribution channel is to transfer goods and services
efficiently. They can either be sent to a retail store or directly to a customer's
residence.
There are advantages and disadvantages to direct distribution channels.
The same goes for indirect channels. It is the job of the managers and others
involved in corporate governance to find the most effective means based on
the firm's specific needs.


Direct Distribution Channel

Producers Custom
ers
Figure 2.1 : Direct Distribution Channel

Direct channels tend to be more expensive to start running
and can sometimes require significant capital investment. Warehouses,

15


logistics systems, trucks and driving staff need to be set up. However, once
those are in place, the direct channel is likely to be shorter and less costly than
an indirect channel.

16


P
R
O
D
U
C
E
R
S
I

N
T
E
R
M
E
D
I
A
R
Y
C
U
S
T
O
M
E
R
S
PRODUCERS INTERMEDIARY CUSTOMERS


Indirect Distribution Channel

Figure 2.2: Indirect Distribution Channel

The most challenging part of indirect distribution channels is that

another party has to be entrusted with the manufacturer's products and

customer interaction. However, the most successful logistics companies are
experts at delivering receivables in a way that most manufacturers cannot be.
Indirect channels also free the manufacturer from any startup costs.
With the right relationship, they are much simpler to manage than direct
distribution channels.
2.1.4.2. The concept and function of the market
Market is generally understood to mean a particular place or locality
where goods are sold and purchased. However, in economics, by the term
market we do not mean any particular place or locality in which goods are
bought and sold. The idea of a particular locality or geographical place is not
necessary to the concept of the market.(Malkiel, Burton G. 1987)
Thus, an economist say that: “Economists understand by the term
market not any particular market place in which things are bought and sold
but the whole of any region in which buyers and sellers are in such free
intercourse with one another that the price of the same good tends to equality
easily and quickly”.(Cournot- Frenc1990)
Further, it is not-worthy that because in a market, there is close and free

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