Exercise 1 Introduction to Agricultural Business Management
The term agri-business was first introduced by
John Davis and Gold Berg in 1957 and their definition is as follows, “Agri-business is the sum total of all operations involved in the
manufacture and distribution
of farm supplies, production activities on the farm, storage, processing and
distribution of farm commodities and items made from them” (John David and A. Gold Berg).
In 1980s it was given three connotations: (1)
synonymous with term agriculture, (2) synonymous with agricultural economics
and (3) a modified concept of agriculture, excluding farming, or the off-farm
aspects of agriculture.
At present, agribusiness is defined as all
business enterprises that cater farmers / traders / consumers. Such transactions may involve either an input or a produce or service and encompasses
items such as:
1) Productive resources (feed, seed, fertilizer,
equipment, energy, pesticides, machinery)
2) Agricultural commodities – (raw and processed or
manufactured commodities of food
and fiber)
3) Facilitative services (credit, insurance,
marketing, storage, processing, transportation, packing, distribution,
consultancy, soil testing).
In
other words, agri-business is that sector of the economy which is concerned
with the production, processing and distribution of agricultural products,
including supplies (human labour, bullock labour, fertilizers, pesticides)
essential for farm production, various agricultural services (processing,
storage etc.) and also the economic agencies (financial institutions,
warehouses, marketing agencies etc.) that serve agricultural producers.
Agricultural
Economics Vs Agribusiness
Agribusiness
is different from the study of agricultural economics as agricultural economics
emphasizes on the economics of farm production alone whereas agribusiness in
addition to that, also takes in to account non-farm agricultural enterprises
(e.g. processing). Besides, in case of agribusiness thrust is given more on the
business outside the scope of the farm (e.g.) the pricing objective of a firm
includes not only profit maximization (of that of a farm) but also image
building of a farm firm as well as to insulate from competitors.
Scope for Agribusiness in India
1. India is endowed with varied ago-climate,
which facilitates production of temperate, sub-tropical and tropical
agricultural commodities.
2. There is growing demand for agricultural
inputs like feed and fodder, inorganic fertilizers, bio-fertilizers.
3. Biotechnology applications in agriculture have
vast scope in production of seed, bio-control agents, industrial harnessing of
microbes for bakery products.
4. Export can be harnessed as a source of
economic growth.
5. The size
of Indian food market is at least Rs. 450,000 crores (2014-15), which needs to
be exploited well before exploring the opportunities abroad. An average Indian
spends 53 per cent of his income on food.
6. As a signatory of World Trade Organization (WTO), India has vast potential to improve its present position in the World trade of
agricultural commodities in both raw and processed form.
7. At present processing is done at primary level
only and the rising standard of living expands opportunities for secondary and
tertiary processing of agricultural commodities.
8. The enhanced agricultural production throws
open opportunities for employment in marketing, transport, cold storage and
warehousing facilities, credit, insurance and logistic support services.
9. Production of vegetables and flowers under
green house conditions can be taken up to harness the export market.
10. There is wide scope for production and
promotion of bio-pesticides and bio-control agents for crop
protection
11. The vast coastal line and internal water
courses provides enormous opportunity for production of marine and inland fish
and ornamental fish culture gaining
popularity with increase in aesthetic value among the citizens
of India.
12. The livestock wealth gives enormous scope for
production of meat, milk and milk products, poultry products etc.
13. The forest resources can be
utilized for production of byproducts
of forestry.
14. Beekeeping and apiary can be taken up on large
scale in India.
Management
Management
is the unifying and coordinating action, which combines different activities of
individuals or an organization through establishing an environment favourable
of performance thereby leading to the accomplishment of desired objectives.
Important
requisites/ tasks for success in business are:
Today,
the business has become very competitive and complex. This is mainly due to
changing taste and fashion of the consumers on the one hand, and introduction
of substitute and cheaper and better competitive goods, on the other.
Production has become customer-oriented catering their demands and wants. A
farmer / business firm owner has to give proper thought to this consideration
in order to make his business a successful one. The important requisites for
success in business are:
1) Clean objectives
2) Planning
3) Sound organization
4) Research
5) Finance
6) Proper plant location, layout, and size
7) Efficient management
8)
Harmonious relationship with workers
Agricultural
market and marketing management
Market:
The
word market comes from the latin word “markatus” which means merchandise
or trade or a place where business is
conducted. Various terms used for describing markets in India are hats, painths,
shandies, santhais and bazzars.
The
term markets means not a particular market place in which things are bought and
sold but the whole of any region in which buyers and sellers are in such a free
communicate with, one another the price
of the same goods tend to equality, easily and quickly.
Marketing:
Connects a series of activities involved in moving the goods from the point of
production to the point of consumption. It is that part of
economics which deal with the creation of time, place and possession utilities.
Agricultural marketing:
It is the study of all the activities, agencies and policy involved in the
procurement of farm inputs by the farmers and movement of agricultural products
from the farms to the consumers.
Marketing
activities: They are traditionally divided
on the basis of operational activities, such as sales and distribution,
and marketing service
activities which include
advertising, promotion and market research.
4 P’s in marketing:
In considering the needs of their customers, companies must think in terms of the product itself, the price of the product and the place where the farmer needs it, while
making sure that the existence of the product is known through effective promotion. These various components are
described in more detail below,
Product: The product
is the focus of marketing. Although many aspects of the product are not
marketing responsibilities (such as plant breeding, seed production and
processing), marketing is concerned with the product's attributes and what
these mean to the farmer. Such factors include quality, appearance and
performance.
Price: Price creates
sales revenue and is therefore important in determining the total value of the
sales made. Price is really determined by what farmers perceive as the value of
seed of a particular variety. It is important to understand how farmers value
seed as well as how much they are prepared to pay in relation to the benefit
they expect to earn.
Place: The place
factor deals with the various methods of transporting and storing seeds and
then making them available to the farmer. Getting the product to the right
place at the right time depends on the distribution system. The choice of
distribution method will depend on market circumstances and the nature of both
the seed and the farmer.
Promotion: Promotion
is the business of communicating with and influencing the customer. Although
the cost associated with promotion can be a significant element in the overall
cost of a product, successful seed promotion increases sales so that costs are
spread over a larger output. While increased promotional activity may be a
response to competitor activity or a new product launch, it is important to
maintain a constant flow of messages to the consumer as well as visibility in
the market place.
Characteristics of a developed market:
(1)
A
good market should provide commodities which the consumers want and are ready
to pay for.
(2)
It
should provide wide variety of product but not so wide that create confusion
for consumers.
(3)
No
harmful products should be offered for sale in the market. Precautions should
be taken into protect consumers.
(4)
The
information on the presence of goods in the market and their relative merits
should be available to the entire prospective consumer.
(5)
There
should not be any sort of pressure on the consumers to buy products from a
particular trader.
(6)
The
retailing servants should be available in the market for small consumer.
(7)
Price
should be fair and uniform for the products for all categories of consumers.
(8)
There
should not be any inefficiency or waste in the market.
Characteristics of good marketing system:
(1)
There
should not be any government interference in free market transactions.
(2)
Market
should operate independently but systematic and orderly
(3)
The
marketing system should bring demand & supply to gather and should establish
an equilibrium between the this two forces
(4)
The
marketing system should be able to generate employment.
Payoff
Matrix:
A payoff
matrix depicts the probable value / expected value of each of the decision
alternatives, by displaying the various outcomes and the probabilities of their
occurrence.
Probability:
A probability is the degree
of likelihood that a particular event will occur. It ranges in value from 0 (no
chance of occurring) to 1 (certain chance of occurring).
Expected
Value:
The expected value of an
alternative course of action is the sum of values of all the predicted outcomes
for the alternative multiplied by their respective probabilities.
