Welcome to Agribusiness Management Course

Facilitator : Prof. S.R.Asokan

Images of agribusiness Small units Rural areas Using local resources Low cost technology Local semiskilled and unskilled labours Images typical village and cottage industry

KVIC classification village industries Mineral based Agro based Polymer and Chemical Based Forest Based Handmade Paper and Fibre Industry Rural Engineering Service Industry Products from Agro based industry Pappad Bakery Products Poha Masala Powder Pickles Potato wafers Vegetable Sauces Temporal Spatial --Time Dimension through Processing No Space Dimension

What sort of managerial skills needed to run the units Short term courses by KVIC, SIDO, EDI etc Improve some skills accounting, marketing tips, food safety issues etc Cater to the distance market pooling Quality consistency and branding etc

Davies and Goldberg Agribusiness is the sum total of all operations involved in the manufacture and distribution of farm supplies; production activities on the farm; and the storage, processing and distribution of farm commodities and the items made from them. Production Sub-sector Input subsystem : Seed, Fertilizer, other inputs, Prod sub systems : On farm activities Processing Sub-sector Activities after the farm Commodity Processing Value added Processing Logistics, Storage, Transportation
5

What managerial function we would look for in these industries? Is it finance in a fertilizer company? Is it HR in a pesticide firm? Is it marketing in a seed company? Why need a special programme like ABM?

Consumers

Retailers Govt. Officers Wholesalers Managers Processors Educators Researchers Farmers

Farm suppliers

The vertical structure and the coordinators of agribusiness

Each subsystem is independent of each other and is free to make its decision.

However, the viability of the firm operating in the vertical structure depends on the ability to understand and appreciate the interaction of their decisions.

The coordinators or decision makers in each of the subsystem must be well informed of what is happening and what is likely to happen in the subsystems for the whole vertical structure to function efficiently.
9

Input Oriented Goods and Services

Machinery and Equipment

Financing

Feed, Seed And Fertilizer Commodity Producers Marketing Services

Production Information

Transportation

Commodity Processing

Market Information

Figure 1.1. A Traditional View of Competitiveness Focusing on the Production Sector

10

Consumer The focus on food differs from the narrow perspective of production of basic food commodities with price as the primary measure. Societal food agenda highlights a consumer who demands an increasing and changing variety of food products. Those products also must be attractive to a consumer concerned about food safety in terms of the manner of production and effect on human health.
11

Stable Prices Convenience

Value For their Rupee

Variety Product Quality

Nutrition Consumer Nutrition Investment Opportunities Ethical Business Conduct

Food Safety Food Safety

Economic Stability Environmental Security

Human Welfare

Figure 1.2. An Emerging View of Competitiveness Focusing on the Consumer

12

13

UPGRADING QUALITY
Parameter Chapati Biscuit Bread Gluten Strength Grain Texture Protein Content Starch Medium Weak Hard 12-13% Soft <11% Noodle Pasta

Strong Medium Strong Hard >12% Soft Hard

10-12% >13% Waxy -

Flour recovery, Semolina yield, Flour colour

14

The Vertical Coordination Continuum

Spot/Cash Market Characteristics of Invisible Hand Coordination Self Interest Long-term Relationship Short-term Relationship Opportunism Limited Information Sharing Flexibility Independence External control via price and genetic standards External control via specifications and legal appeal Mutual control Internal control via decentralized decision structure Internal control via centralized decision structure Shared Benefits Open Information Sharing Sustainability Interdependence Contracts Strategic Alliances Formal Vertical Cooperation Integration Characteristics of Managed Coordination Mutual Interest

Respective Primary Coordinating Mechanisms

15

Retailer
tes rela

ha s

has

Consumer
Tastes and Preferences
about

Marketing Strategy
is

Buying Strategy
of

based on

Levels of Agribusiness
ed link

Wholesaler

Processor Institutional Arrangements Merchandiser Variety Convenience Price Stability Value

Farmer Producer

Input Supplier

Figure 1a. Standard view of coordination in the food and agribusiness sector 16

to

lin ke d

Manipulation
by

by

Product Attributes Price

e.g.

The Commodity Oriented agribusiness sector has been driven by economic forces to produce at maximum efficiency while maintaining low costs The scenario is changing with the emergence of more demanding and differentiated food consumer Intrinsic Qualities taste, aroma, texture etc Extrinsic Qualities pesticide use, GM, Organic, Environmental issues

17

Retailer
Re to es lat

ha s

s ha

Consumer
Tastes and Preferences
about
of

Marketing Strategy
is linked by

Buying Strategy

Levels of Agribusiness

Discovery Price
facilitates

Product Attributes
ls ea ev r

Wholesaler Value Added Processor Merchandiser Farmer Producer Input Supplier

thru

e.g.

Institutional Arrangements

Variety

Information Technology
using

Convenience Price Stability Value

18 Figure 1b. An alternative view of coordination in the food and agribusiness sector

at all

Coordination Quality Nutrition

require

Consistency/ Assurance

Food Safety Environmental Concerns

Quality, nutrition, food safety and environmental concerns are affected at each step of the continuum which begins with the input provider and ends with the consumer. This puts into question the traditional view that product differentiation is the responsibility of the marketing sub sector. Market Orientation requires that processors more carefully coordinate their procurement activities with their processing and selling operations

19