Hawassa UniversitySchool of Environment, Gender and Development

Department of Agribusiness & Value Chain Management

Distinctive features of agribusiness management and the importance of good management

By Teshale Endalamaw – ABVM/012/06

22nd December 2013Hawassa

PRESENTATION OUTLINE

Introduction (Background) Agribusiness Agribusiness management Management

INTRODUCTION• 75% of the world’s poor live in rural areas and most are involved in agriculture.

• In the 21st century, agriculture remains fundamental to economic growth, poverty alleviation, and environmental sustainability (WB, 2010).

• Today the business has become very competitive and complex.• old dictum “produce and sells” has changed overtime into “produce only what customers

want”

• Agribusiness • encompasses the entire agricultural sector and portion of the industrial sector • include not only that productive piece of land but also the people and firms that provide

the inputs , process the output , manufacture the food products , and transport and sell the food products to consumers

• revolves around the farm, without farms, agribusiness would not have something to process, distribute, or provide inputs for

• Management • a process of developing and maintaining an environment by which people (i.e manager,

farmers and stakeholders etc.) working together in a group efficiently to accomplish agribusiness objectives”

• it is a process of various functions like planning, organizing, leading and controlling the business operations

AGRIBUSINESS• born and introduced in 1957 at Harvard University by Davis and

Goldberg

• 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 items made from them

• all business enterprises that buy from or sell to farmers

• transaction may involve either an in input or a product or service and it encompasses items such as

i. productivity resources, for example; seed, fertilizer, pesticides, machinery … etc

ii. agricultural commodity, for example; raw and processed commodities of food and

iii. facilitative services, for example; financial services, bulking, transporting, processing and marketing.

OBJECTIVES OF AGRIBUSINESS

• The objectives of Agribusiness are to: Develop a competitive and sustainable private sector led

agribusiness sector Increase productivity / reduce yield gaps Promote commercially oriented agriculture activity, Commercialization of Agriculture Advance high potential sectors: horticulture, livestock and

fisheries Use of modern technologies Reducing cost of production Value addition Export agriculture Higher farm income

DISTINCT FEATURES OF AGRIBUSINESS• variations in the kinds of business in agribusiness sector: basic producers, wholesalers,

transporters, etc

• large number of different businesses are evolved from the producer to retailers)

• built around several millions of farm producers;

• revolves around the farm, without farms, agribusiness would not have something to process, distribute, etc

• vary in their sizes right from one person or one family organisation to large giants

• are small and compete in a relatively free market

• product differentiation is common because of the brand and composition of the products.

• community oriented in the sense most of them are located in small towns and rural areas

• highly seasonal in their nature due to the fact that they depend on farm production

• affected by natural calamities like drought, floods, insects and pests and diseases

• vertical structure composed of input suppliers, farmers, processors, transport operators, financiers, wholesalers, retailers, and consumers.

• The Government programmes and policies have direct impact on agribusiness.

SCOPE OF AGRIBUSINESSAgriculture Sector

Service Sector

Industrial Sector

Agribusiness Sector

Figure 1 the agribusiness sector

AGRIBUSINESS AS AN OPEN SYSTEM• Agribusiness interdependent sub-systems

1. Input sub-system - firms that provide the farm production sector with inputs needed for operation including human resources.

2. Farm production sub-system - individuals and enterprises directly engaged in agro-based products

3. Processing sub-system - all firms engaged in the primary and final transformation of the raw materials output

4. Marketing sub-system - all individuals and firms involved in the distribution of agro-based products. Marketers usually have direct links with the end-consumers.

5. Support sub-system - all organizations and institutions and other entities directly and indirectly affecting the agribusiness system through provision of services, logistics and coordination of services from technology, information, programs and incentives to the system.

CONT Input

Sub-system

ProductionSub-system

ProcessingSub-system

Marketing Sub-system

Consumers

CoordinationFinancingManpowerTechnologyInformationInfrastructurePolicies/programsOther Services

Government agenciesPrivate institutions

Industry associationsFinancing institutions

Education and Research Institutions

 

Figure 2 the agribusiness system

AGRIBUSINESS MANAGEMENT

• Agribusiness is very unique and requires unique abilities and skills to its managers.

• Agribusiness management is a combination of three distinct terms namely – 1. Agriculture - art of cultivating various categories of crops including

animal husbandry, forestry, fishery and other related activities. 2. Business - an economic unit that aims to sell goods and services

to customers at prices that will provide an adequate return to its owners. Simply it means commercialization of any enterprise.

3. Management - a set of activities (planning & decision making, organizing, leading/directing & controlling) directed at an organization’s resources (human, financial, physical, and information) with the aim of achieving organizational goals in an efficient and effective manner.

The 7-S in Agribusiness Management

• The 7-S Framework of McKinsey is a management model that describes 7 factors to organize a company in a holistic and effective way.

• can be applied in the organization of an agribusiness company provided that the factors are properly addressed and understood by those who are involved in the agribusiness system and process.

Figure 3 7S Framework of McKinsey management model

CONT Sr. No.

Factor Meaning Application to agribusiness management (answer for the following managerial questions)

1. Shared Values (Superordinate Goals)

The interconnecting centreWhat does the organization stands for and what it believes in.These are usually the central beliefs and attitudes of the organization or the company.

Is your agribusiness supported by corporate values which guide in the attainment of business goal, delivery of goods, and performance of staff?

2. Strategy Plans for the allocation of firms scarce resources, over time, to reach identified goals

Do you encourage full staff development especially in skills training? Are these strategies innovative to address the needs of the business? Are these helping in achieving the goals of the business?

3. Structure The way in which the organization's units relate to each other: centralized, functional divisions (top-down); decentralized; a matrix, a network, a holding, etc

What kind of agribusiness structure do you have? Is it formal or informal? Are there levels of operation from top to bottom?What are the divisions or units in place for the smooth functioning of the business?

4. Systems The procedures, processes and routines that characterize how the work should be done: financial systems; recruiting, promotion and performance appraisal systems; information systems

Is your business systematic, organized and well managed because of the operations set? Do you have a database management system that assists in wise decision making? Is the system supported by manual of operation? Is this understood by all staff and working for better performance?

5. Staff Numbers and types of personnel within the organization

Who are the people involved in the business? Do they have specific functions to perform? What are their roles and responsibilities?

6. Style Cultural style of the organization and how key managers behave in achieving the organization's goals

What is your management style in the orchestration of your business? Is this helping your staff and operation?

7. Skills Distinctive capabilities of personnel or of the organization as a whole

What kind of skills do you possess? Are your staffs provided with proper skills enhancement activities? Are you after technical or managerial skills? How do you measure these skills for the business?

DISTINCTIVE FEATURES OF AGRIBUSINESS MANAGEMENT

Tremendous variety in the kinds of businesses in the agribusiness sector; eg. From basic producers to shippers, brokers, wholesalers, processors, etc.

Complete number of agribusinesses; literally millions of different business have evolved to handle the route from the producer to the retail marketer.

The way in which basic agribusiness is built around several million farm producers.

Infinite variety in size of agribusiness

small and complete in a relatively free market in which there are many sellers and fmany buyers

workers exhibit traditional philosophy of life

tend to be family-oriented

tend to be community-oriented

tend to be market-oriented

are likely to be highly seasonal in nature, even those that are industrial giants

deal with the vagaries of nature

Government programs and policies have direct impact on agribusinesses

MANAGEMENT • no single definition of management

1.Henry Fayol who is considered as the father of principles of management, - “To manage is to forecast, to plan, to organize, to command coordinate and to control”.

2.Freederick Winslow Taylor who is considered as the father of scientific management, - “Management is knowing exactly what you want men to do and then seeing that they do it in the best and cheapest way”.

3.Mary parker, - “Management is the art of getting things done through people”.

4.Per Drucker, - “Management is a multi-purpose organ that manages a business, manages manager and manages worker and work”.

5.George Terry, - “Management is a distinct process consisting of planning, organizing actuating and controlling performance to determine and accomplish the objectives by the use of people and resources”.

TYPES OF MANAGEMENT STYLE• Authoritarian (or autocratic) - When a manager tells

subordinates what to do. If tasks have to be completed quickly or if subordinates lack

the experience or skills required for the job this style may be necessary.

If employees do not feel they have an input into what happens in the business this style may de-motivate them.

• Democratic - When a manager adopts more of a listening approach.

Employees have an input into the decision-making and managers can benefit from their ideas.

Greater involvement may motivate employees by meeting their esteem needs but also delay decision making.

QUALITIES OF GOOD MANAGEMENT

• a manager to be effective needs the following skills: Technical: ability to perform specific tasks and have certain

knowledge. Conceptual: ability to see "big picture"...relative to the "parts“ Human relations: leadership, motivation, coaching, morale

building.....communication!

• business organizations needs to hire an effective and efficient manager must understand these qualities that make up good management

Appreciation of Employees Provide Necessary Resources Knowledge Listens and Makes Good Decisions Lead Employees and Delegate Tasks

IMPORTANCE OF GOOD MANAGEMENT• According to Frenchman Henri Fayol (1841-1925), managers

needed to:• forecast and plan to determine where the business is going• organise the resources necessary to achieve these objectives• command people to do things• coordinate the different activities• control the activities to make sure they are completed as

planned.

• make the right decisions and ensure the business is able to exploit any opportunities open to it.

• have to decide on its priorities and allocate resources within it

• must decide what needs doing and how best to do it

• a good manager should push the business forward, as new challenges arise, and take responsibility for their decisions.

• At the same time, good managers protect the business by anticipating and acting against any threats to its welfare.