Agribusiness decision making

ASSIGNMENT

Topic: AGRIBUSINESS DECISION MAKING- KEY DECISION AREAS
WITHRESPECT TO INPUT PROCESS AND OUTPUTS- FORECASTING TECHNIQUES

Submitted to, submitted by
Dr.G Veerakumaran Laya Thomas 2012-31-126
Dept of Co-operative management Prabhath 2012-31-127
Pramitha Prakash 2012-31-128
Swetha NK 2012-31-129

Topic: AGRIBUSINESS DECISION MAKING- KEY DECISION AREAS
WITHRESPECT TO INPUT PROCESS AND OUTPUTS- FORECASTING TECHNIQUES

INTRODUCTION
Agriculture contributed around two -third of the
national income India. It has been the mainstay of Indian economy
because of its high share in e m p l o ym e n t and livelihood creation
notwithstanding its reduced contribution to the nations GDP. The
importance of agriculture to the national economy is crucial in terms of
meeting the growing demands for food ang raw materials of the non -farm
and urban populations, expanding the secondary and territory sectors of
t h e e c o n o m y, w i d e n i n g t h e e x t e n d o f t h e m a r k e t s f o r i n d u s t r i a l p r o d u c e ,
earning the much needed foreign exchange, maintain price stability and
mobilization of resources for capital formation.

Agribusiness
Agribusiness is a generic term that refers to the
various business involved in food production including farming, seed
s u p p l y, agrichemicals, farm m a c h i n e r y, wholesale and distribution,
processing, marketing and retail sales. It encompasses agricultural and
a l l i e d s e c t o r s l i k e d a i r y, p o u l t r y, f i s h e r i e s , f o r e s t r y e t c . .

Definition: “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 Gold
Berg)

Scope of Agri-business:

1) Our daily requirements of food and fiber products at desired place
at required form and time come from efficient and hard working of
many business personnel in input, farm and food production and
a l s o i n m a r k e t i n g t h e m . T h e e n t i r e s ys t e m i n b r i e f i s c a l l e d
Agribusiness.

2) Agribusiness, of late, is combining the diverse commercial
enterprises, using heterogeneous combination of labour, materials,
c a p i t a l a n d t e c h n o l o g y.
3 ) I t i s a d yn a m i c s e c t o r a n d c o n t i n u o u s l y m e e t s c u r r e n t d e m a n d s o f
consumers in domestic and world markets.

4) Agri-business establishment leads to strengthening of
infrastructural facilities in that area, expansion of credit, raw
materials supply agencies, adoption of modern technology in
production and marketing of agricultural products.

5. Agri-business provides crucial forward and backward linkages .
(Backward linkage includes supply of inputs, credit, production
technologies, farm services et. A forward linkage includes storage,
processing, transportation and marketing aspects.)

6 . A g r i - b u s i n e s s g e n e r a t e s p o t e n t i a l e m p l o ym e n t o p p o r t u n i t i e s .

7. It adds value to products and thereby increases the net profits.

AGRIBUSINESS MANAGEMENT

Being a developing country which is
traditionally agriculture in nature, India needs to infuse professionalism
into the agricultural sector in order to cash in on its inherent competitive

advantage. Agribusiness manageme nt deals with the economics and
business management principles related to the production common
distribution and consumption of agricultural products.
Decision making is life blood of any
organization and the very essence of management. Decision making is the
process of identifying a set of feasible alternatives and, from these,
choosing a course of action. Decisions are the judgement which directly
affects a course of action. Agribusiness managers make decisions that
affect various levels of organizational responsibilities. Product decision,
process decision, pricing and financing decision, labeling and packaging
decision, decision for promotion and publicity, channels of distribution
etc.,

A G RI C U L T UR AL I NP U T DE CI S I O N

Agro inputs are either biological or chemical or
inorganic compounds used in the production of agricultural and allied
sector.
The availability of inputs is critical for
agriculture production. Agricultural input supply sector comprises of
f i r m s t h a t m a n u f a c t u r e a n d d i s t r i b u t e t h e m yr i a d o f i n p u t s t h a t f u e l t h e
production agriculture sector. Seeds, fertilizers, water, machinery and
equipment, agrochemicals, credit, infrastructure, information, technology
etc are a few of the major agricultural inputs. Input management should
f o c u s o n a g r i c u l t u r a l p r o d u c t i v i t y. I t m e a s u r e s t h e d i f f e r e n c e b e t w e e n
output growth and input growth rates. If productivity growth is positive,
then the same output can be produced with fewer inputs and lower costs.
Increased efficiencies in agricultural productivit y have been an important
factor in maintain the balance between food supply and world demand.

PROCESSING DECISION :

Processing can convert an undifferentiated, low profit
commodity into a differentiated, branded, high value product. The
decision to process depends on economies of scale, perish ability of
produce, cost of transportation and geographical concentration or
availability of raw materials from surrounding areas. In order to
operate efficiently, food processing facilities have to be utilized
t h r o u g h o u t t h e ye a r . T h e r i s k c a n b e o f f s e t b y h a v i n g e x p a n d e d s t o r a g e
facility for later processing, supply contract and planning on having a
wider range of raw materials for processing. The cost of assembling large
quantities of raw materials should not be too high. Food processors have
to manage several marketing functions such as market intelligence, risk
bearing, financing, transportation and storage.

PRODUCT DECISION:
The management takes decisions about the nature of
product. The product classified on three levels - core product tangible
p r o d u c t a n d a u g m e n t e d p r o d u c t . A p r o d u c t m i x i s a n a s s o r t m e n t o f t yp e s
of products and product lines. A product line is series of related products.
The decision as to whether a given product line should be extended is
strategic issue. The management must be aware and it has the
responsibility to take the decision about how each product within the
portfolio is positioned against those of competitors.

PRODUCTION DECISIONS:
In decisions on producing or providing product and
services in the international market it is essential that the production of
the product or service is well planned and coordinated, both within and
with other functional area of the firm particularly marketing.
I n m a n u f a c t u r e p r o d u c t s t h i s m a y i n c l u d e d e c i s i o n s o n t h e t yp e o f
manufacturing process- artisanal, job, batch, and flow line or group
t e c h n o l o g y. However in many agricultural commodities factors li ke

seasonality perish ability and supply & demand have to be taken into
consideration

PACKAGING DECISIONS:
Packaging protects the product from damage which
could be incurred in handling and transportation. It also has a
promotional aspect. So, the decisions related with this aspect should be
c l e a r a n d c o n c i s e . I t m u s t c o v e r d i f f e r e n t a s p e c t s l i k e s i z e , u n i t t yp e ,
weight and volume. Agricultural products that are basically perishable are
often stored over long periods of time and transported over long
distances. Hence packaging is of extreme importance in agribusiness
marketing.

PRICING DECISION:
Three basic factors determine the bound of pricing
decision- the price floor or minimum price, maximum price and optimum
price. The price setting cognizance must be taken of government tax
policies, resale prices, dumping p roblems, transportation cost, middlemen
etc. There should be a proper decision for determining the pricing
policies (skimming or penetration) and strategies of pricing.

DECISION ON BRANDING PRODUCTS :
Established brands are appearing as assets
o n b a l a n c e s h e e t s a n d a r e b e i n g a s s e s s e d f o r t h e i r p r o f i t e a r n i n g c a p a c i t y.
T h e i n i t i a l d e c i s i o n i s w h e t h e r t o b r a n d o r n o t . H i s t o r i c a l l y, m o s t
unprocessed agricultural output has been sold as generic product that is
unbranded. These are some basic product characteristic which will help to
determine whether branding is feasible.

KEY DECISIONS

There are a number of key decision areas pertaining to
t h e a p p o i n t m e n t o f i n t e r m e d i a r i e s . T h e s e i n c l u d e p r i c e p o l i c y, t e r m s a n d
conditions of sale, territorial rights and the definition of responsibilities.
In addition, a choice has to be made between extensive and intensive
coverage of the market.
 P r i c e p o l i c y: l i s t p r i c e s , w h o l e s a l e o r r e t a i l m a r g i n s a n d s c h e d u l e o f
discounts have to be developed. These have to reflect the interests
of the intermediary, as well as those of the producer or supplier if
lasting alliances are to be formed with channel member.
 Terms and conditions of sale: producer must explicitly state
p a ym e n t t e r m s , g u a r a n t e e s a n d a n y r e s t r i c t i o n s o n w h e r e a n d h o w
products are to be sold.
 Territorial rights: distributors will be given exclusive rights to
m a r k e t a p r o d u c t w i t h i n s p e c i f i e d t e r r i t o r y. I n d e c i d i n g u p o n t h e
boundaries of territories the manufacturer or supplier has to strike a
balance between defining territories which are sufficiently large to
provide good sales potential for distributors but small enough to
allow distributors to a dequately service the customers within the
t e r r i t o r y.
 Definition of responsibilities: the respective duties and
responsibilities of supplier and distributor have to be clearly
defined. The agreement between the producer and the distributor
should clearly specify which party is responsible for the coast of
p r o d u c t t r a i n i n g w h e n n e w e m p l o ye e s j o i n . T h e d i s t r i b u t o r o r n e w
products are introduced.

FORECASTING TECHNIQUES
Forecasting plays an important role in the
operations of modern management. It is an important and necessary
aid to planning and planning act as the backbone of every effective

operation. Lot of organizations has failed because of faulty
forecasting on which the planning was based.
Forecasting implies the act of making a
d e t a i l e d a n a l ys i s o f t h e f u t u r e a n d p l a n n i n g i s i m p o s s i b l e w i t h o u t
either predicting the future as accurately as possible or making
intelligent assumptions about it. Forecasting may be a form of
intentional and considered judgment based on feelings, options and
ex periences and judgments, at best will be educated guesses. It
c o u l d a l s o b e b a s e d u p o n a r a t i o n a l s t u d y a n d a n a l ys i s o f p e r t i n e n t
data and this process is known as “scientific forecasting”

1 . Q u a n t i t a t i v e t i m e s e r i e s a n a l ys i s
A study of past data. Such as monthly sales or
shipments made.

2. Derived forecast
If we can discover another phenomenon that has
been forecasted by government agency or expert, and this phenomenon is
closely associated with the variable that we need to predict, a forecast
can be derived from these ot her estimates.

3. Causal models
If an underlying cause for the variable can be
determined, the forecast can be handled mathematically and produce quite
accurate results.

4. Brainstorming

One method for predicting the future is to assemble a group of people
with knowledge and interest in a specific problem and encourage free

flow of creative commends. The condition required for these
brainstorming sessions are important.

(a) No participant may criticize any idea regardless of how
farfetched it might be
(b) Each participant is encouraged to supplement the comments of
others and to provide inputs for future estimates.
(c) After recording the comments during the meeting, a manager may
then construct a fo recast built on the variety of ideas from the
group.

5. Delphi method

The judgement of experts is sometimes the best and the most feasible
method of forecasting. The Rant Corporation developed the “Delphi
method” as a means of forecasting by seeking expert opinions. The
method contrasts with brainstorming in securing independent judgements
by having experts complete a detailed questionnaire independently and
without knowledge of the responses of other experts.

6. Contingent forecasting scenarios

One approach for handling the lack of precision in forecasting is
contingent forecasting & planning. At the heart of this approach is the
development of several scenarios, each scenario providing a different set
of assumptions about future events. The scenario describ es a logical
sequence of events that might occur in the future.

CONCLUSION
All human beings make decision that affected by their own actions.
Managers are chiefly concerned with making decisions that will influence
the action of others. Thus the decision making process is affected by the
environment of the decision makers and the role that they assume. The
proper definition of the right problem depends on use of concept of the
limiting factor. Out of the maze of problems and facts the manager seek s
to frame an understanding of the problem by seeking definition that will
strike at the heart of the issue and provide residual answers to lesser
problems

REFERENCES:

1. Gangadhar Bhatia
“Agribussiness management”
A Mittal publication (2007)
New Delhi (1st edition)

2. Karnam Lokanadhan
K.Mani,K.Mahenran
“Innovations In Agribusiness Management” .
New India publishing agency (1 st edition)
Pitampura, New Delhi

3. Randall.B.Dunham
Jon.L.Pierce
“Management”
Library of congress cataloging in publication data
Printed in US

4. Dr. smita Diwasa
“Indian Agriculture & Agri -bussiness Management”
Published by “Krish Resource Management Network”
Panchawati, Pashan, Pune (1st edition)

5. Joseph.L.Massie
“Essential Of Management ”
Published b y Prentice -Hall of India PV T ltd (4 th edition)
NewDelhi (1998)

Agribusiness decision making

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