Distinctive features of agribusiness management and the importance of good management
School of Environment, Gender and Development
Department of Agribusiness & Value Chain Management
Distinctive features of agribusiness management and the
importance of good management
Teshale Endalamaw – ABVM/012/06
22nd December 2013
75% of the world’s poor live in rural areas and most are involved in agriculture.
In the 21 st 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”
• 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
• revolves around the farm, without farms, agribusiness would not have something to process,
distribute, or provide inputs for
• 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
born and introduced in 1957 at Harvard University by Davis and
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
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
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
Higher farm income
DISTINCT FEATURES OF AGRIBUSINESS
variations in the kinds of business in agribusiness sector: basic producers, wholesalers,
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 AGRIBUSINESS
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.
Education and Research
Figure 2 the agribusiness system
Agribusiness is very unique and requires unique abilities and skills
to its managers.
Agribusiness management is a combination of three distinct terms
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
can be applied in the
organization of an
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
Application to agribusiness management (answer for the
following managerial questions)
Is your agribusiness supported by corporate values which guide in the
attainment of business goal, delivery of goods, and performance of
The interconnecting centre
What does the organization stands for and what
it believes in.
These are usually the central beliefs and
attitudes of the organization or the company.
Plans for the allocation of firms scarce
resources, over time, to reach identified goals
The way in which the organization's units relate
to each other: centralized, functional divisions
(top-down); decentralized; a matrix, a network, a
The procedures, processes and routines that
characterize how the work should be done:
financial systems; recruiting, promotion and
performance appraisal systems; information
Numbers and types of personnel within the
Who are the people involved in the business?
Do they have specific functions to perform?
What are their roles and responsibilities?
What is your management style in the orchestration of your business?
Is this helping your staff and operation?
Cultural style of the organization and how key
managers behave in achieving the organization's
Distinctive capabilities of personnel or of the
organization as a whole
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?
What kind of agribusiness structure do you have?
Is it formal or informal? Are there levels of operation from top to
What are the divisions or units in place for the smooth functioning of
Is your business systematic, organized and well managed because of
the operations set?
Do you have a database management system that assists in wise
Is the system supported by manual of operation?
Is this understood by all staff and working for better performance?
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
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
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
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
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
business organizations needs to hire an effective and efficient
manager must understand these qualities that make up good
Appreciation of Employees
Provide Necessary Resources
Listens and Makes Good Decisions
Lead Employees and Delegate Tasks
IMPORTANCE OF GOOD MANAGEMENT
According to Frenchman Henri Fayol (1841-1925), managers needed
• 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.