Objectives

 The “agribusiness system” approach to marketing

 Size and scope of agribusiness
 Various sectors
 Marketing in the economy
 Functions of marketing
 Marketing in agribusiness firms
History
 What is agriculture to most people? Farming, ranching,
fishing?

 This was true until the early 1960s when “agribusiness”

evolved into a complex system reaching well beyond the
farm

 The big picture included all things needed to bring

food to the consumer.

 As it turned out aquaculture shares many similarities to

traditional agribusiness.
 NATURE OF AGRICULTURE
 Agriculture before independence- SUBSISTENCE
 Agriculture between 1947-1966- (five year plan-Labour
intensive)
 Agriculture between 1966-1990- (Green revolution-
Commercialization)
 Agriculture after 1990- (Globalization, liberalization
and privatization)
 What is agribusiness?
The Word agriculture
indicates ploughing a field, planting seed, harvesting a
crop, milking cows or feeding livestock. Until recently,
this was a fairly accurate picture. But today’s
agriculture is radically different.

 Agriculture has evolved in to agribusiness and has

become, a vast and complex system that reaches far
beyond the farm to include all those. Who are involved
in bringing food & fiber to consumers?
 Agribusiness:
Include not only those
cultivating the land but also the people and firms that
provide the inputs (for Ex. seed, chemicals, Credit
etc.), process the output (for Ex. Milk, Grain, Meat etc)
, manufacture, the food products ( for Ex. Ice-cream,
bread etc.) , and transport and sell the food products
to consumers ( for Ex. Processing firms)

 Prof. R. Gold berg:

Agribusiness
encompasses (encircle) all those involved in the
production, processing and marketing. It includes
farm suppliers, farmers, storage operators, processors,
wholesalers and retailers, involved in commodity flow
from initial inputs to the final consumers.
Agribusiness History
 The agribusiness system includes many facets:
 Not only production (e.g., farmers, hatchery
managers), also
 Organizations which provide inputs (e.g., fry,
chemicals, feed)
 Processors the output (e.g., processing plants)
 Manufacturers (e.g., shrimp  microwavable
products)
 Transporters/Sellers/Brokers (e.g., retail grocery
stores, seafood wholesalers, etc.)
Agribusiness: Evolution
 Late 1800’s: self-sufficient farms!
 Then wars increased produce prices, stimulating more
production (Recall: demand and supply). War was profitable
even back then!
 Mechanization was developed largely due to labor shortages.
 Crop production became a focus of farmers. (They started
purchasing inputs; this is where aquaculture is today!)
 Much of the manufacturing and processing was relocated off
the farm to become businesses themselves.
 Preservation of raw products was also improved.
 This made food more convenient to consumers.
The Agribusiness System

Processing-
Aquaculture Production Manufactoring
Input Sector Sector Sector

Distribution/ Marketing sector

Agribusiness System

Note: the success of each part depends upon the proper functioning
of the other two!(SCOPE OF AGRIBUSINESS)
How large is it??
 Agribusiness is largest sector in the Indian.
economy: 11% of all goods, 16% employment
 Production systems occupy half of all land, valued
at $1 trillion
 Aside from food production, why does this matter?
 Self sufficiency: (science, government, education);
separates developed from developing economies
 Point of interest: processing is the largest sub-
sector! (Preservation of goods perfected??)
 Structure of agribusiness
FARM SUPPLIES
Petroleum, transportation, feed,
Seed, fertilizers, machinery & eq.
others

FARMING

PROCESSING AGROBASED INDUSTRIES

PROCESSING
Industrial, food(supermarkets,
Retail, others
malls, restaurants, institutions)
The Input Subsector
 Provides farmers with all things needed for
production: feed, fry, credit, equipment, fuel,
chemicals

 Total level of inputs remains stagnant since WWII;

but, type of inputs has varied greatly.

 If labor costs increase, you typically see a shift towards

increased purchase of inputs (Since 1960, farm labor
has decreased 50%!)

 Purchase of more inputs actually facilitates more

production.
The Input Subsector
 Use/efficiency of energy usage has also changed.

 Relatively few input businesses compared to

production or processing (look at feed
manufacturing vs. the number of farms!)

 Why is this trend observed??

The Production Subsector
 Larger farms in all areas (including aqua-)!
 Corporate farms
 New technologies have resulted in increased
specialization of production
 genetically altered animals
 specific pathogen-free stocks (big deal in aqua-)
 What does this mean?
 Stability in that aquaculture production is
becoming more diversified
The Production Subsector
 Specialization also allows for increased
production efficiency (telltale sign: increased
production in face of decreased or constant levels
of input)
 Another blast from the past: production
economics
 production costs increase every year due to increase input
cost
 but cost of inputs is not related to commodity prices (e.g.,
shrimp)
 when commodity prices drop, gross farm income falls, but
amount spent on inputs doesn’t (the great squeeze!)
The Production Subsector
 Two sizes of farms: Large (economies of
scale) and small (no economy of scale)
 Large farms: new technologies (aeration,
telemetry, genetically-improved strains)
 Small farms can also, however: sell something
that commands a high price! ($16/lbs.
shrimp!)
 Who knows what we can get for farm raised
grouper off Florida coast?? $10, $12/lbs.
The Processing-Manufacturing
Subsector
 Includes all business that turn raw materials into
finished (or partially-finished) products

 In aquaculture, mostly done by processors

 Also includes packaging, distribution, and sales, places

and forms desired by consumers (Marketing bill?)

 Marketing bill represents 70% of total amount spent

by consumers on food!!!
The Processing-Manufacturing
Subsector
 Firms in this sector are
very large (again,
gathering economies of Packaging

scale); very responsive Transportation

Before-tax profits
to consumer tastes/ Fuel and power
Depreciation
preferences Advertising
Rent
 Examples: ADM (grain Net interest

processing), Zapata- Repairs

Other
Haynie (fish meal), Labor

Tyson Foods (feeds)

The Marketing Bill: What
are you paying for?
Big Companies: How do they work?
 Obviousley, aquaculture depends flexibility and
diversification for sucess, not isolation.

 Many large companies have divisions in other

parts of the agribusiness system

 Example: Cargill, Inc., one of the largest grain

traders in the world, also largest soybean
processor, flour miller, feed manufacturers,
seed producers, etc.!!!
Part 2: Role of Marketing in the
Agribusiness System
 Marketing mission revealed!: not to rip-off people (Hard
to believe, esp. after buying a new car!!!)

 Lowers prices/increase availability

1) bridge between producers and consumers
2) helps producers understand consumer needs
3) helps producers decide what to produce
4) helps consumers know what products are available and at what
prices

 Bottom Line: Consumer satisfaction!!, higher profits

for producers! Everyone wins!!

 Extension of the business world?? Maybe!

Conflicting Needs of Producers
and Consumers
Producers seek to
Maximize long-term profits
Sell large quantities of a few
products
Consumers seek to
Maximize the happiness they
receive from the products they
consume with their limited
incomes
Buy small quantities of many
products
Nine Marketing Functions and Barriers to
Consumer Satisfaction
 buying/selling: required for product exchange,
exchange of legal title between producer and
consumer
 storage: keeps product fresh between production
and final sale
 transportation: overcomes separation of space by
moving product from site of production to where it
is sold (globalization)
Marketing Functions
 processing (value adding): changing the form
of a commodity or raw product to one that has
more convenience, better taste.)
 grades/standards: assures the consumer they
are getting what they think they’re purchasing
 financing: providing the funds necessary to
pay for the production and marketing of a
product during the time period the producer
must wait to receive payment for a sale
Marketing Functions
 risk-taking: assuming the risk of loss between
the time of purchase and sale
 market information: includes methods
information is communicated about markets,
market prices, etc.
 All of the above functions are usually performed by
“middlemen” (added step: has a tendency to
increase prices)
Four Utilities of Marketing
 Another way to describe marketing is to look at the
performance of the previous marketing functions
as a way of adding value to products.
 Otherwise, we wouldn’t need “middlemen”?
 Adding value = increased consumer happiness or
“utility”
 Utilities: form, place, time, possession
Four Utilities of Marketing
 form: to process the product into a form
desired or needed by the consumer (fish in the
round vs. nuggets)
 place: transporting the product to a location
desired by the consumer (shipping,
convenience= big deal!!!)
 time: storage
 possession: gaining ownership so it can be
legally used
Evaluating Performance of the
Marketing System
 How well does the marketing system meet the needs of
consumers?: it has to be measured
 Two criteria or yardsticks:
 efficiency: how well goods and services flow from businesses to
consumers
 fairness: how the marketing system meets the needs of the
consumers
 When you buy something, you are saying that you like the
price, the goods/services, etc.
 Rating of the system is indirect through voting and has led
to the rise of consumerism.
Market Performance Evaluation Criteria
 Market Structure
 number and size of firms in the market (no monopolies)
 barriers to market entry/exit (not prevented by other firms)
 degree of product and price competition (allows increased quality)
 Conduct of Firms in the Market
 firms compete via price (sell at lower price)
 no unlawful cooperation between firms (price fixing-this still happens)
 truthful product claims (better? Show me the data!)
 meaningful product differences (Are different models different?)
 Market Performance
 optimal output available at minimal price (appropriate tech, conserve
resources)
 reasonable levels of profits (good firms deserve this)
 encouragement of innovation (products should be improved over time,
how is this possible with seafood??)
 reasonable levels of investment (firms support in industry, new tech,
higher efficiency, development of company)
Role of Marketing in Agribusiness
Firms
 We’ve been talking about the role of the
marketing system in a free market economy.

 We’ll now bring this down to the “firm” level

 What is the role of marketing in the operation

of agribusiness firms?

 Introduce basic principles

Five Approaches to Marketing
 How should a firm approach its market?
 Approaches:
 production
 product
 selling
 marketing
 societal marketing
 Each succeeding approach represents a higher
level of marketing and management skill
Production Approach
 Max production/lowest cost
 works in early stages of market development,
(demand exceeds supply)
 maximum output/unit input
 producers can become insensitive to needs of
consumers (uh oh!)
 only trying to find ways to lower the cost of
production and transport (feed industry)
Product Approach
 High-quality product; “Build it and they will
come? (Japanese car manufacturers.)

 Another inwardly-looking approach to marketing

 Hopefully consumers will recognize this “quality”

and pay a premium price (How do we do this with
seafood?)

 Caveat: producer still making the product(s) he/she

wants, not consumer need-oriented
Selling Approach
 Products need a strong selling effort for sales:
 if left alone, consumers won’t buy enough of the
product that’s already been produced
 result: producers try to convince consumers that
their products are really the best
 setting: supply is greater than demand
 Problem: assumes that with enough pressure, or
correct language, anything can be sold (selling an
Eskimo ice cubes)
Marketing Approach
 Produce a product that fills a consumer need,
offer it at the correct price, make it available,
and promote it properly (What a concept!)
 major advance in strategy
 moves away from selling to meeting demands
 must truly understand users of products, not
because of superior technology
 appropriate for highly competitive markets where
production capacity exceeds demand
Societal Marketing Approach
 Includes same items as Marketing Approach, but
includes both consumers’ and society’s well-being
 firms and their products often introduce societal
backlashes (e.g., increased garbage)
 not practiced by many, often not needed if product is
well thought out
 often good just from a PR standpoint
Fantastic 4
of
Management
 Planning: what approach should be taken to
marketing, setting firms goals and objectives
 Organizing: directing the flow of work: emphasize
consumer needs, not those of the employee, can
planning goals be met efficiently? Who reports to
whom?
 Controlling: establishing a system of feedback to
determine how well goals are being met
 Directing: implementing plans, 90% of mgrs job,
most important
Final Thoughts...
The marketing idea is the driving force for the
entire firm and gives it direction and purpose.

The purpose is meeting the needs of consumers

and their satisfaction.

Meeting these goals = profit!

 MANAGEMENT
 What is Management:
Management is a
technique of utilizing the scarce resources
economically and effectively to achieve the objective.

 Management is a process consisting of different

elements like planning, organizing, staffing, directing,
controlling.
 Lawrence Apply:
Management means
“getting things done through the efforts of other
people”.

FUNCTIONS OF MANAGEMENT
 Planning : the process by witch a manger anticipates
the future and discovers alternative cores of action
open to him
 Organizing: The process by witch this structure and
allocation of jobs are determine
 Staffing: The process by witch manager select train
and promote as well as retire sub ordinates.
 Directing: The process by witch actual performances
of sub-ordinate its gilded to words common goals.
 Controlling: The process that measures current
performances and guide it towards some
predetermined goals.

 PLANNING
 George Terry:
 Planning is the selecting and relating of fact and the
making and using of assumptions regarding the future
in the visualizations and formation of proposed
activities believed necessary to achieve desired results.

 Planning means thinking before doing planning is a

method to optimize the available resources & to see in
the future. Planning is the preparation for action and
it is based on knowledge and research.
 IMPORTANCE OF PLANNING
 To offset uncertainties and changes :
 Uncertainties and changes make planning a necessity.
Planning means selecting from amongst the available
alternatives the best way to accomplish an objective.
 To Focus Attention on objectives :
 Planning is directed towards achieving enterprise
goals.
 To Gain Economic Operation :
 Planning minimizes costs because of emphasis on
efficient operations and consistency. It substitutes
unwarranted warlock.
 To Facilitate Control :
 It helps to check subordinate accomplishment.
COMPNENTS OF PLANNING
 Objectives :
 Objectives are nothing but aims. These are aimed at
the end towards which activity is aimed. In fact it is
not the ultimate end point of planning
 Policies :
 Policies are general statement or understanding
which guide or channel thinking in decision making of
subordinates. Policies delimit area within which
decision is to be made.
 Procedure :
 These are methods of handling future actions and
activities. These are guide to action .
 Programmers can be defined as a complex of policies,
procedures, rules, tasks, assignments, and other
elements necessary to carry a given course of action.
 Budget: is also a plan where estimated results are
shown in terms of money or quantity, it anticipates
operating results over some future period of time, say
one year
 Strategies: decide where we are heading from the
present given position by deploying the available
resources. Strategy means planning inn response to
competitive environment.
 Rules: is the ultimate analysis of a plan. It is simplest
possible version of plan as it directs a particular
activity in a particular way & prevent us doing
particular activity in a particular way

 Characteristics of sound plan: (Good plan)
 Malcolm Pennington has highlighted the
following characteristics of a good plan.
 Involvement of top management only at key points in
the planning process.
 Involvement of line executives in developing the plan.
 Do not look for the perfect answer.
 Planning must provide realistic. Schedules, targets and
alternative ways to achieve them.
 Planning should start on a small scale and be
expanded only when the executive have learned the
technique and have been convinced of their
usefulness.
 Flexible Long range Written Complex Broad



Policy
 Level

 Middle
 Management

 Supervisory Level
 detailed intermediate Unwritten Simple Speci
 fic
 LEVELS OF PLANNING


 The steps in Planning Process
 Step 1: Gathering Facts
 Step 2: Analyzing the Facts
 Step 3: Forecasting Change
 Step 4 : Setting Goals and Results.
 Step 5: Developing Alternatives
 Step 6: Evaluating Progress
 Step 1: Gathering Facts
 Gather sufficient information to identify the needed
for a plan.
 Systematically gather specific facts needed to make the
plan work.
 Step 2: Analyzing the Facts
 Analysis should give answers to questions like where
are we? How did we get here i.e. it helps
identifying existing problems and opportunities and
provides the framework upon which to base successful
decisions.
 Analysis of facts prevents making foolish
decisions/mistakes and allows for the wisest use of the
organization resources
 Step 3: Forecasting Change
 The forecasting of change is the ultimate test of good
planning. It shads been truly said that the ability to
determine what the future holds is the highest form of
management skill.
 The broader, the more complex, the more long-range a
plan is, more difficult it is to foresee results accurately.
 Forecasting is interrelated with all other steps of
planning
 Forecasting is interrelated with all other steps of
planning.
 Forecasting change is not a guessing game, it is based
on a her, disciplined, though approach to planning.
 Step 4 : Setting Goals and Results.
 Goals cannot be set in vacuum, but must be related to
the attainable.
 Goals must be formed as a consequence of tee
gathering and, analysis of facts and information.
 Goals should be aimed toward organizational
objectives.

 Step 5: Developing Alternatives
 Explore different ways of getting wherever they want to
go.
 Alternatives must be weighed, evaluated, and tested in
the light of the unique agribusiness resources.
 Imagination is crucial, since new ways and/or new
paths can blaze the route of success.
 Step 6: Evaluating progress
 Surveillance and checking of progress have been found
by management specialists to be one of the highest
priorities,
 Evaluation shows whether the plan is on the right
course, and allows both the analysis of new
information and the discovery of new opportunities.
 Evaluation must be incorporated as the most
important step of the planning process.

 ORGANIZATION
 Organization
 The word organization is used basically in two
contexts. Those are as below.
 Referring to a particular company or group of persons
working together.
 Referring to the organization as a structure or as a
network of specific relationship among individuals.
The word “organizing” refer to a process or a
managerial function. Organizing is required to
generate effective group action towards predetermined
objectives and goals. By proper organizing a manager
expects synergism. That is, the production of a total
effect for greater than the sum of the individual
contributions.
 He Hainman has defined as: Organization is a
process of defining and grouping the activities of the
enterprises and establishing authority relationship
among them.
 Mooney and Riley has defined as: Organization is
a process of formalized and international structure of
roles,
 Importance of Organization:
 It encourages specialization and increased
productivity.
 It is likely to result in increased productivity through
avoidance of duplication.
 It fosters co-operation.
 It aids expansion and growth of the enterprise.
 Basic organization, forms of Argil. Business
Introduction:
 1.individual or single proprietorship.
 2. partnership,
 3. joint stock company,
 4. Co-operative enterprise and
 5.state enterprise
 Individual or single proprietorship:
 The common form of business organization in
India is one-man business. In agriculture and retail
business, this form is general rule.
 There is only on single owner of the business firm. He
is also the manager.
 He provides nearly all the factors of production.
Even the land is his own or in the alternative he may
take the land on rent.
 He also contributes a major portion of capital. He
bears entire risk of the business and his liability for
payment of debt is unlimited.
 The productive process is extremely simple and
involves the use of very elementary type of machinery.
The production is carried on a small scale.
 Partnership:
 Partnership is that form of organization in which
two or more but less than twenty partners jointly
own an enterprise and agree to share the profits in a
pre-determined proportion.
 partnership is known as “Sleeping of Dormant”
partner.
 Main features of partnership business are:
 Every partner contributes his own capital and profit is distributed among the
partners according to their respective capital contribution.
 The liability of the partner is unlimited. This implies that every partner is liable
to pay the debits of the firm to an unlimited extent both individually as well as
collectively.
 A partner can choose to have limited liability if he desires so. His liability in
that case shall be limited by the extent of his share capital.
 Joint – stock company:
 It is known as the corporate form of business (or
corporation). A joint stock is an association of
individuals as shareholders who are authorized by the
government to run a particular business.
 The various features of this system are-
 The capital of the firm is contributed by a large number of shareholders who
are the real owners of business enterprise.
 The liability of the shareholder is limited up to the value of shares held by him.
 The policy making job of firm is entrusted to the ‘Board of Directors’ who are
elected from amongst the shareholders.
 The paid managers who worked under direct supervision of Managing Director
carry out the actual management of the company.
 The joint-stock company has a separate and distinct legal from those of the
shareholders
 The Corporation:
 A third type of business organization, the
corporation, is defined as a legal entity separate and
distinct from the shareholder who own it, from the
individuals who manage it, and from its employees
who work for it.
 Creating a Corporation: The steps of incorporation may refry
slightly from state to state but generally include the following:

 Certain responsible people are needed to organize and become official of the
new corporation;
 A special document, called the articles of incorporation, is filed with the
designated state official;
 An initial tax and filling fees are paid;
 In order to do the business for which the corporation was formed, certain
official meetings must b e conducted to deals with specific details of
organization and operation.
 Approaches to Organizational Structure
 Following may be identified as Elements of Successful
Business Organization

 Focusing strongly on customer; not employee needs.
 Clearly defining the purpose of the business
 Identifying the risks critical to the accomplishment of
the firm’s purpose
 Giving priority to critical tasks so that the firm can
maintain its competitive edge.
 Responsibility, Authority, and Accountability:

 Responsibility: Is the obligation to see a task through
to completion. It may be contractual obligation, or it
may be voluntarily assumed, but it cannot be given
away. Responsibility can be shared with another
person or group, but it can never be passed downward.
 Authority is the right to command or force an action
by another. Authority allows for instructions to be
given to another with the expectation that they will be
carried out explicitly. Authority is a derivative of
responsibility, since it must come from the ultimate
source responsibility.
 Accountability involves being answerable to another
for performance. Associated with accountability is the
notion of a reward fro acceptable behavior or penalty
for unacceptable results. It too, is derived from
responsibility.
 RESPONSIBILITY
 (SHARED)

 ACCOUNTABILITY AUTHORITHY
 (DELEGATED)
 DIRECTING
 Directing is:
 Assigning duties and responsibilities,
 Establishing the results to be achieved,
 Delegating necessary authority,
 Creating the desire for success, and
 Seeing that the job is done and done properly
 Directing, then, involves leading, supervising,
motivating, delegating and evaluating those whom you
manage.
 The personnel management or the management of
Humor Resources accomplishes the objectives of
directing.
 The Functions of Personnel Management.
 The steps by which personnel management finds the
right people for the right jobs and provides for their
continued productivity and developments are.
 Determining the firm’s personnel needs.
 Finding and recruiting people.
 Hiring or selecting people.
 Orienting people to their jobs.
 Setting terms of compensation and fringe benefits.
 Evaluating performance.
 Overseeing training and development.
 Handling termination or transfer.
 Motivation
 Motivation is the stimulus that produces action. And
action, directed action is the primary function of
management. This is why managers are so concerned
with the concept of motivation
 Ideas of Motivating People or Motivational
methods
 Intrinsic rewards:
 Sense of participating
 Autonomy
 Increased responsibilities
 Interesting work
 Opportunities for advancement
 Variety in skills and work schedule
 Extrinsic rewards:
 Direct compensation:
 Indirect compensation
 Non-monetary rewards
 A brief overview of some widely used theories of
motivation will provide useful ideas for managing and
motivating people in agribusinesses
 Maslow’s Need Hierarchy
 Self
 actualization

 ego status

 belongings
 safety

 survival

 Motivators and Hygienic Factors:
 Hygienic factors
Dissatisfaction No Dissatisf
 Dissatisfaction

 Motivators
 Satisfaction ………………………………………No satisfaction

 Controlling:
 “Controlling is a continuous process of determining
what is being performed, measuring its actual results
in relation to the predetermined objectives and
adopting such corrective measures as may be
necessary to make the performances conform to the
operational plan

 Ordering:
 It is the process in which directives are
transmitted to the subordinates which will reflect in to
their response orders are issued to eliminate confusion
and to require. Subordinates to act or not to act in a
particular way.
 Leading:
 It is a process of interpersonal influence by which
executive or manager influence the activities of other
in choosing and attaining given goals.

 Supervision:
 Supervision may be defined “as the activity
managing at the organization level where.
Management members and non-management
members of an organization are in direct contact”
 Communication:
 Communication may be defined as the process of
passing information and understanding from one
person to another. Communication provides
employees both the skill to work and the will to work.
 Financial management of agribusiness

 Balance Sheet Or Net Worth Statement

 More specifically it is a statement of the financial
position of a farm business at a particular time,
showing its assets, liabilities and equity. If the assets
are more than liabilities it is called net worth or equity
and its converse is known as net deficit.
 Assets: Assets are those items which are owned by the
farmer.
 Liabilities: These refer to all things which are owned
to others by the farmer.
 Current assets: They are very liquid or short-term
assets. They can be converted into within a short time,
usually one year. For example, cash on hand,
agricultural produce ready for disposal i.e., stocks of
paddy, blackgram, Jowar, wheat, etc.
 Intermediate or working assets: These assets take two
to five years to convert into cash form. Examples:
Machinery, equipment, livestock, tractors, trucks, etc.
 Long term assets or fixed assets: An asset that is
permanent or will be used continuously for several
years is called a long-term asset. It takes longer time to
convert into cash due to verification of records, legal
transactions, tec. Examples: Land, Farm buildings, etc.
 Current liabilities : Debts that must be paid in the
short term or in very near future. Examples: Crop
loans, other loans, cost of maintenance of cattle, etc.
 Intermediate liabilities: These loans are due for the
repayment within a period of two to five years.
Examples: livestock loans, machinery loans, etc.
 Long-term liabilities: The duration of loan repayment
is five or more years. Examples: Tractor loan, orchard
loan, land development loan, etc.
 TABLE 5.1
Balance Sheet of a Hypothetical farm

Assets Amount Liabilities Amount

( in Rs) ( in Rs)

Current assets current liabilities

Cash on hand 10,000 Crop loans to be repaired to 8,000
Institutional agencies
Savings in bank 8,000
Value of grains ready Cost of cultivation (excluding
for disposal 38,500 loans) 6,000
Livestock products Other loans (unsecured loans
(eggs, birds, etc.) 60,000 due for immediate repayment) 5,000
Fruits, Vegetables, Cost of maintenance of cattle 3,600
Fodder and feed ready Costs in poultry enterprise 25,000
for sale 8,000 Annual installments’ 19,000
Shares to be realized
in the same year. 2,000
Sub – total 1,26,500 Sub- total 66,600
Intermediate assets Intermediate liabilities
Dairy cattle 10,000 Livestock loans 8,000
Bullocks 9,000 Machinery loan 15,000
Poultry birds 15,000 Unsecured loans 10,000
Machinery and equipment 15,000
Tractor 1,75,000
Sub – total 2,24,000 Sub- total 33,000
Long-term assets Long-term liabilities
Land (book value) 6,00,000 Tractor loan 1,20,000
Farm buildings 25,000 Orchard loan 25,000
Sub – total 6,25,000 Sub- total 1,55,000

Total assets 9,75,000 Total of liabilities 2,54,600

New worth or equity = 7,20,900
This ratio indicates the capacity of the farmer to meet immediate
financial obligations (liquidity).
If current assets are more than current liabilities and if the
borrower fails to repay the loan, his is a case of willful-default in
spite of his position being solvent.
A ratio of more than one indicates a favorable run of the farm
business. Current ratio reflects liquidity within one year’s time.
 Total current assets + Total intermediate
2. Intermediate ratio = assets
Or working ratio Total current liabilities + Total intermediate liabilities

 This indicates the liquidity position of the farm

business over an intermediate period of time, ranging
from 2 to 5 years. Here certain time is allowed for the
farmer to build up the farm business to improve his
liquidity position.
 The steady growth of this ratio over a period is a
healthy sign of the business.
 Total assets
3. Net capital ratio =
Total liabilities

 It indicates the long-term liquidity position of the

farmers. If the net capital ratio is more than one, the
funds of institutional agencies are safe.
 A consistently increasing ratio over the years reveals
the sound financial growth of farm business.
 This ratio is also the most important measure of
overall solvency position of the farmer-borrowers.

4. Acid test ratio or quick ratio
Cash receipts + accounts receivable + marketable securities
( bonds, shares, etc.) available in more than one year
Total current liabilities
 This reflects adequacy of cash and income surpluses
to cover all current liabilities during the period of one to
two years.
 If there is no difference in income position of a
farmer within that period, current ratio and acid test
reflect the same position.
 This presents the capacity of the farmer to meet the
long-term commitments.
 A consistently falling ratio indicates a very heartening
performance of farming and the ability of the farmer to
reduce dependence on borrowings.
Equity-value ratio = Owner’s equity
Value of assets

 This ratio highlights the productivity gained by the

farmer in relation to the assets he has.
 The improvement in the ratio over the years makes it
crystal clear regarding the increased strength in the
financial structure of the farm business.
 Income Statement or Profit and loss Statement
 This is entirely different from balance sheet in the
sense that in a balance sheet, we considered assets and
liabilities and did not consider operational efficiency
in terms of receipts an expenses.
 In income statement the items included are receipts
and expenses. In income statement the items included
are receipts, expenses, gains and losses.
 It could be defined as a summary of receipts and gains
minus expenses and losses during a specified period.
 It is prepared for the entire farm for one agricultural
year.
 Receipts: They mean the returns obtained from the
sale of crop produce and other supplementary
products like milk and eggs, wages, gifts, etc.
 Gain in the form of appreciation in the value of assets
is also included in the receipts.
 However, returns from the sale of capital assets, such
as livestock, machinery , farm buildings, etc. are not
included because such returns/income are not really
obtained during the period.
 Expenses: Operating and fixed costs are recorded here.
Losses in the form of depreciation on the asset value
fall under the expenditure item.
 However, the amounts incurred on the purchase of
capital assets are not considered.
 Net income: It constitutes net cash income, net
operating income and net farm income.
 Net cash income: It gives the position of cash receipts
minus cash expenses only during the period for which
income statement is prepared.
 Net operating income: It is arrived at by deducting
operating expenses from the gross income.
 Fixed costs are not given any consideration. Operating
expenses include crop loans.
 Net farm income: Net farm income equals net
operating income less fixed costs.
 Compared to net cash income and net operating
income, it is relatively a better measure of assessing
the performance of a farm. It is the return accrued to
owned capital and family labor employed.
 Financial Test Ratios
 Fixed Ratio= Fixed expenses/gross income
 Gross ratio= Total expenses/ gross income
 Capital turn over ratio=
Gross income/Average Capital investment
 Return rate of investment=
Net return to capital/Average Capital investment
 MARKETING MANAGEMENT

 Marketing is act and buying and selling. The word

'market is a derivative of the Latin word Markets'
which mean trade.
 The word marketing refers to the process involved in
the distribution of exchange of goods and services.

 Marketing activities are those directly concerned with

the demand stimulating and demand fulfilling efforts of
a firm.
 Concepts of Marketing: -

 There are four alternative concepts of marketing

under which organizations conduct their marketing
activities. These concepts are

1. Production concept
2. Product concept
3. Selling concept
4. Marketing concept
 1. Production concept:
 The production concept is one of the oldest
marketing management philosophies. Under this
concepts , consumers accept the products at affordable
prices.
 Thus management focuses on improving production
and distribution efficiency.
 The production concept relied on mass production
and cutting down prices.
 It emphasizes that customers will prefer those items,
which are readily available at low prices. Mass
production will naturally reduce production cost and
thereby ensures low price.
 Product concept:
 The product concept holds that consumers prefer
products of high quality, performance, and innovative
features.
 Organizations give the utmost attention on product
improvement by product innovation, quality assurance
and efforts on research and development.
 They have ignored the customer and his needs and
concentrated only on products.
 . Selling concept :
 The selling concept undergoes a stage where in
the consumers buy the products on which selling and
production efforts take place.
 Under this concept, business firms aim to sell what
they produce rather than what the consumer need.
 The organization believes in selling concept relies
on effecting sales by any means. The selling efforts
acquire importance and aggressive selling methods are
adopted.
 The customers needs are not given importance.
 Marketing myopia:
 This term indicates the painted market situation,
which may be perceived by the market which may be
perceived by the marketing man as a favorable factor
for his business.
 The actual field situation or market position, may be
quite different from that has been perceived by the
company.
 This lack of understanding or short-sightedness about
the market realities, i.e. about the needs/demands of
the customer and his choices, creates the situation
which is nothing but marketing myopia.
 In other words, marketing myopia can be explained in
common man’s language as “building castles in the
air.”
 Marketing
1. Emphasizes on customer's wants.
2. Satisfaction of consumer is primary
3. Buyer's need is the motive
4. Consumer determines price
5. First customer's need is known & then
product is sold at profit
Selling
1. Emphasizes on the product.
2. Sales are the primary motive
3. Company's need is the motive
4. Cost determines price
5. First production, then selling takes place
at a profit without knowing consumer's need

6. Marketing starts with the buyer and 6. Selling starts with seller and is
focuses constantly on the need of the buyer preoccupied all the time with the needs of
the seller
7. Management is profit oriented 7. Management is Salvo - volume oriented
organization objectives oriented
8. Planning is long - run oriented in terms of 8. Planning is short - run oriented in terms of
new products and tomorrow's markets and today's products and markets.
future growth
9.View business as a ‘customer satisfying 9. View business as a ‘goods (services)
process’. producing process’.
 Features of Marketing concept :-
 1. Consumer's orientation :-
 Selling focuses on the need of the buyer.
 Selling is preoccupied with the seller's need to convert
his product into cash, marketing with the idea of
satisfying the need of customer by means of the
product and the whole cluster of things associated
with creating, delivering and finally consuming it.''
 Integrated marketing :
 A customer should have a feeling that all the departments are
doing something for him.

 Customer Satisfaction :-

 Firms aim to give satisfaction to consumers through marketing

concept.
 Realizing the organization goals including profit.

 The key to satisfying organizational goals in a consumer's need

orientation backed by integrated marketing aimed at generating
consumer satisfaction.
 Marketing Mix

 The marketing mix is the combination of strategies

and processes adopted for consumer satisfaction.

 Philip kotler defines marketing mix as, '' the set of

marketing tools that the firm uses to pursue its
marketing objectives in the target market.


 Marketing mix is the term used to describe a
combination of four elements- the product, price,
physical distribution and promotion. These are
popularly known as four Ps of marketing

 Four Ps of marketing :-

1. Product variable
2. Place variable
3. Price variable
4. Promotion variable
 1. Product :-

 The product is itself is the first element. Products

must satisfy consumer needs. The management must,
first decide the products to be produced, by knowing
the needs of the consumers.
 2. Price :-

 The marked or announced amount of money asked

from a buyer is know as basic price (value) placed on a
product. Basic price alterations may be made by the
manufacture in order to attract the butters.
 This may be in the form of discount, allowances etc.
Apart from this, the terms of credit, liberal dealings will
also boost sales.

 Promotion :-

 The product may be made known to the consumers,

Firms must undertake promotion work advertising,
publicity, personal sealing etc. Which are the major
activities..
 Thus, the public may be informed of the products and
be persuaded by the customers. Promotion is the
persuasive communication about the products, by the
manufacturer to the public.
 4. Place (Distribution) :-

 Physical distribution is the delivery of products at the

right time and at the right place.

 Distribution mix is the combination of decisions

relating to marketing channels, storage facility,
inventory control, location, transportation, warehousing.
 Sub-components of 4 Ps of marketing :-
Product Price Place Promotion

Factures Credit terms Channels Advertising

Design Payment period Location Sales promotion

Brand Discount Stock Publicity

Package Commission Delivery Selling

Service Price- Transport Communication

Warranty differentials Wholesaling

Quality Retailing

Style
  Market Segmentation
 Meaning and concept of market segmentation
 Market segmentation is a process of grouping the
customers into number of different divisions on the
basis of similar characteristics.
 Market segmentation is grouping of two or more
consumers for a product or service so that their needs
are better served.

 The segmentation or grouping of people on the basis
of their needs into different segments can be termed as
segmentation.
 The total market is segmented into number of
submarkets.
 The heterogeneous market is divided into number of
likely homogenous units.
 Market segmentation helps to :- (Role of
segmentation)
1. understand potential customers.
2. pay proper attention to particular areas.
3. formulate marketing programme.
4. select channels of distribution.
5. understand competition
6. use marketing resources efficiently
1. advertise the products & launch sales promotion
programmes
2. design marketing mix - product, price, place and
promotion.
 Merits of Market segmentation
1. It is easy to identify prospective buyer
2. It is easy to locate customer
3. It is easy to access market opportunities
4. It improved marketing efficiency
5. It discovers the area where prospective customer
resides
6. It ensures high degree of customer satisfaction.
 Methods / Bases for Market segmentation
 Market may be segmented on the bases of geographic,
demographic, socioeconomic and buyer behavior
variables The commonest bases for market
segmentation are as follows
 1. Geographic segmentation :-
 Market is divided on the basis of geographical area
where consumer resides. such as village market, region,
country, state, district, tahsil and also climatic
conditions where ,consumers resides
 2. Demographic segmentation
 Market is divided on the basis of demographic
variables such as age, gender, marital status, education,
income, occupation, religion, family size, family life
cycle, race, nationality etc.
 3. Psychographics segmentation:-
 It means dividing the buyers into different groups on
the basis of their social class, compulsiveness, lifestyle,
personality of customers, culture and out look to a
particular system and leadership style.
 4. Behavioral Segmentation :-
 It means dividing the customers into different groups
based on their knowledge, behavior, attitudes, action
and response to product.
 The buyers i.e. the customers expectation of benefits
from a particular product vary.
 It may not be the same for all customers. Under this
method, this expectation forms the basis of
segmentation.
 3. Psychographics segmentation:-
 It means dividing the buyers into different groups on
the basis of their social class, compulsiveness, lifestyle,
personality of customers, culture and out look to a
particular system and leadership style.
 4. Behavioral Segmentation :-
 It means dividing the customers into different groups
based on their knowledge, behavior, attitudes, action
and response to product.
 The buyers i.e. the customers expectation of benefits
from a particular product vary. It may not be the same
for all customers. Under this method, this expectation
forms the basis of segmentation.
 Basis of market segmentation

Geographic Demographic Psychographics Behavioral

Village Age Compulsiveness Brand belief
Local market Gender Autonomy Attitude
Zonal Region Race Leadership usage loyality
City or metro Marital station Personality market factors
Size of density Education occasions
Country Income
Climatic Occupation
Conditions Religion
Family size
Family life cycle
Nationality
 Product Life Cycle :-
 Product life cycle has been defined as '' an attempt to
recognize the distinct stages in the sales history of
product''.
 The various stages from its birth, which, a product
passes through until its death are said to constitute the ''
Product life cycle.'' The life cycle of a product
comprises four stages viz; Introduction, Growth,
Maturity and Decline.

 Stage of Product Life Cycle :-


 1. Market pioneering stage or Introduction Stage :-

 It is the period when the product appears in the market
for the first time.
 Marketing strategy in terms of advertisements
designed provide all information about the product is
required.
 The new product associated with the high cost
because of heavy promotional activities
 2. Market growth Stage :
 It is a period & rapid expansion in sales and profits.
The product will be available to larger sections of the
society.
 Since, the fixed cost spread larger sales, profits will
increase. Increased profits often attract new
competitors. The presence of the competitors is felt in
the market.
 Market growth Stage :

 At this stage, competitors may enter the market and

the market manager has to change the strategy to meet
the competition.
 At this stage, if marketing efforts are continued, the
sales and profits will go on increasing year after year.
 Market maturity stage :-
 This stage is characterized by slow growth in sales
often even some decline in the sales as the market
becomes saturated.
 Marketing strategy in terms of reducing price, refining
the product, changing the product design, adding new
fractures to the product or increasing promotional
efforts in required.
 As a result of these strategies cost may go up and
reduce the profits.
 4. Market decline stage :-
 This stage is characterized by rapid decline in sales
and profits.
 changing consumer preferences, availability of new
substitutes may lead to death or removal of the product
from the market.
 some firms may withdraw from the market.
 Methods of Projects Appraisal
 There are two methods of project appraisal, viz.,
undiscounted and discounted measures.
 In the undiscounted measures, pay back period,
ranking by inspection. Proceeds per rupee of outlay,
average annual proceeds of rupee outlay etc., are
important.
 Under discounted measure Net Present Worth (NPW),
Benefit- Cost Ratio ( B-C ratio), Internal Rate of Return
(IRR), and Profitability Index are prominent.
 Undiscounted Measures

 Ranking by Inspection: It is based on the size of costs

and length of cash-flow stream.
 Suppose if the two projects are with the same
investment and the same net value of production, but
with difference in the length of the period, then the
project with longer duration is preferred to the one
with shorter time period.
 Payback period
 Another simple method of ranking a project is the
length of time required to get back the investment on
the project.


Where,
 P = Payback period of the project in years,
 I = Investment of the project in rupees, and
 E = Annual net cash revenue in rupees.
 Proceeds Per Rupee of Outlay
 This is worked out by dividing the total proceeds
with the total amount of investment, and a given project
is ranked based on the highest magnitude of the
parameter.
 Average Annual Proceeds of Rupee Outlay
 This is another simple choice criterion and in this
procedure, total receipts are first divided by the project
life span and the average proceeds obtained per year are
divided by the initial investment on the project.
 Here too, ranking is given to the projects, based on
the highest magnitude of the estimate.
 DISCOUNTED MEASURES
 Net Present Worth (NPW)
 This is simply the present worth of the cash flow
stream. Sometimes, it is referred to as Net Present
Value (NPV).
 The choice of discount rate to be used in the
measurement of Net Present Worth (NPW) posses
many problems as discussed earlier.
 NPW is helpful in working out benefit-cost ratio of
the project.
 Benefit- Cost Ratio (B-C Ratio)
 Here, we compare the present worth of costs with
present worth of benefits.
 Absolute value of the benefit-cost ratio will change
based on the interest rate choosen.
 Internal Rate of Return (IRR)
 In the computation of Internal Rate of Return (IRR),
the time value of money is accounted.
 The method of working IRR provides the knowledge
of actual rate of return from the different projects.
Thus IRR is known as ‘marginal efficiency of capital
or yield on the investment’.
 It is the discount rate at which the present values of
the net cash flows are just equal to zero, i.e., NPW =
zero.
 Profitability Index
 Here we relate the NPV of the cash flows of the
project to the total capital required (c r) for a project
through “profitability index”.
 It is defined as the ratio of net present values of the
cash flows to the initial capital expenditure (co)