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Management is a very commonly used term, by people in various sectors. It has wide applications across many sectors. In the last two decades several management courses with specific reference to a sector; viz., hospital management, retail management, tourism management, education management etc., have come into existence. This is a testimonial to the expanding application of management for the effective and efficient functioning of several diversified institutions. Since ‘Industrial Revolution’ there have been tremendous developments in management as a science. The definitions of management by some of the well known experts are presented.  Management is defined as the process by which a cooperative group directs action towards common goals. Joseph Massie  To manage is to forecast and to plan, to organize, to command, to co-ordinate and to control. Henry Fayol  Management is a multi purpose organ that manages a business and manages managers and manages worker and work. Peter F. Drucker  Management is the use of people and other resources to accomplish objectives of the firm. Louis E Boone and David L Kurtz  Management is the process by which managers create, direct, maintain and operate purposive organizations through systematic, coordinated and cooperative human effort. Dalton E Mcfarland  Management is the process of designing and maintaining an environment in which individuals, working together in groups, accomplish their aims effectively and efficiently. Harold Koontz and Heinz Wiehrich Management functions a. Planning: It is the process of selection of objectives of the firm and deciding the course of action to achieve them. b. Organizing: It is the process of assigning tasks and authority and responsibility to enable employees to accomplish organization objectives.

c. Staffing: It is the process of recruiting employees for various positions in the organization and train them to achieve the objectives of the organization d. Directing / Leading: It is the process of influencing, motivating, and directing people towards achieving the organizational goals e. Controlling: It is the process of monitoring the progress of an organization for achieving its objectives Management Hierarchy a. Top Management: Chief Executive Officer, Chairman, President, Board of Directors, Managing Director b. Middle Management: Division managers, Zonal managers c.Junior Management: Regional managers, area managers This description generally varies with the size of the firm. Tasks at various levels of Management     a. Top Management Develop and review strategies and long range plans Evaluate overall performance of the firm and ensure cooperation of all employees Involved in selection of key personnel (top and middle management) Consults subordinate managers on subjects or problems of general scope b. Middle Management Prepare medium range plans Establish department policies Employee performance appraisal Review reports and counsel subordinates Select personnel (middle and junior management)

     c.    

Junior Management Prepare short range plans Review performance of subordinates Supervise daily operations Maintain close contact with employees in operations Management hierarchy and functions


Managers at different hierarchy have to execute all the managerial functions, but the extent of role played in each of these functions varies with each level in the hierarchy. Top management has greater role in planning, organizing and controlling and the junior management have greater role in leading. The middle management has significant role in all these functions. Besides, the scope of these functions also varies with the level of management. The Top Management does planning for the entire organization, middle management plans activities that are to be executed by them within their region / zone and the junior management plans for the domain that is in their control / area of operations. Managerial skills Managers require at least four skills  Technical skills – technical knowledge to do the job  Human skills - ability to work with people, team work  Conceptual skills - ability to see the organization as a whole; “big picture”  Design skills - ability to analyze and solve problems

Managerial Hierarchy and Skills

All the four skills are required for managers at various levels of hierarchy, but their share varies. At the junior management level, the manager is mostly at the operational level and should be well conversant with the technologies for executing the job, ex: seed production technologies, so that he can guide his subordinates. As the managers moves up in the hierarchy, he has to manage more and more people, so human skills are more required. At top most level the manager should be able to look at the industry big picture, forecast future trends in technology, market needs, and government policies and should be able to design strategies for the firm to be successful in the long run. Hence


conceptual and design skills are required in greater proportion at top management level. Managerial Roles Interpersonal Figure head Leader Liaison Recipient Disseminator Spokesperson Entrepreneur Disturbance handler Resource allocator Negotiator



BUSINESS ENVIRONMENT Business firms operate in a given context with reference to time and space. The context in which they operate is construed as the environment. The environment comprises of micro and macro environment. Micro environment is constituted by the firm and its suppliers, distributors, competitors, customers and public. It includes all units where the individual firm can exert direct influence through its actions. Macro environment comprises of elements which can influence the behaviour of the firms. It includes, economic environment, social, political, technological, demography and legal. Micro environment Suppliers: It comprises of firms that provide raw materials (seeds, fertilizers fruit pulp) and other inputs such as electricity, fuel, packing material, etc and services such as transport, market information, storage etc. They can influence the firm through pricing, supply of materials, supply schedule, delivery mode, payment schedule etc. Distributors: It comprises of firms that distribute the produce to the retailers and consumers. They can influence through the distribution costs, market reach, promotion, margins etc. Competitors: It comprises of firms producing the same or similar products for the same consumer segment. They will compete for the market share and respond to the promotion programmes, pricing, release of new products etc. 4

Customers: They are the ultimate buyers whose needs the firm is trying to fulfill. Public: People matter because the actions of the firm affect society – pollution, anti-cultural, anti-social, unethical management practices, product supply, irrationally high prices etc. Macro environment Four major constituents of the macro environment are; economic environment, political environment, technological environment and social environment. Economic environment Tax structure and policies that influence money supply, interest rates for lending and deposit, subsidy, export / import duties etc form a part of the economic factors that affect the functioning of the firm. Reduction in direct tax results in increase in disposable income of the consumer and the consumers’ demand will increase. Reduction in indirect tax reduces the price of the product, enabling more consumers to buy the product. The CRR and SLR can influence the money supply in the economy and in turn the demand for commodities. Decrease in CRR and SLR rates will increase money supply and therefore increase demand. Fall in lending rates (PLR) motivates consumers to buy products by availing loan, (demand increases) but increase in deposit rates will motivate consumer to save money and it leads to reduction in spending. Direct Tax Indirect tax Cash reserve ratio (CRR) Statutory Liquidity Ratio (SLR) Income growth Inflation Interest rates Affects disposable income of people (income tax) Affects price of the commodity / service (Sales tax / service tax / VAT) Amount of funds banks have to keep with RBI – 6.5 per cent of net demand and time liabilities Amount which the bank should have in the form of cash, gold and government securities – 24 per cent of total demand and time liabilities Gross Domestic Product, per capita income Increasing trend in price of commodities Deposit rates – saving behaviour Primary Lending Rates (PLR) – increases demand for credit Favourable for industry



Import duties

Discourage imports and favour local industries

Inflation Year

Inflation % change Year on Year basis 3.5 3.2 5.5

2000-01 2001-02 2002-03

Inflation % change Year on Year basis 2003-04 6.4 2004-05 2005-06 4.4 5.2


Inflation % change Year on Year basis 2006-07 4.5 2007-08 2008 - 09 March 2009 6-7 6 - 12 2.5 – 3.0


Social Social factors include demographic features, social class – beliefs, culture, custom, attitudes, social status, decision making behaviour in the family, human resource capability, etc. Age structure of the population, literacy, beliefs, culture and custom influence the consumers’ taste and preference for various products. Preference for fast foods, products made of genetically modified crops, etc to greater extent depend on culture beliefs, custom, attitude, age and literacy There are households with male dominated decision making, female dominated decision making, children may influence in certain cases. Family structure (joint family / nuclear family) also influences decision making. Demography Human resource capability Social class Social status Relationship Attitudes Political Population structure (age distribution), literacy, taste and preferences, Leaders, managers, administrative, professionals, skilled, semi skilled Beliefs, culture and practices Occupation, wealth – influence spending behaviour Decision making behaviour in family, social groups, village panchayats, Health, environment


In democratic countries the government is run by political parties with distinct ideological differences which influences polices towards privatization, liberalization, extent of foreign direct investment, export promotion, taxation, etc. All these policies affect the functioning and ultimately the profitability and growth of the firm. A stable government with considerable majority in the parliament will be able to successfully get the approval of the elected representatives and enact new Acts, rules and regulation. Terrorism and wars cause diversion of fund for protecting country and less funds for infrastructure creation and business promotion; consequently there is a decline in the pace of development. Pressure groups are active with regard to genetically modified crops, pollution and cultural erosion. They would create hurdles to hinder the production and performance of businesses that cause above mentioned damages to the society. Ideology Democratic Stability of government Terrorism / wars Laws and regulations Capitalism / socialism / communism Dictatorship / Monarchy Conducive climate and policies India, Pakistan, Sri Lanka, - diversion funds meant for development Labour laws, Child labour, Liberalization, globalization, privatization, disinvestment of public sector companies, export and import policies, foreign direct investment

Pressure groups Human rights, environmentalists, fundamentalists, Technological Nation’s progress to a greater extent depends upon its ability to develop new products and the entrepreneurship, which commercializes new ideas and products. This becomes more vital with the implementation of Intellectual Property Rights (IPR). IPR promotes patenting of products and processes (there are many versions such as geographical indication, trade mark, copy right). If a business does not own IPR, then it has to pay license to the owner. Investment in research and development by private and public sector has a great impact on technological developments. This investment is influenced by government polices. Technological developments in communications have given greater competitive advantage to firms and also dissemination of market information and creation of awareness among consumers, facilitating informed decision making.


Product development / Innovation Patenting Communication systems

Research and development Public and private sector investment Intellectual Property Rights – laws and implementation, number of patents Support services, networking


EARLY APPROACHES TO MANAGEMENT The Industrial Revolution, which began in Europe in the mid-1700s, was the starting point for the development of management concepts and theories. The rapid growth in the number of factories during this period and the need to coordinate the efforts of large number of people in the production process necessitated the development of management theories and principles. Robert Owen: Human Resource Management Pioneer Robert Owen (1771-1858) was a successful British entrepreneur in the early 19th century. He was one of the earliest management thinkers to realize the significance of human resources. He believed that workers' performance was influenced by the environment in which they worked. He proposed legislative reform that would limit the number of working hours and restrict the use of child labor. At his own factories, he introduced a standard working day of 10.5 hours and refused to employ children under the age of ten. Owen recommended the use of a "silent monitor" to openly rate an employee's work on a daily basis. Owen believed that the open ratings will instill pride and encourage healthy competition. Charles Babbage Charles Babbage (1792-1871) was an advocate of the concept of division of labor. He was impressed by the idea of work specialization, or the degree to which work is divided into various tasks. He believed that each factory operation should be thoroughly understood so that the necessary skill involved in each operation could be isolated. Each worker could then be trained in one specific skill and made responsible only for that part of the operation. He observed that work specialization could apply not only to physical work but also mental work. Babbage felt that work specialization would reduce training time and improve (through constant repetition of each operation) the skills and efficiency of workers. Babbage believed that the interests of employees and management were closely linked. He therefore devised a profit-sharing plan under which bonuses were given for useful suggestions contributed by employees and wages were based on the profits generated by the factory. Andrew Ure and Charles Dupin: Management Education Pioneers Andrew Ure (1778-1857) and Charles Dupin (1784-1873) were the early proponents of the study of management. Ure, who taught at Glasgow University, published The Philosophy of Manufacturing, in which he explained the various principles and concepts of manufacturing. In 1819, Dupin was appointed as a management professor in Paris, which marked the beginning of an illustrious career.


Henry Robinson Towne (1844-1924) Towne, emphasized the need to consider management as a separate field of systematic study on the same level as engineering. Towne suggested that management be studied as a science and that principles be developed that could be used across various management situations. CLASSICAL APPROACH Classical management thought can be divided into three separate schools: scientific management, administrative theory and bureaucratic management. Scientific Management Scientific management became increasingly popular in the early 1900s. In the early 19th century, scientific management was defined as "that kind of management which conducts a business or affairs by standards established, by facts or truths gained through systematic observation, experiment, or reasoning’. Frederick Winslow Taylor An engineer and inventor, Taylor first began to experiment with new managerial concepts in 1878. He ventured to tackle a grave issue faced by the organization - the soldiering problem. 'Soldiering' refers to the practice of employees deliberately working at a pace slower than their capabilities. According to Taylor, workers indulge in soldiering for three main reasons: 1. Workers feared that if they increased their productivity, other workers would lose their jobs. 2. Faulty wage systems employed by the organization encouraged 3. Outdated methods of working handed down from generation to generation led to a great deal of wasted efforts. Taylor felt that the soldiering problem could be eliminated by developing a science of management. In essence, scientific management as propounded by Taylor emphasizes: 1. Need for developing a scientific way of performing each job.

them to work at a slow pace.


2. Training and preparing workers to perform that particular job. 3. Establishing harmonious relations between management . and workers so that the job is performed in the desired way.

The two major managerial practices that emerged from Taylor's approach to management are the piece-rate incentive system and the time-and-motion study. Piece-rate incentive system Taylor felt that the wage system was one of the major reasons for soldiering. To resolve this problem, he advocated the use of a piece-rate incentive system. The aim of this system was to reward the worker who produced the maximum output. Under this system, a worker who met the established standards of performance would earn the basic wage rate set by management. If the worker's output exceeded the set target, his wages would increase proportionately. Time-and-motion study Taylor tried to determine the best way to perform each and every job. To do so, he introduced a method called "time-and-motion" study. In a "time-and-motion" study, jobs are broken down into various small tasks or motions and unnecessary motions are removed to find out the best way of doing a job. Then each part of the job is studied to fmd out the expected amount of goods that can be produced each day. The objective of a timeand-motion analysis is to ascertain a simpler, easier and better way of performing a work or job. Frank and Lillian Gilbreth Frank Gilbreth (1868-1924) is considered the ''father of motion study." Lillian Gilbreth (1878-1972) was associated with the research pertaining to motion studies. Motion study involves finding out the best sequence and minimum number of motions needed to complete a task. Frank and Lillian Gilbreth were mainly involved in exploring new ways for eliminating unnecessary motions and reducing work fatigue. The Gilbreths devised a classification scheme to label seventeen basic hand motions such as "search," "select," "position," and "hold" - which they used to study tasks in a number of industries. These 17 motions, which they called therbligs (Gilbreth spelled backward with the't' and 'h' transposed), allowed them to analyze the exact elements of a worker's hand movements. Henry Laurence Gantt


Henry L. Gantt (1861-1919) was a close associate of Taylor is probably best remembered for his work on the task-and-bonus system and the Gantt chart. Under Gantt's incentive plan, if the worker completed the work fast, i.e. in less than the standard time, he received a bonus. He also introduced an incentive plan for foremen, who would be paid a bonus for every worker who reached the daily standard. If all the workers under a foreman reached the daily standard, he would receive an extra bonus. The Gantt Chart is a simple chart that compares actual and planned performances. The Gantt chart was the first simple visual device to maintain production control. The chart indicates the progress of production in terms of time rather than quantity. Along the horizontal axis of the chart, time, work scheduled and work completed are shown. The vertical axis identifies the individuals and machines assigned to these work schedules. Limitations of scientific Management • The principles of scientific management revolve round problems at the operational level and do not focus on the management of an organization from a manager's point of view. The proponents of scientific management were of the opinion that people were "rational" and were motivated primarily by the desire for material gain. Taylor and his followers overlooked the social needs of workers and overemphasized their economic and physical needs. Scientific management theorists also ignored the human desire for job -satisfaction. Since workers are more likely to go on strike over factors like working conditions and job content (the job itself) rather than salary, principles of scientific management, which were based on the "rational worker" model, became increasingly ineffective.

Administrative Theory While the proponents of scientific management developed principles that could help workers perform their tasks more efficiently, another classical theory - the administrative management theory - focused on principles that could be used by managers to coordinate the internal activities of organizations Henri Fayol A prominent European management theorist developed a general theory of management. Fayol believed that "with scientific forecasting and proper' methods of management, satisfactory results were inevitable’. Fayol was unknown to American managers and scholars until his most 12

important work, General and Industrial Management, was translated into English in 1949. According to Fayol, the business operations of an organization could be divided into six activities. Technical Commercial Financial Security Accounting statistics. Managerial coordinating and Planning, organizing, commanding, Producing and manufacturing products. Buying, selling and exchange. Search for and optimal use of capital. Protecting employees and property. Recording and taking stock of costs, profits, and, liabilities maintaining balance sheets, and compiling

controlling. Fayol outlined fourteen principles of management 1. Division of work: Work specialization results in improving efficiency of operations. The concept of division of work can be applied to both managerial and technical functions. 2. Authority and responsibility: Authority is defined as "the right to give orders and the power to exact obedience." Authority can be formal or personal. Formal authority is derived from one's official position and personal authority is derived from factors like intelligence and experience. Authority and responsibility go hand-inhand. When a manager exercises authority, he should be held responsible for getting the work done in the desired manner. 3. Discipline: Discipline is vital for running an organization smoothly. It involves obedience to authority, adherence to rules, respect for superiors and dedication to one's job. 4. Unity of command: Each employee should receive orders or instructions from one superior only. 5. Unity of direction: Activities should be organized in such a way that they all come under one plan and are supervised by only one person. 6. Subordination of the individual interest to the general interest: Individual interests should not take precedence over the goals of the organization. 7. Remuneration: The compensation paid to employees should be fair and based on factors like business conditions, cost of living, productivity of employees and the ability of the firm to pay.


8. Centralization: Depending on the situation, an organization should adopt a centralized or decentralized approach to make optimum use of its personnel. 9. Scalar chain: This refers to the chain of authority that extends from the top to the bottom of an organization. The scalar chain defines the communication path in an organization. 10. Order: This refers to both material and social order in organizations. Material order indicates that everything is kept in the right place to facilitate the smooth coordination of work activities. Similarly, social order implies that the right person is placed in the right job (this is achieved by having a proper selection procedure in the organization). 11. Equity: All employees should be treated fairly. A manager should treat all employees in the same manner without prejudice. 12. Stability of tenure of personnel: A high labor turnover should be prevented and managers should motivate their employees to do a better job. 13. Initiative: Employees should be encouraged to give suggestions and develop new and better work practices. 14. Esprit de corps: This means "a sense of union." Management must inculcate a team spirit in its employees. Bureaucratic Management - Max Weber Weber observed that nepotism (hiring of relatives regardless of their competence) was prevalent in most organizations. He felt that nepotism was grossly unjust and hindered the progress of individuals. He therefore identified the characteristics of an ideal bureaucracy to show how large organizations should be run. The term "bureaucracy" (derived from the German buro, meaning office) referred to organizations that operated on a rational basis. According to Weber, "a bureaucracy is a highly structured, formalized, and impersonal organization" I other words, it is a formal organization structure with a set of rules and regulations. Major Characteristics of Weber’s Ideal Bureaucracy Characteristic Work specialization and division of labour Abstract rules and regulations Description The duties and responsibilities of all the employees are clearly defined. Jobs are divided into tasks and subtasks. Each employee is given a particular task to perform repeatedly so that he acquires expertise in that task. The rules and regulations that are to be followed by employees are well defined to instill discipline in them and to ensure that they work in a co coordinated manner to achieve the goals of the organization. 14

Impersonality of managers

Hierarchy of organization structure

Mangers make rational decisions and judgments based purely on facts. They try to be immune to feelings like affection, enthusiasm, hatred and passion so as to remain unattached and unbiased towards their subordinates. The activities of employees at each level are monitored by employees at higher levels. Subordinates do not take any decision on their own and always look up to their superiors for approval of their ideas and opinions.

Limitations of bureaucratic management and administrative theory Weber’s concept of bureaucracy is not as popular today as it was when it was first proposed. The principal characteristics of bureaucracy strict division of labor, adherence to formal rules and regulations, and impersonal application of rules and controls - destroy individual creativity and the flexibility to respond to complex changes in the global environment. BEHAVIORAL APPROACH The behavioral school of management emphasized what the classical theorists ignored - the human element. While classical theorists viewed the organization from a production point of view, the behavioral theorists viewed it from the individual's point of view. The behavioral approach to management emphasized individual attitudes and behaviors and group processes, and recognized the significance of behavioral processes in the workplace. Contributions of Behavioral Thinkers to Management Thought Name Mary Parker Follet Elton Mayo Period 18681933 18801949 Contribution Emphasized group influence and advocated the concept of ‘power sharing’ and integration Laid the foundation for the Human Relations Movement; recognized the influence of group and workplace culture on job performance Advocated that humans 'are essentially motivated by hierarchy of 15

Abraham Maslow


needs Douglas McGregor Chris Argyris 19061964 Differentiated employees and managers into· Theory X and Theory Y personalities Classified organizations based on the employees' set of values

Mary Parker Follet: Focusing on Group Influences Follet recognized the critical role managers play in bringing about the kind of constructive change that enables organizations to function. Power, according to Follet, was the ability to influence and bring about a change. She argued that power should not be based on hierarchy; instead, it should be based on cooperation and should involve both superiors and subordinates. In other words, she advocated 'power sharing.' Follet also advocated the concept of integration, which involves finding a solution acceptable to all group members. She believed that managers should be responsible for keeping a group together and ensuring that organizational objectives are achieved through group interaction. Elton Mayo: Focusing on Human Relations Elton Mayo (1880-1949), the "Father of the Human Relations Approach," led the team which conducted a study at Western Electric's Hawthorne Plant between 1927 and 1933 to evaluate the attitudes and psychological reactions of workers in on-the job situations The experiments were conducted in four phases: a.Illumination experiments b. Relay assembly test room experiments c.Interview phase Contributions of Hawthorne Experiments ‘The Hawthorne experiments, which laid the foundation for the Human Relations Movement, made significant contributions to the evolution of management theory. Hawthorne Studies Pre-judgments Findings


Job performance depends on the The group is the key factor in job individual worker. performance. Fatigue is the affecting output Management standards. sets main factor Perceived meaning and importance of the work determine output.

production Workplace culture sets its own production standards.

Criticism of Hawthorne Studies The Hawthorne studies have received considerable criticism. They have been criticized on the following grounds: 1. The procedures, analysis of findings, and the conclusions reached were found to be questionable. Critics felt that the conclusions were supported by little evidence. 2. The relationship made between the satisfaction or happiness of workers and their productivity was too simplistic. 3. These studies failed to focus attention on the attitudes of employees at the workplace. Abraham Maslow: Focusing on Human Needs In 1943, Abraham H. Maslow (1908-1970), a Brandeis University psychologist, theorized that people were motivated by a hierarchy of needs. His theory rested on three assumptions. First, all of us have needs which are never completely fulfilled. Second, through our actions we try to fulfill our unsatisfied needs. Third, human needs occur in the following hierarchical manner: (i) physiological needs; (ii) safety or security needs; (iii) belongingness or social needs; (iv) esteem or status needs; (v) selfactualization, or self-fulfillment needs. According to Maslow, once needs at a specific level have been satisfied, they no longer act as motivators of behavior. Then the individual strives to fulfill needs at the next level. Managers who accepted Maslow's hierarchy of needs attempted to change their management practices so that employees' needs could be satisfied.


Douglas McGregor: Challenging Traditional Assumptions about Employees Douglas McGregor (1906-1964) developed two assumptions about human behavior, which he labeled "Theory X" and "Theory Y." According to McGregor, these two theories reflect the two extreme sets of belief that different managers have about their workers. Theory X presents an essentially negative view of people. Theory X managers assume that workers are lazy, have little ambition, dislike work, want to avoid responsibility and need to be closely directed to make them work effectively. Theory Y is more positive and presumes that workers can be creative and innovative, are willing to take responsibility, can exercise self-control and can enjoy their work. They generally have higher-level needs which have not been satisfied by the job. Chris Argyris: Matching Human and Organizational

Development Chris Argyris, a Yale University Professor, made significant contributions to the behavioral school of management thought. The major contributions of this behavioral scientist are the maturityimmaturity theory, the integration of individual and organizational goals, and Model I and Model II organization analysis. He believes that people progress from a stage of immaturity and


dependence to a state of maturity and independence. Many organizations tend to keep their employees in a dependent state, thereby blocking further progress. Model I and Model II organizations: Argyris classifies organizations as Model I and Model II organizations on the basis of the employees' set of values. The employees in Model I organization are manipulative and pitted against each other. They are not willing to take risks. Workers in Model II organization are open to learning and less manipulative. Their access to information gives them freedom to make informed choices, which in turn increases their willingness to take risks. Hence, according to Argyris, managers should strive to create a Model II environment. QUANTITATIVE APPROACH These experts used some of the mathematical approaches to management devised earlier by Taylor and Gantt to solve the logistical problems encountered by the army during the war. After the war many organizations started applying the same techniques to solve business problems. The quantitative approach to management includes the application of statistics, optimization models, information models and computer simulations. More specifically, this approach focuses on achieving organizational effectiveness through the application of mathematical and statistical concepts. The three main branches of the quantitative approach are: (i) management science (ii) operations management and (iii) management information systems. Management Science The management science approach stresses the use of mathematical models and statistical methods for decision-making. Management science techniques are widely used in the following areas:  Capital budgeting and cash flow management  Production scheduling  Development of product strategies  Planning for human resource development programs  Maintenance of optimal inventory levels  Aircraft scheduling Various mathematical tools like the waiting line theory or queuing theory, linear programming, the program evaluation review technique (PERT), the critical path method (CPM), the decision theory, the simulation


theory, the probability theory, sampling, time series analysis etc. have increased the effectiveness of managerial decision-making. Operations Management Operations management is an applied form of management science. It deals with the effective management of the production process and the timely delivery of an organization's products and services. Operations management is concerned with: (i) inventory management, (ii) work scheduling, (iii) production planning, (iv) facilities location and design, and (v) quality assurance. The tools used by operations managers are forecasting, inventory analysis, materials requirement planning systems, networking models, statistical quality control methods, and project planning and control techniques. Management information systems Management information system focuses on designing and implementing computer based information systems for business organizations. In simple terms, the MIS converts raw data into information and provides the needed information to each manager at the right time, in the needed form. MODERN APPROACHES TO MANAGEMENT Modern approaches include systems theory and the contingency theory, which have significantly shaped modem management thought. Systems Theory Those who advocate a systems view contend that an organization cannot exist in isolation and that management cannot function effectively without considering external environmental factors. The systems approach gives managers a new way of looking at an organization as a whole and as a part of the larger, external environment. The two basic types of systems are closed and open systems. A system that interacts with its environment is regarded as an open system and system that does not interact with its environment is considered a closed system. Contingency theory This is also known as the situational theory. According to this theory, there is no one best way to manage all situations. Approach

Important Features of the Major Approaches Important Features
This approach is divided into three schools - scientific management, administrative theory and bureaucratic management


Scientific management emphasizes the scientific -study of work methods to improve the efficiency of the workers. Administrative theory focused on principles that could be used by managers to coordinate the internal activities of organizations. Bureaucratic management emphasizes the need for organizations to function on a rational basis. Behavioral The behavioral approach to management emphasizes individual attitudes and behaviors and group processes and recognized the significance of behavioral processes in the workplace. Mary Parker Follett focused on the functioning of groups in the workplace. Elton Mayo's Hawthorne studies were aimed at evaluating the attitudes and psychological reactions of workers in on-thejob situations and laid the foundation for the Human Relations Movement. Abraham Maslow theorized that people were motivated by a hierarchy of needs. Doug'las McGregor's assumptions about human behavior led to the development of Theory X and Theory Y which reflect the two extreme sets of belief that different managers have about their workers. Chris Argyris is known for his maturity-immaturity theory. Integration of individual and organizational goals, and Model I and Model II organization analysis. This approach focuses on achieving organizational effectiveness through the application of mathematical and statistical concepts. The three main branches of this approach are: management science, operations management, and management information systems. The Systems Approach views organizations as a part of the larger, external environment. The Contingency Theory states that there is no one best way to manage all situations.


Contempora ry (systems and contingency)


Theory Z William Ouchi, a management expert, conducted research on both American and Japanese management approaches and outlined a new theory called Theory Z. This theory combines the positive aspects of both American and Japanese management styles. The Theory Z approach involves providing job security to employees to ensure their loyalty and long-term association with the company. It also involves job rotation of employees to develop their cross-functional skills. This approach advocates the participation of employees in the decisionmaking process and emphasizes the use of informal control in the organization along with explicit performance measures. The organization shows concern for its employees' well-being and lays emphasis on their training and development.


Values Values are beliefs about what is right or wrong and what is good or bad. Generally people do not differ in their values. All of them would agree that corruption, nepotism, cheating, fraud etc., are undesirable practices, hence not accepted by the society. Having good values alone does not create an impact on the performance of the organization. The firm must be able to translate these values into an ethic, to have a positive impact on its performance. Ethics Ethics is the act of the individuals to uphold values by putting them to practice. The firm must set forth a moral code of professional behaviour to enable it to uphold the values so that it could make a meaningful contribution to the society. Firms must take efforts to be honest, unbiased, truthful, etc. Pragmatic corporate ethics creates positive image and reputation for the firm, which creates a feeling of trust that is shared by the various groups of stake-holders. Hence, ethical behaviour is very important and can not be left to the desires of individual employees. Ethical issues in management Some of the commonly observed violations of ethics are;  Excise duty and tax evasion  resource depletion and causing pollution  exploiting labour  Adulteration and Low quality employees including Disinformation Lack of transparency

child  share price manipulation  accounting manipulations  violation rules of government

Role of top management in business ethics


Top management sets the tone for ethical behaviour in an organization by communicating what is meant by ethical behaviour and also by setting an example by practicing it. activities to promote ethics in the organization. Written code of conduct: The firm must take every effort to ensure that every individual follows a common set of ethics regardless of position. This underlines the relevance of a well defined written Code of Conduct that is routinely reviewed and followed starting with the senior management. To be meaningful it should be a brief, clearly worded, living document that spells the organization’s values. The Tata and Sons, have used the maxim 'leadership with trust' to promote ethical conduct throughout the group, and this is borne out by its longevity. The group's embedded values have been unity, integrity, excellence, responsibility and understanding. Since 1999, the group has circulated to all its employees a document called the 'Tata code of conduct', which is simple, easy to understand and easy to follow. In its journey towards institutionalization, the substance of the code is constantly communicated at all levels of the organization, apart from parties with whom the Tatas do business.
( tm).

It can initiate following









constructive role to play in adopting ethics by setting an example and also motivating employees to adopt the same. They should encourage employees, customers and other stakeholders to report on violations made by employees regarding ethical practices. Penalties for violations: People committing breaches of the code of conduct, where the offence is established, should be firmly dealt with and suitably penalized, while employees who are courageously committed to the Code of Conduct should be suitably rewarded. Establishment of


uniform disciplinary actions in case of violations and taking preventive steps to head off future violations, after understanding the 'root' causes of such violations would go a long way in better adoption of ethical practices. Commitment of top management: Business leaders are the principal architects of corporate conscience. They are the ones who must manage the challenges associated with pursuing profit while maintaining integrity. They are the ones most responsible for delivering on the moral agenda of the corporation. That agenda includes three broad imperatives: orienting, institutionalizing and sustaining ethical values within the corporate culture. Ethics counselor: A clearly designated ethics counselor / officer could be appointed to guide employees, clarify ethical issues and suggest measures for putting values into practice. Besides, establishment of an advisory panel would also enable employees to obtain advice regarding possible ethical dilemmas. Communication and training: Adopting ethical practices would go long way through periodical emphasis on ethical practices and also by conducting training programs to employees. Corporate Culture Corporate culture is described as the personality of an organization, related to a set of shared norms, values and beliefs. Corporate culture often guides how employees think, act, and feel. Understanding an organization's corporate culture is important for employee's and managers alike, as the collective culture will affect everyone in the organization in many ways, including the number of hours worked per day and per week, availability of options such as flextime and telecommuting, how people interact with each other in the workplace, individual behaviors and behaviors in groups, how people dress for work, benefits offered to employees, office space, training and professional development 25

opportunities, perks and nearly everything related to work and how those within the organization perform it. People interact with each other in the workplace, individual behaviors and behaviors in groups, how people dress for work, benefits offered to employees, office space, training and professional development opportunities, perks and nearly everything related to work and how those within the organization perform it. Developing and nurturing the right organizational culture contributes to the overall employee performance of the organization, and help to mould new entrants. Corporate culture can often reflect the philosophy and leadership style of the CEO. Organizations with strong corporate cultures achieve better results because employees could focus both on what to do and how to do it. Since globalization and privatization in India, there has been lot of developments in the corporate sector. Companies also recruit a diverse workforce that appropriately reflects the demographics of their customer base and also fulfils talent needs to keep the company competitive and successful. The challenge lies in ensuring unity amidst diversity so as to reap the benefits of diverse workforce. Hence it is important to foster an environment in which employees understand and value each other and respect their differences.

Building Culture in firms
Some of the points to be considered for designing and implementing the right culture in the firms are; Incorporate good traditions from different cultures: Firms to incorporate good traditions and customs that would be acceptable to all employees and also enrich the working environment. Diverse workforce but common goals: Employees from different regions and socio-cultural setting come together to work in an organization. The culture should infuse togetherness (a sense of belonging


in the firm) among employees and work towards a common goal (goal of the firm). Emphasis on human resource: Technology and other physical infrastructure only facilitate the business process but it is ultimately the human resource that utilizes this infrastructure for efficient and effective business process. Hence the culture of an organization should focus on nurturing human resource and stimulating them to contribute their best. Learning and sharing: Employees must be willing share their knowledge and skills with their colleagues so that the overall capacity of the organization is enriched. Concern over performance, promotions, power of information, etc., may prevent employees from sharing their knowledge and skill with their colleagues, or seniors with their junior colleagues. Ideal culture should alley such fear and promote learning and sharing among employees, promote team play and emphasize co-operation among employees. Promote a sense of belonging: Employees must realize that they are part of the team. The team by itself becomes a community and creates a sense of belonging. An ideal culture must be able achieve this kind of harmony among employees. Person or task oriented. Promote positive thinking: All the endeavours of the employees may not bear fruits but they should not be bogged down by the set back. Organizations should promote positive thinking so that employees learn from the experience and nurture positive mindset for joining hands for better efforts in future. Types of corporate culture Four types of corporate culture have been identified using two traits of a firm namely; hierarchical (Top down organization, authoritative) or egalitarian (democratic) and person or task oriented. Incubator Guided Missile
• organizations secondary to individual fulfillment highly Egalitarian task-oriented, impersonal


• existence precedes organization • aim at self-expression and self-fulfillment • personal and egalitarian • minimal structure; minimal hierarchy • emotional commitment

team approach emphasized cross-disciplinary performance emphasized ·loyalty to professions / project greater than to company Motivation intrinsic (USA, UK, Canada)

• creative, innovative

Family • personal, close face-to-face relationship • hierarchal ("father knows best") • power-oriented (leader is fatherly figure) • home-like work atmosphere • long-term relationships of employee to company; high loyalty • values, norms, atmosphere set by father" or "elder brother" Japan, Singapore, South Korea,

Eiffel Tower hierarchal structure more important than function leader is boss (not father) relationships specific; status ascribed highly bureaucratic, depersonalized rules dominate; roles before people careers depend upon professional qualifications symbolic of machine age Germany, Austria


Spain, Italy, India

Corporate Social Responsibility (CSR) Every firm has a social obligation to the society. They are responsible for the impact of their actions on the society. CSR is defined as the obligation of the firm to contribute to the welfare of the society through its activities. The right to existence of a firm in the society depends on its ability to fulfill its obligations to the society. Though profit is essential for firms, their ultimate motive should be contribution to the welfare of the society. To fulfill the CSR obligations firms generally, contribute funds for educations activities, scholarships, creating education infrastructure and other social overheads like hospital, roads, cultural functions etc. CSR as a concept has evolved over the years and it is no more viewed as activities outside the purview of its core activities such as creating social overheads for the society but as the central part of the organization. This includes the following tasks; a. Producing and supplying quality goods and services and fulfilling consumer society. b. Employment generation, employee welfare and employee empowerment (heeding to the suggestions of employees, problems faced by them and improving their standard of living). 29 needs without any harm to the stakeholders (shareholders, suppliers, buyers, government) of the firm and the

c. Due recognition for the employees for their contribution to the success of the firm, proportionate increase in perks and pay at all levels of employees etc. d. Environment protection – production without pollution of the environment. Conserving natural resources. e. Protection of the interests of the stakeholders of the firm through better corporate governance. f. Self regulation by private firms, especially in a liberalized economy (monitoring themselves for their actions such as; paying taxes, proper accounting and auditing practices, adherence to rules of the government, not engaging child labour etc.). Corporate Governance Worldwide the “corporation” is considered to be the essential engine driving the private sector economically. Corporate Governance (CG) is critical to its competitive performance. Despite a long corporate history, the phrase “corporate governance” remained unknown until the late 1990s in India. It came to the fore due to a spate of corporate scandals that occurred after the first phase of economic liberalization. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation is directed, administered or controlled. It also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. Principal stakeholders of a firm are shareholders, management, and the board of directors and other stakeholders are labourers (employees), customers, creditors (e.g., banks, bond holders), suppliers, regulators, and the community at large. Corporate Governance (CG) concerns the way in which other shareholders can legitimately exercise influence and exert effective control over the actions of corporate managers/promoters. The discipline of corporate governance has developed as a way of ensuring that: (a) 30

investors other than promoters receive a fair return on their investment by protecting them against management misuse or use of the investment capital to finance poor projects and (b) other stakeholders are assured that their interests are properly fulfilled. CG is a system by which firms are directed and monitored. Importance of Corporate Governance A good CG system • • • • • • • ensures the independence of the board of management of firms clearly states the responsibilities of institutional investors or shareholders, ensures transparency of business structure, operations and accounts facilitates easy institutions and complete evaluation by financial

discourages use of unethical practices by employees ensures fair returns to all stakeholders promotes efficient functioning of firms

Agribusiness has evolved over the years since subsistence farming. The farm production has been central to the agribusiness. As the commercialization of farm production gained significance the production and supply of farm inputs, marketing of farm output including value addition (processing) and services to farm sector have expanded leading to proliferation of several independent business units. Agricultural development has been a precursor to economic development. With the growth of agriculture sector, each operation became specialized and had the potential for business. This has led to establishment of numerous firms that cater to various needs of the agribusiness sector. Thus, the gamut of agribusiness enlarged including few sub systems in its realm. Definition “Agribusiness includes all those business and management activities performed by firms that provide inputs to the farm sector, produce farm products, and/or process, transport, finance, handle or market farm products." Downey and Erickson (1987) 31

Input Supply Seeds, Fertilizers, Pesticides, Farm machinery Capital, Labour

Production Crops, livestock, fisheries, Agriculture allied activities - apiary, Agribusiness sector mushroom

Output marketing Traders, Processors, Exporters

Services Market information, transport, storage, farm machinery hiring and maintenance, technology transfer, consultancy, commodity exchanges, grading

The agribusiness sector comprises predominantly of four sub systems; Input supply sub system, Production sub system, Output marketing subsystem and services subsystem. a) Input supply subsystem: It includes all firms that provide input for farm production, such as seeds, fertilizers, pesticides, bio-inputs, farm machinery, capital, labour etc. b) Production subsystem: The individual farms were crops, livestock, mulberry and fish production takes place and firms that are involved in agriculture allied activities such as sericulture, mushroom, apiary production. c) Output marketing subsystem: this includes all the firms that are involved in the marketing channel through which the produce from the farm, either in the raw or processed form reaches the consumer in the domestic or international market. The major participants are market intermediaries such as, wholesalers, retailers, village merchants, processors, exporters etc. d) Services subsystem: It includes all the firms that provide services such as market information, grading, storage, transport, farm machinery hiring and maintenance, technology transfer, consultancy, commodity exchanges, etc. The globalization of markets, increasing per capita income, education levels etc., created new opportunities and challenges for the agribusiness sector and has led to greater specialization of activities.

Evolution of agribusiness sector

Agriculture has come a long way from the era of shifting cultivation. The domestication of livestock and initiation of crop production paved way for creation of independently owned farms, where subsistence farming was mainly practiced. Growth of the economy, need for food security for the population, opportunities for exchange and increase in demand for other goods and services led to commercialization of agriculture. Commercial agriculture could be segmented in four distinct phases – green revolution, sustainable agriculture, market led agriculture and supply chain management (“farm to fork”). In this transformation process, several new products and services, firms and management systems have added to the agribusiness sector with the each stage of evolution. Subsistence agriculture is self-sufficient farming in which farmers grow only enough food to feed their family and pay taxes. The typical subsistence farm has a range of crops and animals needed by the family to eat during the year. Planting decisions are made considering what the family will need during the coming year, rather than market prices. Commercial agriculture Green revolution: After independence, the farmers transformed subsistence agriculture into commercial agriculture. Green Revolution, launched in mid sixties became a landmark in the transition of agriculture in India. The introduction of high yielding varieties in wheat and rice with improved responsiveness to fertilizers and irrigation was collectively referred to as "Green Revolution". The Green Revolution was a government sponsored programme to ensure availability of adequate food for the population (food security) through domestic production. This drive by the government enabled farmers to increase productivity and farm income. Adoption of improved technology was encouraged through a favourable policy environment, which envisaged; (i) increase in domestic production and supply of fertilizers at subsidized prices, (ii) increase in supply of quality seeds, (iii) expansion of irrigation facilities and enabling groundwater usage through subsidized / free electricity, (iv) transfer of technology on a continuous basis, (v) appropriate price policies to motivate risk averse farmers to adopt technologies and ensure fair returns to farmers and (vi) distribution of food grains throughout the country, for providing food to the needy and also stabilize the markets by creation of buffer stock and supply through public distribution system. Emphasis was on increasing production and distribution. Marketing was not given due attention. Sustainable agriculture: The imbalanced fertilizer application and other inputs, such as water, pesticides led to degradation of natural resources, which adversely affected the productive capability of land. To offset this undesirable trend the concept of sustainable production was given major emphasis. Integrated approach for nutrient, pest, water and land 33

management involving manual, chemical, and biotechnologies was advocated. The objective was to increase productivity by conserving natural resources and effectively integrating various technologies for production. Market led agriculture: In the early nineties (1990s) the economic policies in India were changed in order to globalize the market access and liberalize the business activities giving more scope for private sector participation, especially large firms. As a result the opportunities for export of agricultural commodities increased. The World Trade Organization also introduced new norms for international trade, with specifications for quality, food safety and sanitation. In order to capitalize the export opportunities the firms had to produce conforming to the standards prescribed by the market. Understanding the market needs was advised as the basis for production operations. Though such practices were advocated for the business sector quite long ago, this approach was given greater emphasis to the farming community. The farmer has to understand the market needs not only in terms of quantity to produce but also the quality aspects such as size, colour, residual toxicity, variety etc. the entry of organized retail sector in agriculture produce marketing during late nineties also made it imperative for farmers to understand the market needs and produce accordingly. The growth in market infrastructure through private sector participation and government assistance, establishment of commodity exchanges and better access to market information due the technological developments in communication systems have enabled the farmers to orient themselves to market led agriculture. “Farm to Fork” (Supply chain management): Supply chain management in agriculture is gaining attention. It is a step forward and complimentary to market led agriculture. In this approach efforts are taken to integrate various elements in the agriculture produce supply chain to improve the effectiveness and efficiency of the operations and dynamic market orientation, thus enabling a “farm to fork” integrated system. The elements in the supply chain for agricultural produces are not integrated and there is a dearth of information flow on consumers’ preference, demand, arrivals and prices in various markets. Hence private firms, especially processors, organized retail chains and the government is taking efforts to establish integrated supply chains that would also take into account the interests of the farmers.

Agribusiness sector in developed and under developed nations
Agriculture has undergone a transition in India in terms of technology adoption, shift in cropping pattern, export orientation, etc but


there has been unequal growth with the rainfed areas greatly lagging behind. A comparison of the agribusiness sector in India (developing country) and developed country (USA) is presented for better understanding. Comparison of Agribusiness Sector in developing and developed country Production sub system Feature India (Developing USA (Developed country) country) Average farm size 0.50 ha small, 1249 ha – very large scattered and farms fragmented Number of farm 116 – too many 2.1 Small number of holdings (millions) independent farmers, very large farms with individual decision making Share of 14 – has been declining 1 – developed countries agriculture in over the years – in have only 1 – 2 % National Gross developing countries the contribution from Domestic Product share of agriculture is agriculture (%) high Agriculture growth 2.2 – low growth rate 1.9 – 2.0 low but yield of rate (%) 2007 and fluctuating due to most crops greater than variations in climate – those in developing mainly rainfall and countries temperature Share of workers 58 – very high in spite of 2 – Labour engaged in employed in the growth in industry agriculture is very low in agriculture (%) and service sectors developed nations. Greater share comes from service and manufacturing sector Per capita AgGDP 201 – very low due to 27651 – Due large farm of Ag population fragmented holdings, size and only one per (US $) low marketable surplus cent of labour population and too many people engaged in agriculture depend on agriculture Share of GCA to 54 Large area under 20 – less area, TGA (%) cultivation, since India is temperate country, a tropical country severe winter, snow fall Share of area 35 Tropical country, 13 Temperate country, under irrigation benefits from two high industrialization (%) monsoons Input sub system


Feature Share of water use for agriculture (%) Share production fertilizer in world (%) of of the

Fertilizer use Kg. per ha. Herbicide use Area under Bt crops (million ha)

India (Developing country) 86 Very high, low demands due to less industrialization 9.77 Production cost is high due to obsolete technology and raw material and energy costs 90 Low and imbalanced usage Less – presently growing due to labour shortages for weeding 3.8 Only cotton is grown farms,

USA (Developed country) 41 High industrialization and domestic use 12.24 Production cost less

Number of tractors 16 Small per 1000 ha resources Number of Negligible harvesters / threshers per 1000 ha

110 Need based application High- high labour costs and farming is mechanized 54.6 many crops, maize, soybean, cotton, mustard less 27.4 farming is mechanized 3.8 farming is mechanized

Output sub system Feature India (Developing country) Post harvest loss Very high – low awareness and adoption of post harvest management practices, and inadequate market infrastructure Extent of 3 – 4 Low, mostly processing (% of cottage and tiny production) industries, technology adoption is less, growing market, Value of exports 7058 The value of (Million US $) exports is less, cost and quality constraints Value of imports 5108 restricted by (Million US $) government, export oriented imports

USA (Developed country) Low – post harvest management begins at the farm

High share, modern processing units, farm level integrated processing 63893 export processed food of

59874 Import of fresh fruits and vegetables from the tropics


Services subsystem Feature India (Developing country) Market Inadequate, most of the infrastructure sale at farm gate, transactions increasing in commodity exchanges Grading Voluntary, AgMark. Export - compulsory Storage Inadequate at farm level and at assembling points, mostly government owned – Central warehousing, State Warehousing and rural godowns. Cold storages inadequate but increasing Transport / Cold Inadequate chains Organized retailing Growing market, opposition in some states – UP, Kerala by traders Eco-tourism / Growing market alternative health systems – Ayurveda, Siddha Technology Larger government role transfer

USA (Developed country) Well established, price dissemination advanced, commodity exchanges vibrant Farm level grading Adequate storage at farm level and sufficient cold storages

More organized and greater availability Well established and integrated with farms Growing market

Greater private sector participation

Source Farm holdings USA Agrl growth rate: Economic growth: Lessons from two centuries of American agriculture

Special Features of Agribusiness Sector in India
The production subsystem (farm) is central to the agribusiness sector and the rest of the subsystems revolve around this subsystem. The special features of agribusiness are discussed subsystem wise. Production subsystem Feature Implications Entire system Fluctuations in farm production, production risk, dependent on affects sustainable production agriculture – 37

climate – natural resources Fragmented and scattered farm holdings Rainfed area 60 % Technology and yield Marketing Input subsystem Feature Fertilizers mostly public sector units Fertigation and micronutrients Biofertilizers and biocontrol agents / biopesticides Pesticides Farm mechanization Seeds

Small marketed surplus, assembling difficult, no economies of scale, variations in quality, less capital, mechanization is difficult Technology adoption less, low production, more risk Technology adoption is less, high yield gap Post harvest management – low adoption Mostly at farm, low share in consumer rupee, low value addition Implications Old Technology, Low production, Subsidized Government regulated – prevent shortages Growing market Less growth, certification fragmented and small units, no

mostly private sector units, new molecules, high price, Indian companies mostly formulators, Spurious chemicals Growing market, few large private companies – tractors and power tillers Few large companies – Multi National Companies (MNCs) and national firms, many regional players. Research and development initiative in private sector is less Implications Scattered and small size, absorb greater margin, largely passing on risk to farmers, Growing segment, resistance in some States and traditional market intermediaries, Increasing, meeting quality standards is a hurdle, cost advantage in few crops, stiff competition from other countries Fruits, onion, garlic etc., due to low production and cost advantage, export oriented imports – sugar, cashew Less quantity processed, consumer preference and availability of raw fruits and vegetables for greater period of the year, growing market, technology at low level, mostly cottage industries,

Output subsystem Feature Market intermediaries Organized retailing Exports Imports Processing


Services subsystem Feature Implications Market Inadequate, most of the sale at farm gate, infrastructure transactions increasing in commodity exchanges Grading Voluntary, AgMark. Export - compulsory Storage Inadequate at farm level and at assembling points, mostly government owned – Central warehousing, State Warehousing and rural godowns. Cold storages inadequate but increasing Transport / Cold Inadequate chains Organized retailing Growing market, opposition in some states – UP, Kerala by traders Technology Larger government role development and transfer Credit Largely met by nationalized banks – 18 % lending to priority sector, influenced by government policy on agriculture

Scope for agribusiness in India
Growing population and economy create greater demand for agricultural produce for consumption and industrial use. Technological developments, changes in business environment and government policy in the domestic and international market create opportunities for agricultural production. Thus the scope for agribusiness could be examined with respect to the demand side changes and supply side changes. Demand Increasing population, declining poverty ratio (19 per cent by 2007) and changes in income structure are likely to affect the nature of demand for agricultural produce in future. During 2005 – 2007 the GDP of the country has grown at about 9 per cent and during 2008 it has come down to 7 per cent due to global financial crisis. McKinsey Global Institute 2007 report indicates that income levels will almost triple and India will climb from its position as the 12th largest consumer market today to become the world's fifth-largest consumer market by 2025. Over 291 million people will move from desperate poverty to a more sustainable life, and India's middle class will swell by over ten times from its current size of 50 million to 583 million people. By 2025 over 23 million Indians – more than the population of Australia today – will number among the country's wealthiest citizens.


The population of the country is estimated to be 1.33 billion by 2020. Under the assumption of 3.5% growth in per capita GDP (low income growth scenario), demand for foodgrains (including feed, seed, wastage and export) is projected in the year 2020 at the level of 256 mt comprising 112 mt of rice, 82 mt of wheat, 39 mt of coarse grains and 22 mt of pulses. The demand for sugar, fruits, vegetables, and milk is estimated to grow to a level 33 mt, 77mt, 13 6mt and 116 mt respectively. The demand for meat is projected at 9 mt, fish 11 mt and eggs 77.5 billion. Increase in literacy and exposure to mass media could bring about changes in the preferences of the consumers and their consumption pattern. As more and more women get employed and the nuclear families increase, the demand for processed and fast foods is likely to increase. Motorized transport, computerization, better communication systems would change the lifestyle of people. Growth in export market also offers opportunities for agribusinesses. Some of the promising areas of agribusiness opportunities are given below; Opportunities for Agribusiness due to Demand side changes Food Non - food Processed food, fast food Art and handicrafts – banana fibre, Nutritive food – nutraceuticals / coir functional foods Demand for flowers, ornamentals, Organic food, no pesticide interior decoration, landscaping residues Organic cotton Demand for fruits and vegetables Natural dyes Medicinal plants – ayurveda, Eco-tourism siddha Cosmetics – plant based Products - Mushroom, fish, honey Organized retailing Wine Frozen and dehydrated produce Supply Constraints in availability of natural resources, development of new varieties, hybrids and technologies, changes in government polices, climate changes, labour shortages, credit flow, market access etc., stimulate agricultural production which in turn would create opportunities for input, output and services subsystem. Some of the likely changes in supply side and the opportunities for agribusiness are given below; Opportunities for Agribusiness due to Supply side changes Factor Opportunities Climate change Choice of crops, technology, renewable Organic farming energy


Reduction in subsidies Resource conservation Input use – need based application Labour shortage Quality Factor Market information Market access Excess production More capital Need for new technology Technology transfer Risk protection

Bio-inputs compost, vermiculture, enriched FYM, Biofertilizer Micro irrigation soil testing, agri-clinics, mechanization, herbicides micronutrients Opportunities media, journals commodity exchanges Cold storage / cold chains, warehouses financial services R & D services e platform, consultancy, extension Crop insurance firms, private

Technology driven projects New technology precision farming, protected cultivation – poly house, green house, shade net Biotechnology & Bt crops – cotton, brinjal, enzymes, nanotechnology foods, inputs Irradiation Increase shelf life, prevent quality loss Onions, Potatoes, Fruits, Marine, Meat, Micro-encapsulation Spices Cryogenic grinding Powder of fruits, Vegetables, Spices, Retort pouches Spices, Herbs. Membrane Technology Packaging – prepared curries, pulses etc. Bio-fuel micro filtration of juices, milk, etc Super Critical Jatropha, Pungam Extraction Oleoresins of Spices, herbs, etc. Agriculture allied enterprises Sericulture • Silkworm Rearing Technology • Silk Yarn Production, value addition & export • Handloom and Textile / Garment Designing Livestock Milk and meat chilling and processing Broiler and Egg Production and marketing


Livestock Feed, vaccine / drug production diagnosis / clinics Rearing quails, turkey, white pigs Fish     Integrated and Intensive Fish Farming, shrimp farming Fish Hatchery and feed Ornamental Fish Frozen and canned products

Government programmes that promote agribusinesses
Since mid sixties (1965s) the government has played an active role in accelerating agricultural production. Initially, the emphasis was to increase production to ensure food security for the growing population, which led to the ‘Green Revolution’. Production subsystem Green Revolution, launched in mid sixties became a landmark in the transition of agriculture in India. The introduction of high yielding varieties in wheat and rice with improved responsiveness to fertilizers and irrigation was collectively referred to as "Green Revolution". Adoption of improved technology was encouraged through a favourable policy environment, which envisaged; (i) increase in domestic production and supply of fertilizers at subsidized prices, (ii) increase in supply of quality seeds, (iii) expansion of irrigation facilities and enabling groundwater usage through subsidized / free electricity, (iv) transfer of technology on a continuous basis, (v) appropriate price policies to motivate risk averse farmers to adopt technologies and ensure fair returns to farmers and (vi) distribution of food grains throughout the country, for providing food to the needy and also stabilize the markets by creation of buffer stock and supply through public distribution system. Stimulating growth in the farm production systems also generates growth in the other sub systems namely, input, output and services sub systems. Presently following schemes are implemented to stimulate agricultural production at farm level. a. National Agricultural Development Programme (NADP) The Government of India have introduced a new Additional Central Assistance scheme to encourage States to draw up plans for their agriculture sector more comprehensively, considering the agro – climatic conditions, natural resource issues and technology into account, and integrating livestock, poultry and fisheries. The National Agriculture Development Programme (RKVY) aims at achieving 4% annual growth in agriculture sector during XI Plan period by ensuring holistic development of agriculture and allied sectors.


This programme provides greater flexibility and autonomy to the states to develop and pursue on the basis of their priorities through State and District agricultural plan. The objective of the scheme is to increase public investment in agriculture, reducing yield gap in key crops through focused interventions, maximize returns to the farmers and bringing quantifiable changes in the production and productivity of agriculture and allied sectors. The pattern of funding is 100% grant by Government of India. The projects relating to Agriculture, Animal Husbandry, Dairy, Fisheries and also minor irrigation are focused under this programme. b. Support to State Extension Programme for Extension Reforms through ATMA In order to involve farmers’ groups in planning and implementation and empowering them to achieve best results in transfer of technology, a centrally sponsored scheme to support State Extension Reforms has been implemented in Tamil Nadu on Pilot basis in 9 districts covering 133 blocks through Agricultural Technology Management Agency (ATMA) with funding pattern of 90:10 between Government of India and State Government. In addition, the Government of India has accorded permission to extend the ATMA scheme to the remaining 19 districts covering remaining 248 blocks except Nilgiris and Chennai districts. TAWDEVA (Tamil Nadu Watershed Development Agency) has been nominated as State Nodal Agency for all 28 ATMA districts. Tamil Nadu Agricultural University, Coimbatore has been nominated as State Agricultural Management Extension Training Institute (SAMETI) The pilot scheme of ATMA in 9 districts has been implemented from September 2006 after creation of administrative structure at Block level exclusively for ATMA represented by officials of all the departments, farmer representatives, women and NGO representatives. Farmer representatives representing Agriculture and 9 line departments formulating block action plans to fulfill their local needs and farmer representatives at block level representing Farmer Advisory Committee is monitoring the implementation of Block Level ATMA activities ATMA is fulfilling the needs of training, demonstrations, Farmer interest Group formation, Capacity Building and Revolving funds, Interstate and Inter-district exposure visits. The best performing farmers and the district ATMAs are felicitated with awards at Block, District and State Levels. c. Irrigated Agriculture Modernization and Water Bodies Restoration and Management (IAMWARM) Project in Tamil Nadu is being implemented with the assistance of World Bank over a period of six years (2007-08 to 2012-13) through Water Resources Organization (WRO) and Agricultural, Horticulture, Agricultural Engineering, Animal Husbandry and Fisheries along with Tamil Nadu Agricultural University. The IAMWARM Project aims to improve the service delivery, productivity in irrigated agriculture with effective integrated water resource management in selected 63 sub basins in Tamil Nadu. Activities like agricultural 43

Intensification and diversification, enhancing market access and agribusiness opportunities, strengthening institutions and instruments dealing with water resource management thereby improving the conveyance efficiency are being practiced in the project areas. Some of the activities of the project are;  Demonstration on various crops and organic farming  Distribution of critical inputs-like Bio-fertilizers, Micro Nutrient mixture, Gypsum, Blue Green Algae etc.  Distribution of Farm Implements like Hand operated Sprayers, Power Sprayers, Seed Drills and Green manure tramples and  Information,/Education and Communication activities (IEC) like Publicity and Capacity Building through training, exposure visits to farmers.

d. National Food Security Mission (NFSM) Introduction: To implement the resolution of National Development Council (NDC) which envisages increasing the production of Rice, Wheat and Pulses to the tune of 10 million tons, 8 million tons and 2 million tons respectively, a Centrally Sponsored Scheme, 'National Food Security Mission' (NFSM) was launched in 2007-08 in 311 districts of 17 States. NFSM has three sub-components viz: NFSM-Rice, NFSM-Wheat and NFSMPulses. Mission Objectives: Increasing production of rice, wheat and pulses through area expansion, and productivity enhancement in a sustainable manner in the identified districts of the country through:  Restoring soil fertility and productivity at the individual farm level;  Creation of employment opportunities; and  Enhancing farm level economy to restore confidence among the farmers. Implementation Strategy: The approach adopted includes active involvement of all stakeholders in planning, execution and monitoring of the programme, promotion and extension of improved technologies (seed, nutrients, plant protection, soil amendments, resource conservation, farm machines and tools), integration of interventions with district plan, regular monitoring and concurrent evaluation for impact assessment. e. National Horticulture Mission The National Horticulture Mission has been launched as a Centrally Sponsored Scheme to promote holistic growth of the horticulture sector through an area based regionally differentiated strategies. The scheme


will be fully funded by the Government and different components proposed for implementation financially supported on the scales laid down. To achieve the above objectives, the mission would adopt the following strategies: 1. Ensure an end-to-end holistic approach covering production, post harvest management, processing and marketing to assure appropriate returns to growers/producers. 2. Promote R&D technologies for production, post-harvest management and processing. 3. Enhance acreage, coverage, and productivity through; a. Diversification, from traditional crops to plantations, orchards, vineyards, flower and vegetable gardens. b. Extension of appropriate technology to the farmers for high-tech horticulture cultivation and precision farming 4. Assist setting up post harvest facilities such as pack house, ripening chamber, cold storages, Controlled Atmosphere (CA) storages etc, processing units for value addition and marketing infrastructure. 5. Adopt a coordinated approach and promotion of partnership, convergence and synergy among R&D, processing and marketing agencies in public as well as private sectors, at the National, Regional, State and sub-State levels. 6. Where appropriate and feasible, promote National Dairy Development Board (NDDB) model of cooperatives to ensure support and adequate returns to farmers. 7. Promote capacity-building and Human Resource Development at all levels. f. Wasteland Development: This scheme is implemented by the Tamil Nadu Government. Two acres of wasteland is given to landless labourers and fruits trees suitable for the region are planted with assistance from the government. The new owners have to manage the farm and benefit from the harvest. Thus, unutilized wasteland is brought under cultivation, supply of fruits increases and labourers become owners of land and they get stable employment. National Horticulture Board (NHB) National Horticulture Board (NHB) was set up by the Government of India in 1984 as an autonomous society under the Societies Registration Act 1860 with a mandate to promote integrated development in horticulture, to help in coordinating , stimulating and sustaining the production and processing of fruits and vegetables and to establish a sound infrastructure in the field of production, processing and marketing with a focus on post harvest management to reduce losses. Schemes are;  Development of commercial Horticulture through Production and Post-Harvest Management.


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Capital Investment Subsidy for Construction / Modernization Expansion of Cold Storage and Storage's for Horticulture Produce Technology Development and Transfer for Promotion of Horticulture Market Information Services for Horticulture Crops Horticulture Promotion Services (including terms of reference for Techno-economic Feasibility Study)...

Seeds Central Government schemes for providing quality seeds are;  Central Sector Scheme on Transport Subsidy for the movement of Seeds to the North-Eastern States, Sikkim, Himachal Pradesh, Jammu & Kashmir, Uttaranchal and Hill Areas of West Bengal.  Quality Control Arrangement on Seeds  Seed Bank Scheme i) Central sector scheme for establishment & maintenance of seed bank (ii)Guidelines for Implementation of Seed Bank Scheme  Central sector scheme for implementation of legislation on plant varieties and farmers rights protection Input subsystem The government provides subsidies for fertilizers, which aims at supporting the fertilizer industry. The government also arranges for production of bio-inputs like bio-fertlizers etc., and sells them to the farmers at subsidized rates. Through the policy and better seed inspection, the government ensures that the farmers get access to quality seed. The government was providing subsidy for micro irrigation systems especially drip and sprinkler so as to enable farmers to improve water use efficiency. Output sub system Various departments of the government provide different schemes to agribusiness firms for promoting processing and exports. Some of the schemes are; a. Small Farmers’ Agri-Business Consortium The central government has established the Small Farmers’ Agri-Business Consortium (SFAC) for promoting small agribusinesses. The major objective of the SFAC is to promote innovative ideas for generating income and employment in rural areas through support to the various types of agri-business. The scheme envisages the provision of financial assistance to the Small Farmers’ Agri-Business Consortium, in the form of Grants-inaid for achieving the objective given above. b. Ministry of Food Processing: Major schemes offered are;


1. Scheme for Technology Upgradation/ Establishment/Modernization of FPI, Modernization of Pulse Milling Unit - installation of driers and dust control system, Setting up of Mini Pulse Processing Unit 2. Scheme for Human Resource Development – setting up Food Processing and Training Centre (FPTC), Creation of Infrastructure facilities for running Degree / Diploma Courses and Training Programme for Food Processing, Entrepreneurship Development Programme 3. Scheme for Quality Assurance and Safety Concept - Total Quality Management (TQM), Promotion of Quality Assurance and Safety Concept, Bar Coding, Strengthening of Codex Cell, Setting up of Quality Control Laboratory, R & D in Processed Food Sector 4. Scheme for Strengthening of Nodal Agencies – State Institutions 5. Scheme for Backward and Forward Integration and other Promotional Activities - Backward Linkages, Forward Integration, Generic Advertisement, Promotional activities such as participation in Exhibition / Fairs , Supporting Seminars / Workshops / Conferences etc. and Studies and Surveys, Strengthening of Fruit and Vegetable Processing Directorate, Strengthening of Industry Associations, Food Fortification 6. Scheme for Infrastructure Development – Food Parks, Packaging Centre, Integrated Cold Chain Facilities, Value Added Centre, Irradiation Facilities


Agricultural and Processed Food Products Export Development Authority (APEDA) An Integrated System for Export Promotion and Support Schemes viz.,

Financial Assistance Scheme (FAS) - Schemes for Market Development, Infrastructure Development , Quality Development, and Research and Development Market Development Assistance Scheme (MDA) Transport Assistance (Air/Sea)

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The Tamil Nadu government offers a scheme on ‘Anna Marumalarchi Thittam’ for promoting food processing industries in the State. The scheme provides 30 per cent back end subsidy for the new units established. Services subsystem Agri-clinics and agri-business centres: The Small Farmers Agribusiness Consortium, Ministry of Agriculture and NABARD, Mumbai together operate a scheme for establishing agri-clinics and agribusiness centres. This scheme is implemented by MANAGE, Hyderabad through various institutions across the country. Graduates from SAUs are eligible for participation in the scheme. The scheme comprises of eight weeks training on various technical aspects of agribusiness and the managerial aspects including accounting and business project formulation for funding from nationalized banks. Lending by banks for agriculture sector: All banks have been advised to allocate 18 per cent of the lending to the priority sector, which includes agriculture. Such huge credit allocation is done as crop loans, loans to buy farm machineries and equipments, livestock etc. Government promotes public private partnerships in technology transfer and facilitates favouarble climate for private firms to engage in technology transfer. Government also promotes contract farming and crop insurance.