Course Title: Introduction to Agribusiness Management : 3CrHrs

Course code: ABVM 211

Academic year: 2022

Target group: 2nd year Abvm Students

Instructor :Etabez A(MSc)

 CHAPTER ONE
INTRODUCTION TO AGRIBUSINESS

CHAPTER OUTLINES
 The Concept of Agribusiness
 Scope and Nature of Agribusiness
 Agribusiness Complex and Development
 Agribusiness Formation: Legal Forms of Agribusines
 Agribusiness is a combination of two words
agriculture and business.
The word agriculture indicates plowing a field, planting seed,
harvesting a crop, milking cows, or feeding livestock
 It is the science of cultivating crops, raising
livestock, provision of raw materials for industries and
agricultural products for man’s use.
 It is directly or indirectly contributed to many
sector of our basic needs or livelihood. Some of
these are:
 Food
 Cloth
 Houses
 Fuel
 Earning source
 Foreign currency
 International relation,
 Revenue income etc
Business is an organized and systematized human
activity involving buying and selling goods,
manufacturing goods or providing services in order to
earn profit.

Agribusiness refers to the industry concerned with the

production, processing, and distribution of agricultural
products or with farm machinery and services.
The food and fiber system is increasingly being
referred to as “agribusiness”.
 It is apparent that the definition of agriculture had to be
expanded to include more than production.

 The food and fiber system is increasingly being referred

to as “agribusiness”.

 Agribusiness Management is oriented towards

management of agricultural business, that is, firms that

provide supplies and services to farmers or process and

market farm products.

 Agribusiness is the business of agricultural
production.

 The term was coined in 1957 by Goldberg and

Davis.

 It includes agrichemicals, breeding, crop production ,

distribution, farm machinery, processing, and seed supply,

as well as marketing and retail sales.

 All agents of the food and fiber value chain and

those institutions that influence it are part of the
agribusiness system.
 The total food and fiber system includes all economic
activities linked to agricultural production, such as
Machinery repair, fertilizer production, food
processing and manufacturing, transportation ,
wholesale and retail distribution of products ,
and eating establishments.
 Also included the economic activities that link the
production of plant and animal fibers and hides to fabric,
clothing, and footwear.
 According to Davis and Goldberg agribusiness represents
three parts:
1. The agricultural input sector,
2. The production sector and,
3. The processing-manufacturing sector.
 These three sectors are interrelated parts of a
system in which the success of each part depends
heavily on the proper functioning of the other two.
 Agribusiness is the sum total of all operations involved in the
manufacture and distribution of farm supplies, production
activities on the farm, storage, processing and distribution of
farm commodities and items made from them” (John David and
Gold Berg).
Agribusiness is everything from farm to fork.

It represents all business-related activities involved in the

production, finance, marketing and distribution of food
and fiber.
Scope of Agribusiness
 It has already indicated that agribusiness is a complex system of
input sector, production sector, processing manufacturing sector
and transport and marketing sector.
 Therefore, it is directly related to industry, commerce and trade.
 Industry is concerned with the production of commodities and
materials.
 While commerce and trade are concerned with their
distribution.
 It has a broader scope
Industry refers to the processes of extraction
and production of goods meant for final
consumption or use buy individual or buy
another industry for its production.
consumer goods are goods used by the final or
ultimate consumers such as edible oils, fruit
papaya, etc
 Type of industry
1. Primary Industries(Extractive industries)

It is the extraction or production of raw materials

(which are natural products) from the land or sea e.g.
timber, Mining, fishing, forestry, and farming are all
example of primary industries.
2. Secondary Industries (Manufacturing industry)

Involve the process of raw materials into another

product by manual lab our or machines.
Secondary industries often use assembly lines e.g. a car
factory, textile production, house constraction, food
processing
3. Tertiary Industries (Services industry)
Neither produce a raw material nor make a product
Instead they provide services to other people and industries
This sector or industry responsible for service delivered to both
primary and secondary industry
Include hotel and resort,haircutt,bank,finance,hospital
etc
4. Quaternary Industries
involve the use of high technique industries.
People who work for these companies are often highly
qualified within their field of work.
Research and development companies are the most common
types of businesses in this sector.
 All of the companies are linked in one way or another. For

example:

 The raw material cotton is extracted by primary industries

 The cotton may then be turned into an item of clothing in the

secondary industry.

 Tertiary industries may advertise the goods in magazines and

newspapers.

 The quaternary industry may involve the product being

advertised or researched to check that the item of clothing

meets the standards that it claims too.

 Dimensions(scope) of Agri-business:
 It deals with different components of both
agricultural and industrial sector, their
interdependence and influence of one sector on other.
 It deals with decision making process of farm either
private or government in relation to production and
selling aspects.
 It deals with strengths and weaknesses of a project
and thereby their viability in competing enterprises.
 Agri-business is always market oriented
 Commerce is another major component of agribusiness.
 It includes all those activities that are necessary to bring goods
and services from the place of their production to the place of their
consumption.
 It include all activities insurance, storage, advertisment that help
directly or indirectly facilitate the purchase and sale of good and
service.
 Trade means buying and selling of good and service in return for
money, but commerce is not only money
 Commerce is wider than trade,Trade is the subset of commerce,
 Trade is normally classified into the following types:
 On the basis of volume as wholesale trade and retail
trade.
 Wholesale trade involves exchange of large volume of
goods
 Retail trade involves exchange of smaller volume of goods.

 And on the basis of coverage as regional trade and

national trade.
The Nature of Successful Agribusiness
 The important requisites for success in a modern
business are:
 Clear objectives: are destination points for an
agribusiness.
 Planning: is a proposal based on part of experience and
present trends for future actions.
 Research: a systematic search for new
knowledge.
 Finance: Finance is said to be the life-blood
of business enterprise.
 It brings together the land, labor, machine
and raw materials into production
Proper plant location, layout and size:
 Plant Location is the right location for the
manufacturing facility
 Location of the business should be convenient from various
points of view such as
 availability of required infrastructure facilities
 availability of inputs like raw materials
 skill labor, transportation, access to customer, nearer to
the market etc.
 Plant location planning is more important for new
enterprises b/s success of organization dependent on
location decision.
 Plant layout refers to the act of planning, an optimum
arrangement of different facilities including man,
machine, equipment, material are brought together for
manufacturing of product
 Efficient management: One of the reasons for
failure of business often attributed to the
poor management or inefficient management.
Efficient businessperson can make proper
use of available resources for achieving the
objectives set for the business
Harmonious relations with the workers: for
successful operation of business, there should be
cordial and harmonious relations maintained with
the workers or labors to get their full cooperation
in achieving business activities.
 Agribusiness Complex and Development
 What does agribusiness complex Involve?

 Agribusiness can be broken down into four economically

interdependent sectors.These sectors include
A. the agricultural input sector,
B. the production or the farm sector
C. the processing or manufacturing sector and
D. the marketing (distribution) sectors.
 Farmers are buying more of their inputs, These inputs
include feed, fertilizer, farm machinery, chemicals and
other farm supplies and services.
Food processors are the link between farmers and food
wholesalers and retailers.
There are large number of processing firms that add
form utility to the raw farm products.
For example, the transformation of sugar cane
into sugar mango into juice and wheat into
bread.
Processors may sell to wholesalers and
retailers through food brokers
1. Agricultural Input supply sub-system

 Agricultural inputs sometimes called (factors of

production, productive resources or simply as
inputs) are the basic resources for agricultural
production.
 The major inputs in agricultural production fall under
the category of land, labor, capital and
management/entreprenurship.
 Agricultural equipment, and machinery are among
the most demanding of agricultural inputs.
 Seeds, fertilizers, pesticides and the like are
known as stock input which are consumed
during the production period and They can be
stored, if not used currently, for future use.
 But labor and management is called flow input if
we not used, cannot be stored for the next
season.
Agricultural inputs can be categorized into two:
 Consumable inputs include manures and
fertilizers, seeds, insecticides, diesel oil and
electricity
 Capital inputs include tractors, harvesters & threshers,
pump sets, and other implements.
2. Production or Farm Sub-System
 This sector is responsible for the transformation of
the raw farm output into a final consumer product at
the retail level.
 This sector is the largest of the sectors in the food
system. The production sector has been the center
of much of the change in agribusiness.

 Two extreme positions which can be identified in

production sector are:
1.Production orientated: farmer regards/focuse on
product which ensures maximum effort is put on quality and
optimum performance of product. It does not focus what the
customers want.
 The Advantage is costs that would have been used in

determining customer preference are eliminated. But

ac company /farmer may be phased out if competitors with
the same products focuses on consumer need.
 A farmer use this method misses on many market
opportunities.
2.Marketing oriented : farmers/companys will
focuses r to produce goods which can profitably be
sold.
 It is focuses on the satisfaction of the customer.but it
involve high cost due to market research
 In general the difference between the two is product
orientation focuses on the quality of product but
market orientation focuse on the needs and
satisfaction of customer.
 Marketing involves producers finding out what customers
want and as a result producing a product that satisfies
those needs in the expected quality, time and price.
 This is what we call market oriented production and it is a
core concept in agribusiness.

 Market orientation is built upon three orientations

namely:
product or quantity,
sales or quality and
market or consumer preference orientations.
 Farmers are increasingly buying farm inputs from
the markets.
 Agriculture is fast getting commercialized and farm
production is getting increasingly transferred to
manufacturing-processing sector because of
domestic consumers and growing to the global
market.
3. The Processing/Manufacturing /Subsystem
 It is primarily responsible to transforming a given
agricultural product into some other valuable product.
 The processing-manufacturing sector includes all of
the individuals and firms which process the raw
agricultural commodities produced by the
production sector.
 They will change one agricultural product into
another. Examples include:
 turn wheat into flour and then flour to bread
 -fruit into juice
 changing raw milk into pasteurized milk
It has a particular importance for
Transforming an unprofitable enterprise into a
profitable one
Creates new markets to differentiate a product from
others and
Gain advantage over competitors
4. Marketing – Distribution Sub-System
 It is generally accepted that marketing is one of the most
crucial aspects of Agribusiness Management.
 It is accountable to the distribution scattering; of the
processed or raw agricultural products to the right customers
at the right time and place with the right price through the
right channel of distribution.
 Marketing It is defined as the process of satisfying human
needs by bringing products to people in the proper form, time
and place (Branson and Norvel, 1983).
 The four P’s used in agribusiness in developing
agricultural product that will improve their
competitive positions in the market place by better
satisfying consumers’ needs and wants are
product, price, place and promotion.
 This subsystem contributes at each level of
agribusiness development that is from the input supply
to production, processing and to consumption.
 On one hand, the sector makes available farm inputs to
the production sector. On the other hand, this sector
makes available processed products to the final
consumers.
 Packaging industries, transport companies,
warehouses, advertising companies, insurance
companies, wholesale firms, retail outlets, etc, are all
parts of this sector.
Agribusiness Formation: Legal Forms of Agribusines

1. sole proprietorships
The vast majority of small businesses start out as sole
proprietorships.
These firms are owned by one person, usually the individual
who has day-to-day responsibility for running the business.
Sole proprietorships own all the assets of the business and the
profits generated by it.
They also assume complete responsibility for any of its
liabilities or debts.
In the eyes of the law and the public, you are one in the same
with the business.
 Easiest and least expensive form of ownership to
organize
2. Partnerships

In a Partnership, two or more people share ownership of a

single business.
The Partners should have a legal agreement that sets forth
how decisions will be made,
profits will be shared, disputes will be resolved,
how future partners will be admitted to the partnership,
how partners can be bought out, or what steps will be taken
to dissolve the partnership when needed;
A legal form of business operation between two or
more individuals who share management and
profits
A partnership is similar to a sole proprietorship in
that the partners are the only beneficiaries of the
firm’s profits, but they are also responsible for any
losses and debts.
 Partnerships can be especially attractive if each
person’s expertise complements the others .
Partnerships are relatively easy to establish; however
time should be invested in developing the partnership
agreement.

With more than one owner, the ability to raise funds

may be increased.
3. Corporations

A corporation is an organization—usually a group of people

or a company.

chartered by the state in which it is headquartered, is

considered by law to be a unique entity, separate and apart
from those who own it.
A Corporation can be taxed; it can be sued; it can enter into
contractual agreements.
The owners of a corporation are its shareholders
Thank you