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Agricultural entrepreneurship

Unit one

Introduction: synopsis of entrepreneurship

An entrepreneur:-

Sees an opportunity,
Figures out away to acquire the needed resources, and
Acts to turn the opportunity into a reward.

Entrepreneurship

Brings a fast growing business started by one or two people with a good idea and a
willingness to work hard.
Help individuals, families, organizations, and communities turn opportunities into actions
to maintain or increase well-being.

In almost all of the definitions of entrepreneurship, there is agreement that we are talking about
a kind of behavior that includes:

Initiative taking,
The organizing and reorganizing of social and economic mechanisms to turn resources
and situations to practical account,
The acceptance of risk or failure.

To an economist, an entrepreneur is
One who brings resources, labor, materials, and other assets into combinations that make
their value greater than before, and also
One who introduces changes, innovations, and a new order
To a psychologist, such a person is typically driven by certain forces
The need to obtain or attain something,
To experiment, to accomplish, or perhaps to escape the authority of others.
Definition of entrepreneurship
Entrepreneurship is the process of creating something new
With value by devoting the necessary time and effort,
Assuming the accompanying financial, psychic, and social risks, and
Receiving the resulting rewards of monetary and personal satisfaction and
independence.
This definition stresses four basic aspects of being an entrepreneur regardless of the field.
First, entrepreneurship involves the creation process
Creating something new of value to the entrepreneur and value to the audience for which it is
developed.
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Second, entrepreneurship requires the devotion of the necessary time and effort.
Assuming the necessary risks is the third aspect of entrepreneurship.
These risks take a variety of forms, but usually
Centre on financial,
Psychological, and
Social areas.
The final part of the definition involves the rewards of being an entrepreneur.
These rewards are
Independence,
Personal satisfaction.
The monetary reward also comes into play.
For the person who actually starts his or her own business, there is a high failure rate due to
such things as
Poor sales,
Intense competition,
Lack of capital, or
Lack of managerial ability.
The financial and emotional risk can also be very high.
Entrepreneur vs. entrepreneurship
Entrepreneur
Considered as a person who sets up his own business or industry.
He has initiative, drive, skill and spirit of innovation who aims at high goals.
He looks for opportunities, identifies and seizes them mainly for economic gains.
Are action-oriented, highly motivated individuals who take risks to achieve goals
Entrepreneurship
Entrepreneurship is the purposeful activity of an individual or a group of associated
individuals, undertaken to initiate, maintain or aggrandize profit by production or
distribution of economic goods and services.
Entrepreneurship is very often associated with adventurism, risk bearing, innovating
creativity.
It is concerned with making dynamic changes in the process of production, innovation in
production, new usage (or materials).
It is a mental attitude to take calculated risks with a view to attaining certain objectives.
It also means doing something in a new and better manner.
CHARACTERISTICS OF AN ENTREPRENEUR
1) An entrepreneur brings about change in the society. He is a catalyst of change.
2) Entrepreneur is action-oriented, highly motivated individual who takes risk to achieve goals.
3) Entrepreneur accepts responsibilities with enthusiasm and endurance.
4) Entrepreneur is thinker and doer, planner and worker.
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5) Entrepreneur can foresee the future, seize market with a salesmans persuasiveness,
manipulate funds with financial talent and smell error, frauds and deficiencies with an auditors
precisions.
6) Entrepreneur undertakes venture not for his personal gain alone but for the benefit of
consumers, government and the society as well.
7) Entrepreneur builds new enterprises.
8) Entrepreneur finds the resources required to exploit opportunities.
9) Entrepreneur does extraordinary things as a function of vision, hard work, and passion.
10) Although many people come up with great business ideas, most of them never act on their
ideas.
Entrepreneur vs. Manager
The entrepreneur differs from the professional manager in that he undertakes a venture for his
personal gratification.
As such he cannot live within the framework of occupational behavior set by others.
He may engage professional manager to perform some of his functions such as setting of
objectives, policies, procedures, rules, strategies, formal communication network. However, the
entrepreneurial functions of innovation, assumption of business risk and commitment to his
vision cannot be delegated to the professional manager.
Innovation and entrepreneurship
Entrepreneurship is
A creative and innovative response to the environment and
An ability to recognize, initiate and exploit an economic opportunity.
Innovation is
Equal to competitive advantage.
Adds value to the product.
It is only through innovation, the organizations can survive the increasing competition in the
market place.
Risks involved with entrepreneurship
Entrepreneurship involves the following types of risks.
1) Financial risk:
2) Personal risk:
3) Carrier risk:
4) Psychological risk: Psychological risk is the mental agonies an entrepreneur bears while
organizing and running a business venture some entrepreneurs who have suffered financial
catastrophes have been unable to bounce back.
Barriers to entrepreneurship
Entrepreneurial development is very slow in under developed and developing countries. This is
due to the presence of several factors.
These barriers to entrepreneurship are classified into three as follows:
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A. environmental barriers
1) Non-Availability of Raw Material: -
2) Lack of Skilled Labor: -
3) Lack of Good Machinery: -
4) Lack of Infrastructure: -
5) Lack of Fund: -
6) Other Environmental Barriers: - Lack of business education, Lack of motivation from
government, corruption in administration, high cost of production etc. are the other
environmental barriers that inhibit the growth of entrepreneurship in underdeveloped countries.
B personal barriers
Personal barrier are those barriers that are caused by emotional blocks of an individual. Some of
the personal barriers may be outlined as below:
1) Unwillingness to Invest Money: -
2) Lack of Confidence: - They feel that they could not master all the skills. Thus most people are
reluctant to become entrepreneurs.
3) Lack of Motivation: -
4) Lack of Patience: -
5) Inability to Dream: -
C social barriers
The social attitude inhibits many people even from thinking of starting a business. The important
social barriers are as follows.
1) Low Status: -
2) Custom and Tradition of People: -.
Who is manager and what management
Manager
A manager is someone who coordinates and oversees the work of other people so that
organizational goals can be accomplished. However, keep in mind that managers may have
additional work duties not related to coordinating the work of others.
A managers job is not about personal achievement, it is about helping others do their work.
Management
"Management is the organizational process that includes strategic planning, setting
objectives, managing resources, deploying the human and financial assets needed to
achieve objectives, and measuring results.
Management also includes recording and storing facts and information for later use or for
others within the organization.
Management functions are not limited to managers and supervisors.
Every member of the organization has some management and reporting functions as part
of their job."
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Levels and Skills of Managers

Most organizations have three levels of management.
First-line,
Middle, and
Top managers.
First-line managers are responsible for the day-to-day supervision of non-managerial
employees.
Middle managers are responsible for developing and utilizing organizational resources
efficiently and effectively, and
Top managers have cross departmental responsibility.
There are three main kinds of managerial skills which include
Conceptual,
Human, and
Technical.
Organizations divide managers into departments according to their job responsibilities because of
the need to develop and build technical skills.
"Top managers must establish appropriate goals for the entire organization and verify that
department managers are utilizing resources to achieve those goals."
Essential Managerial Tasks
A manager's job uniquely describes the functions of management, which are most
commonly cited as
Planning,
Organizing,
Leading, and
Controlling.
The process of management is defined by the functions of management, which are distinct from
accounting, finance, marketing, and other business functions. "
1. Planning
Planning is:-
An attempt to prepare for future by assessing existing resources and capabilities.
Determining future line of action with a view to achieve organizational objectives.
Deciding in advance what is to be done, how and where to be done who will do it and
how results are to be evaluated.
The Basic function of mgt.
Necessary to ensure proper utilization of human, financial and physical resources to
achieve the objectives of the enterprise.
Advantages of planning
Planning give-
Direction on objective
Focuses attention on activities
Helps to affect the change and uncertainty
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Facilitate control
Helps in the economical operations
Accounts for growth
Helps to avoid bottlenecks in production
Steps in Planning
1. Establishing objectives:
2. Premising:
3. Determining alternative courses:
4. Evaluating alternative courses:
5. Selecting the course of action:
6. Formulating a derivative plans:
7. Numbering plans by budgeting
1. Establishing objectives:
Objectives
Specifying the results expected,
Indicate the end points, of what is to be done, where primary emphasis is to be placed
and what is to be accomplished by the network of strategies, policies, procedures,
rules, budget and programmes.
2. Premising:
To establish and obtain agreement to utilize and disseminate critical planning premises.
These are Forecast data of a factual nature, applicable to basic policies and existing
company plans.
Premises then are planning assumptions, in other words, expected environment of plans
in operations. This step leads to one of the major principle of planning, the more
individuals charged with planning understand and agree to utilize consistent planning
premises, the more coordinated enterprise planning will be. Forecasting is important in
premising.
iii. Determining alternative courses: The third step in planning is to reach for and examine
alternative course of action. The most common problem is not finding alternatives, but reducing
the number of alternatives so that the most promising may be analyzed.
iv. Evaluating alternative courses: the fourth step is to evaluate alternative courses by weighing
the various factors in the light of premises and goals.
v. Selecting the course of action: The fifth planning step, selecting the course of action, is the
point at which the plan is adapted to the real point of decision making.
Vi. Formulating a derivative plans: At the point where decision is made, planning is seldom
complete, a sixth step is to formulate derivative plan. There are almost invariably derivative
plans required to support the basic plan.
vii. Numbering plans by budgeting: After decisions are made and plans are set the final step to
give them meaning is to numberize them to budgets.
2. Organizing:
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Organizing is the arrangement and allocation of work, authority and resources in an

effective and efficient way.
To organize an agribusiness, is to provide it with everything useful to its functioning-
land, labor, capital and organization and other managerial techniques on farm.
Organizing is an important function of management by management combines the human
and material resources.
This function must be performed when an activity involves two or more persons.
Organizing involves
Determining the activities to be done,
Grouping the activities,
Assigning the grouping activities to be individuals and creating a structure of authority
and
Responsibility among the people to achieve the objectives of the enterprise.
The process of organization involves the determination of authority and responsibility
relationships in the organization.
3. Staffing: It involves filling positions in agribusiness.
It is done by identifying Work place requirements, Locating, Recruiting, Selecting, Placing, and
Appraising planning the careers of, compensating or training or otherwise develops both
candidates and current job holders to accomplish their tasks efficiently.
In short staffing function includes the process by which the right person is placed in a right
organizational position.
4. Directing: Managers have stimulated action by giving orders to sub ordinates and by
supervising them as they go with their work.
Directing was identified as moving to action and supplying stimulating power to group of
persons.
Directing embraces three important components;
Issuing of orders and instructions to the subordinates.
ii. Guiding and teaching the subordinates the proper method of doing work.
iii. Supervising the subordinates to ensure that these works conforms to the plans.
Thus directing process involves the following functions;
a. Leadership: Leadership is the process by which a manger guides and influences the work of
others in choosing and attaining the specified goals by mediating between the individuals and
organization in such a manner that both will obtain maximum satisfaction.
b. Communication: A manager who is providing leadership to his subordinates has to tell them
what they are required to do, how to do it and when to do it.
He has to create an understanding in the minds of subordinates of the work to be done. This is
done by the process of communication. Communication is the transmission, receipt and
understanding of ideas, instructions or information.
c. Motivation: It means inspiring the personnel with zeal to work and cooperate for the
accomplishment of common objectives. It is function of manager to motivate the people working
under him to perform the work assigned effectively and efficiently.
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d. Supervision: The manager has o see to it that subordinates work effectively to accomplish the
tasks that he has entrusted them to do. Supervision is the process by which conformity between
planned and actual results is maintained. It is essential to ensure that subordinates are doing as
they are directed.
5. Controlling: It is measuring and correcting of activities of subordinates to ensure that events
conform to plans.
It measures performance against goals and plans, shows where negative deviation exist, help
ensure the accomplishment of plans.
Controls are indicators of performance and set up to help measure progress against plan. The
overall areas which are important and controls have to be set up are manpower, material, quality
of work, quantity of work, time, space and methods. Once the areas of controls have been
established the supervisor must find or set up standard for each activity in each area. Standards
are the measuring devices for the activity.
Concept of marketing
Today, marketing must be understood not in the old sense of making a saletelling and
sellingbut in the new sense of satisfying customer needs in a socially responsible and
ethical manner.
Broadly defined, marketing is a social and managerial process by which individuals and
organizations obtain what they need and want through creating and exchanging value with
others.
We define marketing as the process by which companies create value for customers and
build strong customer relationships in order to capture value from customers in return.
Markets
A market is the set of all actual and potential buyers of a product or service. These buyers share a
particular need or want that can be satisfied through exchange relationships.
Marketing means managing markets to bring about profitable customer relationships.
Core marketing activities.
consumer research, distribution,
product development, pricing, and
communication, service

Consumers market when they search for products, interact with companies to obtain
information, and make their purchases.
Marketing involves serving a market of final consumers in the face of competitors.
What are market components?
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What is market analysis?

A good market analysis is predicated on certain key concepts. Three of these concepts
are:
Marketing management philosophies
Market segmentation strategies and
Consumer behavior
Consumer behavior affects all marketing efforts includes: pricing, promotion, and
distribution.
Types of marketing management philosophies
Three distinct philosophies are evident among small firms. These are:
Production oriented
Sales oriented and
Consumer oriented
A consumer oriented philosophy is the essence of what is called the marketing
concept.
Production Concept:
Assumes that customers will favor products that are available and highly affordable
Management should therefore; focus on increasing production and distribution.
Most of producers believe that the customers prefer only low priced products and so they
concentrates on large scale production to reduce the cost.
Selling concept:
Assumes that the consumers response will not increase without promotional efforts.
Even the best products cannot have assured sales without the help of sales promotion and
aggressive salesmanship.
It implies the consumers satisfaction is considered secondary; selling the product is the
primary consideration.
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Marketing /consumer/Concept:
Every attempt is made to satisfy the wants of customers and to achieve this objective;
Assumes that organizations produce what customer want and thereby yield consumers
satisfaction and make profits.
The need for marketing segmentation
Market segmentation is necessary because in most cases buyers of a product or a
service are no homogenous group.
Actually, every buyer has individual needs, preferences, resources and behaviors.
Since it is virtually impossible to cater for every customers individual characteristics,
marketers group customers to market segments by variables they have in common.
Definition:
Market segmentation is the segmentation of customer markets into homogenous groups
of customers, each of them reacting differently to promotion, communication, pricing and
other variables of the marketing mix.
Benefits of Market Segmentation

Better serving customers needs and wants

Up-selling across the customer journey
Absorption of purchasing power by price differentiation
Attract additional customer groups
Sustainable customer relationships in all phases of customer life cycle

Distribution

Justifying channels of distribution

Four main functions of channel intermediaries are
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Breaking bulk,
Assorting,
Providing information, and
Shifting risks.
Breaking Bulk: an intermediary process that makes large quantities of product available
in smaller amounts
Assorting: bringing together homogeneous lines of goods into a heterogeneous
assortment

Shifting Risks: by using intermediaries called merchant middlemen, who take title to the
goods they distribute; a small firm can often share or totally shift business risks.
Demand analysis
Demand reflects the size and the pattern of market.
The demand for output and input; the demand for the firm and the industry; the demand
by the consumer and stockiest; and similar other demand concepts become therefore,
relevant for managerial decision analysis. Even if the firm pursues objectives alternative
to profit-maximization, demand concepts still remain relevant.
Tastes, preferences and choices are all concepts directly built into the economic concepts
of demand.
Significance of demand analysis
Information on the size and type of demand helps management in planning its
requirements of men, materials, machines, money and what have you.
The common theme underlying these examples is that the whole range of planning by the
firmproduction planning, inventory planning, cost budgeting, purchase plan, market
research, pricing decision, advertisement budget, profit planning etc. call for an analysis
of demand.
Demand analysis seeks to identify and measure the forces that determine sales; it reflects
the market conditions for the firms product.
Concept of demand
Demand for product implies:
a) Desires to acquire it,
b) Willingness to pay for it, and
c) Ability to pay for it.
It should also be noted that the demand for a product (a commodity or a service ) has no
meaning unless it is stated with
Specific reference to the time,
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Its price,
Price of is related goods,
Consumers income and tastes etc.
This is because demand, as is used in Economics, varies with fluctuations in these
factors.
To sum up, we can say that the demand for a product is the desire for
that product backed by willingness as well as ability to pay for it.
It is always defined with reference to a particular time, place,
price and given values of other variables on which it depends.
Types of demand
I. Direct and Derived Demands
Direct demand
refers to demand for goods meant for final consumption;
It is the demand for consumers goods like food items, readymade garments and houses.
Derived demand
Refers to demand for goods which are needed for further production;
It is the demand for producers goods like industrial raw materials, machine tools and
equipments.
Thus the demand for an input or what is called a factor of production is a derived
demand; its demand depends on the demand for output where the input enters.
However, the direct demand for a product is not contingent upon the demand for other
products.
ii) Domestic and Industrial Demands
The example of the refrigerator can be restated to distinguish between the demand for
domestic consumption and the demand for industrial use. In case of certain industrial raw
materials which are also used for domestic purpose, this distinction is very meaningful.
For example, coal has both domestic and industrial demand, and the distinction is
important from the standpoint of pricing and distribution of coal.
iii) Autonomous and Induced Demand
When the demand for a product is tied to the purchase of some parent product, its
demand is called induced or derived.
For example, the demand for cement is induced by (derived from) the demand for
housing. As stated above, the demand for all producers goods is derived or induced.
Autonomous demand, on the other hand, is not derived or induced. Unless a product is
totally independent of the use of other products, it is difficult to talk about autonomous
demand. In the present world of dependence, there is hardly any autonomous demand.
Nobody today consumers just a single commodity; everybody consumes a bundle of
commodities. Even then, all direct demand may be loosely called autonomous.
iv) Perishable and Durable Goods Demands
Both consumers goods and producers goods are further classified into perishable/non-
durable/single-use goods and durable/non-perishable/repeated-use goods. The former
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refers to final output like bread or raw material like cement which can be used only once.
The latter refers to items like shirt, car or a machine which can be used repeatedly. This
distinction is useful because durable products present more complicated problems of
demand analysis than perishable products.
Non-durable items are meant for meeting immediate (current) demand, but durable items
are designed to meet current as well as future demand as they are used over a period of
time.
Durable goods demand has two varieties replacement of old products and
expansion of total stock.
v) New and Replacement Demands
If the purchase or acquisition of an item is meant as an addition to stock, it is a new
demand. If the purchase of an item is meant for maintaining the old stock of capital/asset,
it is replacement demand. The demand for spare parts of a machine is replacement
demand, but the demand for the latest model of a particular machine (say, the latest
generation computer) is a new demand. vi) Final and Intermediate Demands
The demand for semi-finished products, industrial raw materials and similar intermediate
goods are all derived demands, i.e., induced by the demand for final goods.
vii) Individual and Market Demands
A market is visited by different consumers, consumer differences depending on factors
like income, age, sex etc. They all react differently to the prevailing market price of a
commodity. For example, when the price is very high, a low-income buyer may not buy
anything, though a high income buyer may buy something. In such a case, we may
distinguish between the demand of an individual buyer and that of the market which is
the aggregate of individuals.
You may note that both individual and market demand schedules (and hence curves,
when plotted) obey the law of demand.
viii) Total Market and Segmented Market Demands
Different individual buyers together may represent a given market segment; and several
market segments together may represent the total market. market segments may be
defined in terms of criteria like location, age, sex, income, nationality, and so on
x) Company and Industry Demands
An industry is the aggregate of firms (companies). Thus the Companys demand is
similar to an individual demand, whereas the industrys demand is similar to aggregated
total demand.
The inter-firm differences with regard to technology, product quality, financial position,
market (demand) share, market leadership and competitiveness---- all these are possible
explanatory factors. In fact, a clear understanding of the relation between company and
industry demands necessitates an understanding of different market structures.
What is demand management?
Demand management is the function of recognizing all of the demand for the products
and services that are required to support the marketplace.
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Demand management encompasses the activities of demand planning, order entry, and
order promising.
Demand elements include customer orders, sister division requirements, samples,
displays, spare parts, and internal needs, such as branch warehouse/distribution center
requirements, interplant orders, and aftermarket and service requirements.
Service demand includes that which is required for implementation support and
maintenance or repair support.
The major components of demand management include the demand plan, the
assumptions behind the plan, and the action plans necessary to execute the plan.
Specifically, action plans are created to assure that the anticipated demand happens. The
plans also help to prioritize the demand when there is a shortage of supply. And when
demand exceeds supply, the plan defines the policy that determines how the product is to
be allocated among the various customers.
There are four major steps in the demand management process:
1. Create the demand plan. A demand plan is the forecast plus the assumptions behind
the forecast plus the action plans to make the demand plan happen.
There is a significant difference between a forecast and a demand plan. A forecast is
typically a number generated either by a statistical forecast package or developed
manually based on history.
To develop this plan, an organization requires multiple views and inputs of the demand,
among them:
The marketing view. Includes market plans, pricing plans, promotions, competitive
analysis, economic analysis, and external factors.
The sales view. This includes sales plans, territory plans, customer plans, and incentive
plans.
The product management view. This includes the plans to develop the brand and
products as well as the future view of the products.
The customer view. This includes the customers selling and marketing plans,
promotions, buying plans, and schedules.
The statistical view. This includes the statistical forecast and any modifications to the
forecast needed to correct for abnormal demands or known changes to the forecast over
time.
The business plan and strategy view. This enables us to see the gaps in revenue
between the demand plans and the business plan.
2. Communicate the demand plan details. The demand plan is the basis for the
integrated set of planning numbers used throughout the sales and operations planning
process, therefore it is essential to share the demand plans details at both the aggregate
and mix levels to all the functions of the business.
3. Create a consensus plan. the objective is to influence the key players to develop a
consensus demand plan.
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4. Manage the exceptions. The fourth element focuses on the timely and effective
management of exceptions, such as abnormal demand, and to control areas such as the
allocation of product. When abnormal demand occurs, demand management must decide
how to accommodate this demand while still protecting its regular customers.
Types of business
There are various types of business entities to choose from and each one has advantage
and disadvantages.
Sole Proprietorships
A sole proprietorship is a one-person business that is not registered with the state like a
limited liability company (LLC) or corporation.
You don't have to do anything special or file any papers to set up a sole proprietorship
You create one just by going into business for yourself.
Legally, a sole proprietorship is inseparable from its owner
The business and the owner are one and the same.
This means the owner of the business reports business income and losses on his or her
personal tax return.
Advantages:
Taxes are paid through regular income tax. Since personal tax rates are lower than for
corporations considerable savings can be made
Business losses can be offset against the owners other income, thereby reducing the
owners overall personal marginal tax rate.
A sole proprietor has complete control over all aspects of the business. There are no other
owners to consult or argue with.
All profits go to the owner.
It is always possible to incorporate later as the business grows.
Disadvantages:
The owner is personally liable for all debts or obligations of the business as well as any
negligence.
It can be much more difficult to raise capital since only the owners financial resources
can be used as security.
The business does not exist without the owner, meaning your personal time and input
may be much higher.
The life of the proprietorship is limited to the life of the proprietor.
The business resources are limited to the skills of the owner and the employees he/she
can afford to hire. This may limit growth as there is only so much one person can do.
Partnership
A partnership is an unincorporated business association between two or more individuals
who join together to carry on a business. Each partner contributes money, labor, property
or skills to the partnership. In return each partner is entitled to a share of the profits or
losses in the business. This share is determined through a partnership agreement
Advantages
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Financial resources and talent are pooled from all the members of the partnership.
It is often easier for a partnership to obtain capital than for a sole proprietorship because
the financial resources of all the partners can be used as security.
As with a sole proprietorship, taxes are paid through each partners personal income tax
so the same savings are possible.
All profits are divided among the owners as per the partnership agreement.
It is always possible to incorporate later as the business grows
Disadvantages
All partners are personally liable for all the debts and obligations of their business and for
any negligence on the part of any of them.
There could be conflict between the partners that might hurt the business.
Changing ownership in a partnership is generally difficult; as a new partnership
agreement must be drawn up each time there is a change.
Personal and professional relationships can become mixed creating the potential for
conflict at the office to spread to the home and vice versa.
Limited Partnerships
Limited partnerships are costly and complicated to set up and run, and are not
recommended for the average small business owner.
Limited partnerships are usually created by one person or company (the "general
partner"), who will solicit investments from others (the "limited partners").
The general partner controls the limited partnership's day-to-day operations and is
personally liable for business debts (unless the general partner is a corporation or an
LLC).
Limited partners have minimal control over daily business decisions or operations and, in
return, they are not personally liable for business debts or claims.
Consult a limited partnership expert if you're interested in creating this type of business.
Corporation
A corporation is a separate legal entity.
It can enter into contracts and own property in its own name, separately from its owners.
It is created by filling out an Article of Incorporation and filing it with the correct
authorities.
Owners are called shareholders and elect directors who are responsible for managing the
business affairs of the corporation.
Profit is distributed based on share ownership through dividends, which are issued at the
discretion of the board of directors.
Advantages:
Shareholders are not personally liable for any of the debts or obligations of the business.
More financial options are available to raise money including selling stock.
Since a corporation is a separate legal entity, it is not tied to the owner.
Treated as a separate tax entity,
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There is no limit to the growth potential of a corporation and since it is less tied to the
owners themselves, growth is much easier.
Ownership is much more transferable.
As long as controlling interest of 51% is maintained an owner can operate the business
while minimizing their financial risk.

Disadvantages:
The costs of incorporating are much higher and complicated than in other forms of
ownership.
A corporation is subject to numerous and complicated legal formalities and regulations.
Losses from a corporation cannot be set against personal income.
A much more complicated structure than the other two. It requires much more time and
energy to set up and understand.
It is not possible to go back to the other forms of business ownership.
Unit two
Agribusiness systems
The modern farmer is an expert involved with cultivation and animal breeding
operations, thus transforming the functions of storing, processing, and distribution of
vegetable and animal products as well as the supply of input and production factors
to organizations other than the farm.
The importance of agriculture and entrepreneurship development
Agriculture is linked to many other industries including plant and animal processing, and
the production of medicine, clothing, building materials, and numerous other products.
Materials such as fuels, herbicides, and machinery are needed to run agricultural
operations as are service including veterinarian service, financial planning, and many
other.
Agriculture and agribusiness
Enhancing agricultural growth and productivity are essential to meet the worldwide
demand for food and reduce poverty, particularly in the poorest developing countries.
As it known the demand for food is expected to continue to grow as a result of both
population and rising incomes.
Therefore, agriculture is economically important for the following reasons.
Agriculture reflects the increasing globalization markets
All humans depend on agriculture for food
Urban-industrial societies depend on the base of food surplus generated by farmers and
herders
Without agriculture there could be no cities, universities, factories, or offices.
Agriculture :The activities involved in the managed exploitation of natural resources
including production, minor modification and trade of natural resources (plants, animals,
soil, water)
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Agri-business: agriculture Plus activities involved in the production, major modification

and utilization of natural resources.
The word agriculture indicates plowing a field, planting seed, harvesting a crop, milking
cows, or feeding livestock.
Agribusiness include not only those that farm the land but also the people and firms that
provide the inputs (for ex. Seed, chemicals, credit etc.), process the output (for ex. Milk,
grain, meat etc.), manufacture the food products (for ex. ice cream, bread, breakfast
cereals etc.), and transport and sell the food products to consumers (for ex. restaurants,
supermarkets).
Scope of agribusiness:
Agribusiness is a large and diverse sector that witness economics activities that ranges
from culturing, processing, extracting and distribution.
The scope of the agribusiness, can be categorized in three independent sectors, which are
the Input sector,
The Farm Production, and
The Output (product) sector
(i) Input Sector:
Includes all resources that serve as building units that are required to service a
transformation process in order to achieve one or more products.
Supplies agribusiness production with the needed inputs in the production process.
The farm firm business covers such areas as
Agrochemical input supplies e.g. fuel, fertilizer, pesticides, herbicides and veterinary,
feed machinery and equipment supplies e.g. tractor wheel barrow, spade, matches, tyres
etc., agricultural Financing from formal and non-formal sources and labour supplies both
skilled and unskilled
(ii) Farm Production Sector:
Covers such areas as the aquaculture, forestry, crop production and livestock.
As this sector grows in size, level of out and efficiency, the other sector of agribusiness
are affected.
The success of this sector has a vital and direct impact on the financial stand of the input
supply and the product sectors of the agribusiness.
The increase in the scale of production leads to more of the output being made available
to the product sector for onward processing and distribution.
(iii) Output Sector:
Accepts diverse economics activities that could be directly identified within the
agriculture domain or from a related fields which otherwise called agro-allied sector.
The output sector is also referred to as the product sector and is the final sector in
agribusiness production and distribution system.
The output sector is the largest of the agribusiness sectors as its functions range from
product processing to marketing and distribution of these products to various consumers
either as raw materials for further production or final consumption.
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Notable examples of the product processing include,

Food processing Cotton processing
Beverage manufacturing:. Skin processing
Convectional processing Marketing and distribution of the
Food packaging and canning outputs from the production sector
Tobacco processing and the processed products to final
Wood processing and furniture consumers.
making,
What is Agribusiness Management?
Management of agribusiness could be defined as the active process of decision making to
ensure planned and controlled use of available human and material resources to achieve
the profit motive of the practitioners.
Decisions that affect the agribusiness profit are decision on
How to produce,
What to produce,
Where to produce, and
Quantity of input to employ in production, and
The level of output to produce
The art of management has several elements, which include:
Stating the goals or objectives
Deciding on how to achieve the objective and the general procedure included planning
and testing of plan.
Evaluation of the plan: organizing, supervising and control. Evaluation of the whole
process:
In evaluating the entire process we try to spot out the mistake. The result or the
performance must be compared with the set standard and reasons for failure or
differences must be identified.
To ensure harmony and effective managements of any agribusiness, top managers should
be able to meet to review their achievement against the set objectives.
A manager can be defined as that person who provides the agribusiness with leadership
and who must be a change agent.
A good manager must therefore possess the following characteristics:
Should be a goal oriented individual Have ability to coordinate and
Should have analytical ability motivate others for a greater
Should not be afraid of taking risk productivity.
Must have a good initiative Should be technically competent.
Must be highly intelligent and with Be one with an enquiring mind.
enough to turn joke into naira and Should be flexible, that is, know that
kobo todays decision may be wrong
tomorrow.
 20

Should be ready to learn even from

his subordinates.
Functions of Agribusiness Management
Management of agribusiness has a series of functions to perform.
These functions include planning, organizing, directing, coordination and control.
Planning Function:
Involves the establishment of the organizational goals and the strategies for
accomplishing them.

Steps in agribusiness planning function

The identification and definition of a problem,
Acquiring initial information,
Identifying alternative courses of action and
Analyzing each alternative.
Organizing Function:
Organizing is an operational function of the agribusiness management, which depends
heavily on the co-ordination of the entire system.
Organizing function involves arranging people and other resources together in the most
effective way.
This includes:
Setting up the structure
Determining the job to be done.
Selecting, allocating and training of personnel
Establishing relationship with the business set-up and staffing them.
Directing Function:
It is the responsibility of the agribusiness management to direct resources.
Directing implies routing resources to where they are mostly needed to ensure proper
implementation of the plan.
It involves such actions as
Assigning duties and responsibilities
Establishing the result to be achieved,
Delegating authorities where necessary,
Creating conducive working environment and
Carrying out the assigned duties effectively.
Coordinating Function:
Involves the pulling together of the actions of different group of people in such a way
that the action of one group provides and aid to the working of the other.
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Coordinating function can be effective only if conducive working environment is

provided for success. It provides for free flow of information and the growth and
development of the workers.
Controlling Function:
Controlling in management describes an information system that monitors plans and
process to ensure that they are meeting the established goals.
A warning note is necessary to effect any remedial action. Prices and other changes,
which occur after the plan had been implemented, can cause the result to deviate from the
expected.
Controlling function therefore monitors and makes adjustment for the managers to stay
on business.

Environmental Factors Affecting Managerial Functions

The management process of agribusiness is seriously affected by number of
environmental factors, which include:
Formal Education
Socio-cultural factors
Lego-political aspects
Economic variables
Formal Education:
Formal education of the manager is an essential aid to effective management in any
agribusiness enterprise.
The more educated the manager is, the better his managerial ability.
The person becomes more perceptive, thinks faster and more able to perform through a
tailor made education or with a high formal educational attainment.
Socio-Cultural Factors:
Socio-cultural factor play a significant role in shaping the effectiveness of the managerial
process.
They represent the most powerful factors and one that the manager has the least control
on.
For instance, a manager has to mix freely with different groups of people with diverse
cultural background. The knowledge, belief, art, morals, customs and habits acquired by
the employees as members of a given society affect their productivity.
Lego-Political Factors: include such factors as government regulations on duties, labor,
laws, salary increases through collective
Bargaining, fringe benefits, bye-laws and statutes that affect the operation of an
organization.
Economic Variable: The effect of this on management depends on the economics system
the country operates. For instance, in a socialist system, the effectiveness of a manager is
 22

definitely going to be hampered by unrealistic demands by the central authority. In a free

market economy or capitalist economy where prices are not stable, the supply and
acquisition of agribusiness inputs will be greatly affected adversely. Under such system
other factors as political instability, foreign exchange problems rapid economic
expansion, industrial unrest and entrenched government bureaucracies are likely to set in.
Farm Management Decision
There are many decisions that affect the profitability of any farming business.
For instance, the decision on what to produce, how to produce, when to produce, for
whom to produce, quantity of output to produce, combination of input to employ and how
to distribute the output.
The choice of what to produce depends on the demand of the consumers and the
manpower objective.
The objective for which the farmer produces a product affects the quality of the product.
The agribusiness manager must also consider how to produce his particular products.
This involves the technology to employ such as mechanization in case of facing high
demand; the input to use and in what proportion, over which enterprise are they to be
allocated.
It is the responsibility of the manager to also decide on the level of output to produce.
Types of Agricultural Business Organization
An agribusiness venture could be privately or publicly owned. Private ownership exists
when individuals exercise the right and responsibilities of ownership. Public ownership
also exists when government (Federal, State or Local) creates exercises and enjoys the
ownership rights.
Instance also exists where both the government and private individuals jointly own
agribusiness enterprise. In deciding whether to organize an individual proprietorship, a
partnership, or a corporation, the following basic factors should be taken into
consideration:
The owner(s) objectives and philosophies of the agribusiness.
The size of the agribusiness being started.
The organizing cost and the nature of work associated with the task of organizing it.
The amount of capital required.
The initial capital outlay available for the business.
The ease of obtaining additional capital.
The tax liabilities and options available
The involvement of the owner(s) in the management and control of the agribusiness.
The desired method of distributing earnings and risk
The factors of stability or continuation and transfer of ownership available

It is therefore the careful evaluation of these factors decisions that can help in the
selection of most appropriate form of agribusiness organization namely:
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The sole proprietorship, Agribusiness cooperative and state

Partnership, farming.
Agribusiness limited company,
 The Sole Proprietorship
Considered as the oldest simplest and the most popular form of agribusiness
organization.
Agricultural sole proprietorship has only one owner who takes all the risks, enjoys all
the profit and makes all the managerial decisions. He therefore takes the responsibilities
(risks) of all that results from these decisions.
Advantages
The owner exerts complete control over plans, programmes, capital, policies and other
management decisions.
Legal formalities are not necessary and license fees are low.
Termination or modification of the agribusiness is easy.
Under good financial standing of the proprietor, leaders would be most wiling to extend
lending (funds) to the proprietorship.

Disadvantages
Possession of limited amount of capital for the funding process
Risk is great since the owner is personally and unlimitedly liable for all debts to
creditors. Lenders are always reluctant to lend money to private owners of agribusiness
except where collaterals are provided as security for such loans.
Sole proprietorship lacks stability and continuity as it depends solely on person. The
dead of that person in effect ends the business.
Partnership in Agribusiness
This is a business that is owned by an association of two or more people (usually not
exceeding) who share in both risk and profit.
Partnership agreement can either be written or oral or on contract between parties
involved. Nevertheless, it is strongly advisable that partnership agreement be written to
avoid any misunderstanding among member and for ease or reference. This agreement
may set forth respective rights and obligations, determine the share of ownership for
each partners and state how profits or losses will be appropriated.
Advantages of Partnership
(1) Partnership brings together more resources (human, capital etc.) than the sole
proprietorship.
(2) It benefits from the enormous talented individuals involved in the business.
(3) They are very much motivated in nature than proprietorship in terms of good welfare
scheme for the workers.
(4) Credit is more easily available, because all partners are personally liable for the debts of
the partnership.
(5) Partnership he partnership only pay tax on the allocated shares and no tax is paid in the
business as a whole.
Disadvantages of Partnership
 (1) In a general partnership each partner is personally and unlimitedly liable for all the
debts of the agribusiness firm.
(2) A limited partnership suffers the lack of both ready funds for business and talented
people
(3) There is lack of stability and continuity of the partnership in a limited partnership.
(4) The size of the agribusiness firm is limited to the patters resources.
Limited Company (Company Farming)
A limited company (corporation) is a body authorized by law as a private personand
legally endowed with various rights and duties, among them to receiving own and
transfer property to make contracts, and to sue and be sued.
A limited company can raise large amount of capital outlay for the faming business by
selling stocks or shares of ownership to public livestock.
The accumulation of these capital resources provides opportunities for the shareholders
(owners of the company) to make profit (dividends) if it succeeds.

Advantages of Corporate Farming
(1) Is limited liability.
(2) Limited liability company have unlimited lifespan.
(3) An investment in a publicly held company is liquid that is, can easily be converted to
cash, be being bought and sold on stock exchange. This liquidity ensures them to raise
far larger sums than other form of agribusiness organization.
Disadvantages
(1) The most serious disadvantages lies on the tangle permit regulation requiring limited
company to publicly disclosed its finances and certain corporate operations.
(2) Disclosing the companys profits margin increase its vulnerability to an unpleasant
competition.
Agribusiness Cooperatives
Cooperatives associations are non-profit organizations formed to provide goods and
services to members at cost
Cooperation developed as a useful instrument for promoting the interest of those who
voluntarily come together to solve most of the problems outlined above and enhances
their own individual welfare.
Cooperatives can also serve as important channels for marketing the product of member
and for such input seeds, fertilizers and farming equipment at reduced cost. Farmers may
receive lower credit cost through their cooperative societies as well as drive other benefit
of large scale operation in production, marketing, credit and input purchases.
Depending on the type of agribusiness venture being carried out, co-operatives can be
classified as Producer, Consumer or Credit Cooperation.
 Agricultural credit cooperatives are associations that are made up of thrift and credit
societies. They borrow funds from other financial institutions for on-lending to member
and also provide saving facilities.
Enterprise Selection
An enterprise in agricultural sector is any producing unit that combines resources to
achieve its strategic objective(s). An enterprise could be a unit producing a particular
crop, livestock and processing any raw resources to consumable goods.
The steps include the following:
A. Setting of Goals
B. Establish an Inventory your Resources
C. Develop a List of Possible Enterprises
D. Determine Which Enterprises Are Compatible With Your Resources
A. Setting of Goals
Goals need to be more specific and action oriented.
Goals should be measurable in some way and have a time frame associated with them.
The following is a list of questions that can be used to help develop your list of
goals:
Is your primary reason for farming to maximize income, to have a rural lifestyle, to
provide income for family members, or other reasons?
What other activities are you involved in, and what are the priorities of these activities
relative to the farm business?
Do you want to devote full-time effort to the farm or would you prefer farming to be a
part-time activity?
How much are you willing to be restricted by time and capital demands of your farm
business? Do you want to eventually transfer the ownership of the farm to a partner or
family member?
Is income from the farm and/or sale of the farm an important part of your retirement
plan?
What is the desired period between initial investment and cash returns?
Do you want to learn new skills through self-study or formal training?
B. Establish an Inventory your Resources
A list of resources typically includes land, labor and capital. But there are other factors
to consider such as climate, access to information, management skills, and markets.
Access to markets is the most commonly overlooked factor in the enterprise selection
process.
But in fact it can be your most limiting constraint. Simply because you can grow
something does not mean you can sell it. And just because you can sell a product does
not mean that it will be profitable. A third possibility is that you will be able to sell a
product at a money making price but that you will only be able to sell a limited amount
 of the product; that is, less than the total amount that you are able to produce. Consider
your market potential carefully.
Be realistic about your cash flow situation and plan accordingly. For each of the areas
listed below create a list of the resources available.
This will be compared later to the resources required by each enterprise you are
considering. A written list will enable you to easily check off the requirements on the
enterprise resource requirement list later on.
Physical Factors
1. Land
How much land do you have available?
What is the physical profile and topography of the land?
What is the soil texture, drainage capability and nutrient levels?
Which types of weeds are growing on the soil?
Which other crops have been grown on the land
What is known about variety adaptability in your area?
About the effects of spacing on yield and quality?
What is your personal experience with the crop?
What is the research base for the crop under consideration?
Where else is the crop grown? Is acreage increasing or decreasing?
2. Climate
What is the average rainfall in your area and when are the rainy periods?
When are the first and last frost dates and how much have the actual dates varied
historically? What are the high and low temperatures for your area and when do they
occur?
What is the average daily temperature?
What is the day/night temperature variation?
What is the direction and strength of winds?
3. Irrigation Water
Where does your water come from and what is its cost?
What is the water quality?
Do you have water rights?
Are you within an irrigation district?
When is irrigation water available to you and in what amount?
What type of irrigation system do you have?
What are the differences in cost and efficiencies for alternative systems?
4. Farm Structures
What type of buildings do you have on the property and what is their condition?
Do you have structurally sound fences?
If you feel you need additional buildings or fences, have you checked into the cost of
their construction?
5. Machinery and Equipment
What type of farm power machinery do you have?
 What farm implements do you have?
What is your transportation equipment: truck, pick-up, or trailer?
Consider capacity and efficiency.
Have you considered leasing/renting some equipment?
What are the possibilities of contracting with custom operators in your area?
6. Financial Factors
How much capital are you willing/ able to invest?
Are you able or willing to borrow capital?
What is your cash flow situation?
Is a high rate of return on your investment important to you?
Are you willing to consider risky enterprises?
Management Factors
(1) Personal Skills
Management skills: record keeping, personnel management, budgeting, familiarity with
tax and other relevant laws - do you consider these to be adequate?
What are your mechanical skills?
Which are your knowledge strong points: plant physiology, animal health, pest
management, greenhouse production, etc.?
Would you prefer handling a diversified farm or would you prefer one or two major
enterprises?
(2) Information Access
Are you familiar with the agricultural information delivery systems?
Are you able to access the resources of these systems?
Is sufficient information available for the enterprises in which you are interested?
Are you willing to learn new skills if they are required?
(3) Labor Factors
What are your labor needs on a monthly basis?
Are you planning to use mostly family or mostly hired labor?
Have you checked out the regulations of the California Labor Law?
Have you considered the opportunity cost of using your own labor?
Marketing Factors
Do you have a preferred marketing method?
Broker, retailer, direct (roadside stand, farmers market, U-pick), cooperative, contract
with processor?
What is your proximity to various potential markets?
Have you contacted potential markets for their advice on crop selection?
How much time are you willing to spend marketing your products?
Do you have cooling facilities for perishable products?
Are you familiar with marketing regulations for the enterprises you are considering?
C. Develop a List of Possible Enterprises
After identifying your goals and resources, develop a list of possible enterprises. The
following set of questions and the list at the end of this publication should help.
 Which enterprises are predominant in your area?
Are there enterprises which interest you that have been successful in other areas in
similar soil and climate conditions (i.e., enterprises that have potential in your area but
have not yet been established)?
What crops or livestock have been raised on your land in the past?
Which are the enterprise types with which you feel more personally compatible:
livestock, field crops, orchard crops, small fruits, vegetables, ornamentals, growing
transplants, raising seed?
D.Determine Which Enterprises Are Compatible With Your Resources
Carefully evaluate the potential for each of the enterprises on your list. This can be done
by systematically comparing the resource needs for each enterprise to the resources available.
Determining the resource requirements for each enterprise will probably require a good
deal of homework. A good place to start is by talking to other growers in your area or
elsewhere about their experience with the enterprise you are considering. Your state
agricultural extension agent in your area is also a good place to start. Of course, there is
nothing like a nearby library at a local college campus.
To the extent possible, answer the following questions for each enterprise and check for
compatibility to your resources as you go along. Also make note if the resources are not
available but are obtainable should the enterprise be selected. An example would be
specialized harvest equipment.
Challenges of agribusiness small and medium scale enterprises
The development of agribusiness generates employment among rural masses and reduces
poverty.
The growth of agribusiness affects manufacturing industries like textile, leather, furniture,
food, paper, beverage, etc. and depends upon the progress of agriculture sector.
Main encounters of agribusiness small and medium scale enterprise
The local infrastructure regarding implementation of food safety standards and quality
control is ever increasing prices for agricultural inputs i.e., fertilizers, high yielding seed,
fuel, agricultural credit, plant protection measures and farm machinery which put this
sector in less productive profile.
The major proactive motivators for the globalization of agribusiness are the price
differentials between national and international markets.
While the market distortion (shortage, hoarding, black market, etc.) at local level are the
reactive motivators.
The principal and common challenges of agribusiness.
Political and legal
Political conflicts in some countries
Corrupt govt regimes
Poor business climate
Economic
 Poor transport infrastructures
High inflation and unemployment
Technological
Diverse agro ecologic conditions limit technology diffusion
Weak national scientific and research institutions and universities
Limited enforcement of intellectual property rights
Limited adoption of technology
Market
Market volatility has increased
Output and input price
Finance
Availability or unavailability of financial institutions
High cost of borrowing