AGRICULTURAL ENTERPRISE DEVELOPMENT MANAGEMENT (AT601)

FARM BUSINESS MANAGEMENT

Prepared by:

JOHN MYR C. SABANAL, L. Agr, LPT

MAST-STUDENT
TOPIC 1. FARM BUSINESS MANAGEMENT

1.1 FARM BUSINESS ENVIRONMENT

- FARM DESCRIPTION
- THE FARM AND THE FAMILY
1.2 BASIC ECONOMY CONCEPT
- SUPPLY
- DEMAND
- MARKET EQUILIBRIUM
- THEORIES OF PRODUCTION AND COSTS
1.3 AGRIBUSINESS MARKETING CONCEPTS
- OVERVIEW OF MARKETING SYSTEM
- MARKETING PLAN AND STRATEGIES
Chapter I: Farm Business Management

Management – is the process of decision making by which a system is

provided to achieve the desired goals and objectives.

Farm Management – is the process of decision making by which limited

resources are allocated to the different production alternatives to
organize and operate the farm to maximize profit.

Limited Resources of the Farm:

1. Land
2. Labor
3. Capital

Different Production Alternatives of the Farm:

1. Crops and
2. Livestock

Basic questions:

1. What to Produce?
2. When to Produce?
3. How to Produce?
4. How much to Produce?
5. For whom to Produce?
Factors to be considered in decision – making:

1. The goals and objectives.

2. Limited Resources.
3. Alternative uses of the limited resources.

Functions of Management:

1. Planning - Formulate your goals and objectives.

- Budget
- Feasibility study
- Choose the business
- Ownership
2. Organizing
a. Organize your manpower.
- Recruitment
- Hire
- Orientation
- Training
b. Organize your materials.
- Purchasing
- Handling
- Storage
3. Directing
a. Delegation of Manpower
4. Control
- Compare the actual performance with the plan and if there are some
instances that you have to deviate from your plan, then it’s time for you to
create an alternative solution so that you can still attain the goals of your
farm.

Steps in Decision Making:

1. Identify and define the problem.

- you should be able to separate the problem from the symptoms.
2. Gather relevant information.
- information related to the problem.
3. Analyze the information and formulate alternative solutions.
4. Select the best solution.
5. Implement.
6. Evaluate the result.

Characteristics of Decision
1. Importance
2. Frequency – the number of occurrence.
3. Imminence
4. Revocability
5. Number of available alternatives.

Farm description:

What is a farm?
- A highly organized integrated set of operation which exist in a complex
of natural, social, political and economic environment.
- An area of land that is devoted primarily to agricultural processes with
primary objective of producing food and other crops.
Other definitions:

A) Farm – is a piece of land where crops and/ or animals are raised

(Dictionary).
B) Farm – refers to a parcel or parcels of land with an area of at least
1,000 sq. meters used for the raising of crops, fruits, vegetables, trees or
other agricultural produce including livestock, poultry or animals. A poultry
farm must have at least 100 birds or at least 20 animals for other livestock
farms (1948 Census of Agriculture).
C) Farm – is a basic managerial unit by which agriculture is carried on.
Agriculture means the manipulation of biological growth in order to produce
products useful to people.

Classification of farms:

1. According to tenure
a. Owner-operated farms
b. Partly owned farms
c. Tenanted farms (share tenancy and leasehold)
2. With respect to Economic Orientation
a. Kitchen-oriented farm (farm produced is intended for consumption)
b. Market-oriented farm (farm produce is for market)
3. With respect to source of labor and management
a. Family farm (labor of the farm is supplied by family)
b. Plantation ( labor is hired and management is provided either by the
owner or through hired manager)
c. Estate (same as plantation plus the provision of housing, medical
and school facilities for the employees and their families)
4. With respect to extent of operation
a. Intensive farm (when capital investment is big relative to the area of
land cultivated)
b. Extensive farm (opposite of intensive farm)
5. With respect to the number of enterprises
a. Specialized farm (one product is the main source of farm income)
b. Diversified farm (two ore more products are the main sources of
farm income)
6. With respect to source of water for the farm
a. Irrigated farm
b. Non-irrigated farm
7. With respect to source of power for the farm
a. Mechanized farm (major operations are done by machines)
b. Non-mechanized farm (most of the major operations are done
manually or through animal labor)
Characteristics of farming:

1. Universal characteristics
A) The main process in farming is biological not mechanical. This
biological nature of farming is the following sub-characteristics:
a. Faming is subject to high risk and uncertainty
b. Farmers have low control over levels or rates of production
c. Farm products are difficult to standardize

B) Farming can be carried on by person even with very limited or no

formal education.

C) The home and the farm business are closely integrated.

D) Farming business requires relatively big amounts of organizational
capital.
E) Farm produce tends to have inelastic demand and supply.
2. Characteristics of farming in the Philippines
A) An over-crowded industry (more than 30% of the population are in
agriculture and many are small farmers)
B) Have low productivity (palay production which has been the top
priority by government has low production per hectare compared with other
countries)

Importance of Farming:

1. General importance is exemplified in this passage

“ At the head of all sciences and arts; at the head of civilization and
progress; stands not militarism, the science that kills, not consumers, the art
that accumulates but Agriculture, the mother of all industries and the
maintainer of human lives”

The Farmers:

A farmer to be successful has to be a jack of all trades (manager, laborer,

carpenter, mechanic, businessman, etc.). His/her primary social responsibility
is to supply agricultural products which are safe for consumption while of
course, earning income (supposedly).
THE FARM LAYOUT
Objective of Farm Layout:

The purpose of farm layout is to arrange the different units of the farm in
such a way as to:

1. Effect the use of the production capacity of the farm;

2. Effect the best uses of the land in order to produce the maximum net
returns;
3. Effect an arrangement that will work to be accomplished more efficiently
and economically; and
4. Make the home surrounding healthy, convenient and attractive.

Steps involved to accomplished objectives of Farm Layout:

1. Locate the farmstead;

Farmstead- the dwellings and their yards and lawns, well and water
system, barns and animal houses, corrals, stock pens, scales and
dipping vats, store houses and other buildings
2. Plan the roads, lanes and fences so as to make fields, orchard, pasture
and other units of the farm as accessible as possible;

3. Plan the land use distribution of the farmland

4. Plan the size, shape and location of each field to fit the layout of the land;
and

5. Plan each field to fit soil types and fertility and rotation contemplated.
ECONOMIC CONCEPTS APPLIED TO FARM MANAGEMENT:

Supply
- is the schedule of various quantities of commodities which producers
are willing and able to produce and offer at a given price, place and time.
- shows the quantity of goods and services that a producer or seller is
willing to sell at a given price and time.

Direct relationship between price and quantity:

Price Quantity supplied

1 1
2 2
3 3
4 4
5 5

Determinants of supply:

1. Technology
2. Cost of production (inputs)
3. Number of sellers
4. Prices of other goods
5. Price expectations
6. Taxes and subsidies
7. Season
Determinants of supply

1. Technology- refers to the techniques or methods of production. Modern

technology which uses modern machines increases supply of goods. In
contrast, primitive technology which uses animals and people is very low in
producing goods. Hence, higher yield is attained by farmers who adopt
appropriate technology for agriculture production than farmers who do not
apply improve technology. More goods will be supplied in the market at higher
production that at lower production.

2. Cost of production- in producing goods, raw materials are needed,

together with laborers. If the price of raw materials or the salaries of the
laborers increase, it means higher cost of production. There are other
production costs like the interest of a bank loan, taxes, and land or building
office rent. If these increase, it results to more cost production. Higher cost of
production decreases supply, because the viability or profitability of the
business decreases. Generally, when cost of production increases, price also
increases.

3. Number of sellers- more sellers or more factories means an increase in

supply. Conversely, smaller number of seller or factories means less supply.
This situation is very evident in rich or industrial countries. They have many
manufacturing firms and service industries like those in the United States and
Japan. Hence, they have also plenty of goods and services for sale. In fact
their industrial goods are being exported in most other parts of the world.
4. Prices of other goods- changes in the prices of goods have effect in the
supply of such good. For example, a decrease in the price of rice may likely
encourage a rice farmer to produce more corn if this gives him profit more
profit.
5. Price expectations- If the producers expect prices to rise very soon,
usually they keep their goods and then release them in the market when the
prices are already high. This creates artificial shortage due to hoarding. It has
been experienced that whenever the government announces the increase in
prices of gasoline, rice, milk, or cooking oil, such goods immediately
disappear in the market.

6. Taxes and subsidies- certain taxes increase cost of production. Higher

taxes discourage production because it reduces the earnings of
businessmen. That is why the government extends tax exemptions to some
new and necessary industries to stimulate their growth. Similarly, tax
incentives are granted to foreign investors in order to increase foreign
investments in the Philippines. This results to more goods. In the case of
subsidies, these are financial grants or financial assistance to producers.
Example is the fertilizer subsidy granted the government to the small farmers.
The price of the fertilizer is much lower than actual market price. The
government pays the difference between the market price and the subsidized
price. Clearly, subsidies reduce cost of production. This induces the farmers
to produce more.

7. Season- in the Philippines, dry season planting yields more than wet
season planting. More products are sold in the market during dry season than
during the wet season.

Law of Supply:

As prices increases, quantity supplied also increases, and as price decreases, quantity
supplied also decreases. This direct relationship between price and quantity supplied
is the law of supply. Producers are willing and able to produce and offer more goods
at a higher price that at lower price
ECONOMIC CONCEPTS APPLIED TO FARM
MANAGEMENT:

Demand
- Demand is the schedule of various quantities of commodities which
buyers are willing and able to purchase at a given price, time and place.
- Demand for a good or commodity is defined as the various quantities
of commodities that consumers/buyers are willing to take off/purchase from
the market at all possible alternative prices, holding other factors affecting
demand constant.
Showing the inverse relationship between price and quantity:

Price Quantity demanded

1 5
2 4
3 3
4 2
5 1

Determinants of Demand:

1. Income
2. Population
3. Taste and preferences
4. Price expectation
5. Prices of related goods

Determinants of Demand:

1. Income- people buy more goods and services when their incomes
increase. Poor people who become rich naturally purchase more basic goods
like food, clothing and shelter; and services like recreation, medicare, and
education. On the other side, if their incomes decrease, demand for such
goods and services also declines.
2. Population- more people means more demand for goods and services.
There are more consumers in an urban community than in rural community.
That is why we can observe that there are more buyer in city stores than in
barrio stores. Conversely, less population means less demand for goods and
services.

3. Taste and preferences- demand for goods and services increases when
people like or prefer them. Such tastes or preferences are greatly influenced
by advertisement or fashion. On the other hand, if a certain product is out of
fashion, the demand for it falls.

4. Price expectation- when people expect the prices of goods, especially

basic commodities like rice, soap, cooking oil, or sugar, to increase tomorrow
or next week, they buy more of these goods. In the same manner, they
decrease their demand for such products if they expect prices to decline
tomorrow or in a few days. The reason for such consumers’ behavior is to
economize. This is the general tendency of buyers.

5. Prices of related goods- when people expect the prices of goods,

especially basic commodities like rice, soap, cooking oil, or sugar, to increase
tomorrow or next week, they buy more of these goods. In the same manner,
they decrease their demand for such products if they expect prices to decline
tomorrow or in a few days. The reason for such consumers’ behavior is to
economize. This is the general tendency of buyers.

Law of Demand:

The law of demand states: “as price increases, quantity demanded decrease,
and as price decreases, quantity demanded increases”.
1. Income effect
2. Substitution effect
 THEORIES OF PRODUCTION AND COSTS

Production - a process of transformation of inputs into output.

- a creation of goods and services to satisfy human wants.

Production Function- it shows the technical relationship between the

application of variable inputs and maximum obtainable output.

Factors of Production:

1. Land
2. Labor
3. Capital
4. Entrepreneur
1. Land- is an original gift of nature. It includes the soil, rivers, lakes, oceans,
mountains, forests, mineral resources, and climate.
2. Labor- is an exertion of physical and mental efforts of individuals. This
applies not only to workers, farmers, or laborers but also to professionals like
accountants, economists, or scientists.
3. Capital- is a finished product which is used to produce other goods.
Examples of capital goods are machines as far as economist is concerned. In
finance and to laymen, capital refers to money. However, money is a medium
of exchange. It can not produce goods. It can only buy goods. This is just an
exchange between money and the corresponding units of goods.
4. Entrepreneur- is the organizer and coordinator of land labor and capital.

Law of Diminishing Returns - as additional units of variable inputs are used

in combination with one or more fixed inputsthe MPP will eventually decline.

The law of marginal productivity states that when the successive units of
variable inputs (like farmers) work in a fixed input (like one herctare of land),
beyond a certain point the additional product (output) produced by each
additional unit of variable input decreases.

Total Physical Product (TPP) – it is the total

output or total yield.
Average Physical Product (APP) – is the
output per unit of input.
APP = TPP
Level of Input
Marginal Physical Product (MPP)
- the additional product brought about by using one more unit of input.
MPP = change in TPP
change in input level

Marginal Value Product (MVP) – an additional revenue or income brought

about by using one more unit of input.

MVP = change in TVP

change in input level

Total Value Product (TVP)

TVP = TPP x Price of Output

Marginal Input Cost (MIC)

– is the additional input cost brough about by using one more unit of
input.

MIC = change in TIC

change in input level

Total Input Cost (TIC)

TIC = Input level x Price of Input

Costs Concept in Economics:

Types of Costs:

1. Fixed cost – is a cost which can not be altered during the production
period.
Example: depreciation, land rent, tax, insurance

2. Variable cost – a cost which can be altered during the production period.
Example: labor, fertilizer, chemical

3. Implicit cost – are value of the factors of production owned by the owner.
Example: family labor

4. Explicit cost - the actual expenses incurred in production or firms pay-out

to purchase inputs or cash cost.
Long Run Period
– is a period of time which is long enough to change both the fixed cost and
variable cost.

Short Run Period

– the period of time which is long enough to change variable cost but too
short to change the fixed cost.

1.3 Agribusiness Marketing Concepts

Marketing
- A series of services involved in moving the product from the point of
production to the point of consumption.
- The process of moving the product from the point of production to the
point of consumption.

Market
- a place where buyers and sellers meet to exchange goods and
services
- A group of buyers and sellers with the facilities for trading with each
other
- A large geographic area wherein a set of supply and demand forces
operate to set up prices.

Services
- a function performed on a product that alters its form, time, place or
possession characteristics.
- services performed involved costs and add value to the product (value
added) and somebody has to pay for it.
Point of Production:

- the point of usual first sale by the farmer

- maybe done in the farm, farmer’s house, along the road, mountain trail,
or assembly market
- transaction occurs between the farmer & the buyer
- A price is established
Point of Consumption

- The point of last purchase or sale

- Transaction occurs between the buyer & the seller
- A price is established
The Marketing Services:
1. Processing
2. Transporting
3. Storing
4. Buying and Selling

Basic Marketing Concepts:

Point of production
- the point of first sale by the farmers.
- Services performed by the producer before the point of first sale are
production services and are not included in the definition.

Marketing creates four types of utility in the process of making goods

and services useful:
- Form utility
- Place utility
- Time utility
- Possession utility

Form utility – created if goods possess the required properties.

 results from changing the form of raw materials and creating
something new.
 ex. hogs that are slaughtered and cut into parts.
Place utility – created when products are made available where they are most
wanted.

 ex. Shippers who bring hogs to Metro Manila from Mindanao, then
from wholesalers, retailers then to consumes.

Time utility – created when products are made available when they are most
wanted.

 ex. Meat wholesalers who freeze some pork products for later use.
 Meat is made available from periods when they are plenty to periods
when they are scarce.

Possession utility – created when goods are placed under the control of those
who decide to use them.
 Participants in the Agribusiness Marketing

Four categories of Participants in enterprise level:

1. Farm input production and distribution (INPUT SUPPLIERS)

- breeding stock and fatteners
- seeds and seedlings
- pesticides and pest control implements
- animal health and veterinary products
- animal feed
- fertilizers and growth regulators
- farm machineries, equipment and implements
- irrigation equipment and implements
2. Primary production (PRODUCERS)
- crop farming
- livestock farming
- pesticides and pest control implements
- aqua-marine farming
- tree farming
- animal
3. Processing of farm products/ items made from them (PROCESSORS)
- milling
- slaughtering/meat fabrication and processing
- fruit/vegetable processing
- wood working
- aqua-marine processing
- fiber processing
- refining
4. Agri-related services (SERVICE SUPPLIERS)
 - natural and artificial insemination
- pest and disease control
- financing and financial services
- customized farm services
- transport
- raw material sourcing
- warehousing
- management and business advisory services
- analytical testing
- continuing education
- trade, investment and business information/missions
- technology commercialization
- environmental management

Marketing strategies
(4 Ps of Marketing)

A marketing mix strategy consists of four parts:

1. Product strategies
2. Pricing strategies
3. Place strategies
4. Promotion strategies
The Other P’s to consider

A. Product Strategies

Product – is anything offered for sale, attention, and acquisition

Categories of Agricultural Products:

1. Raw or fresh e.g. fresh eggs, livestock, poultry, etc.

2. Semi-processed - e.g. dehydrated ginger, ube powder, leather, etc.
3. Processed - ready for final consumption.

Product Classifications:

a. Consumption & Tangibility

 Durables
 Non-durables
 services

b. Effort & Risk

 Convenience products
 Preference products
 Shopping products
 Specialty products
c. Levels of Product

1. CORE PRODUCT- the problem solving benefits that consumers are really
buying
Ex. AMC cookware – better health
2. AUGMENTED PRODUCT- offering of additional services and benefits
Ex. AMC cookware - lifetime warranty, free cooking lessons, free delivery,
home demo service

3. FORMAL PRODUCT
- refers to the product parts, quality level, features, designs, brand
name, packaging and other attributes
a. Product Mix – refers to the number of products a firm is handling. It can
be:

a. wide – if there are a lot of product lines.

b. deep – if there are several products within each line.
c. consistent – if the products being produced are related.
b. Branding

Brand – is a letter, word or symbol used to identify products. It has 3

parts: the name, the mark & the trademark.
BRAND NAME - words, letters or number that can be vocalized

Ex. PENSHOPPE

BRANDMARK- not utterly buts didtinctive enough to be easily associated

with a product or with a company.

Ex. The four leaf clover of San Miguel Corp

TRADEMARK- a brand that is given legal protection under Phil. Patent Office

Ex. JOLLIBEE and McDonalds

Branding functions:

a. makes product identification easier

b. Distinguishes one product from another
c. Emphasizes a certain quality level and facilities setting of prices for each
level
d. Makes handling easier/ sorting by brand

Points in Branding

a. Brands should be short, distinctive, easy to pronounce and easy to

remember.
b. It should show product benefits

c. Packaging – is the total presentation of the product.

Benefits of packaging:

1. Protects the goods in storage & transit

2. It makes handling convenient
3. It promotes the product
4. It enhances the product

Characteristics of a good package:

1. Attractive 5. textural
2. Recognizable 6. dependable
3. Informative 7. functional
4. Immediate 8. labeling

A label is a part of a package which carries information about the product. It

shows the brand, manufacturer, expiry date, etc.

TYPES OF LABELS:

BRAND LABEL- the label shows only the brand.

 Ex. Del Monte label and Swift’s eggs.

GRADE LABEL- the label shows products by grades. Grades indicated by

letter, number, or words.
Ex. Magnolia super premium and Pastilla’s de leche classics.
DESCRIPTIVE LABEL- this shows product descriptive, serving suggestions,
instructions, etc.

IMPORTANCE OF BRAND NAME

CONSUMER
 Easy identification of products
 Assured that you get comparable quality when you buy again
SELLER
 Can be advertised
 Recognized when displayed in a store
 Measure of prestige

BENEFITS OF BRANDING
1. Differentiation
2. Vehicle for communication and promotion
3. Aids advertising
4. Aids recognition
5. Goodwill value
6. Facilitates customer recall and self selection
7. Allows higher price to be charged
8. Improves customer loyalty
CHARACTERISTICS OF A GOOD BRAND NAMES

1. Easy to remember
2. Suggest something about product benefit or use
3. Distinctive
4. Legally protected

B. Pricing Strategies:
Price
- the amount of money which is needed to acquire in exchange some
combined assortment of a product & its accompanying services.

Manufacturer’s Pricing Strategies

1. Skimming the Market

– holding prices at relatively high level & promoting the product’s
effectiveness & value.
2. Moving down the demand curve
– prices are set at a relatively high point & held there until the market
available at that point is pretty well saturated.
3. Penetration Pricing
– aims at getting an immediate mass market
4. Pre-emptive pricing
– set the price of the product so low that the market is unattractive to
competitors
5. Extinction pricing
– price of the product is set based on the variable costs in order to
force firms in weak financial or marketwise positions to discontinue their
production
6. Formula pricing
– pricing agreement is negotiated with the buyer
7. Tie pricing
– negotiate a sale that provides for the inclusion in the purchase of a
sought-for product a quantity of the unwanted product.

Retailer’s Pricing Strategies:

1. Competitive pricing
– set price to be near or equal to those in other stores for products
bought on a regular or irregular basis.
2. Psychological pricing
– odd-centavo pricing to give the appearance of having cut prices to
the base; Minimum/ even- centavo pricing to gain a quality image

3. Unit pricing
– pricing items in units of two or more.
4. Price Lining
– offering two or more classes of the same product at different prices.

5. Special prices
– offering items as specials for a given period of time.

TYPES OF PRICE IN THE MARKET

1. Agricultural Price - result of the forces of D and S which influence
production and consumption of agricultural price.
2. Farm gate Price - price realized by farmers for their product at the
farmgate.
POINT OF FIRST SALE- the first time exchange has taken place between
the farmers as producers and the buyers regardless of the place of exchange.
3. Wholesale Price- the rate at which a relatively large transaction, generally
for further sale is effected.
4. Retail Price- price at which the retailer sells his or her commodity to the
consumers in small quantities or volume.
5. Export Price- the price which determined in export markets for products
intended for delivery outside the customs boundary of the country.

C. Distribution Strategies (Place)

Considerations:
1. Number of potential consumers
2. Complexity of the products
3. Distribution budget
4. Seller’s sales & distribution experience
 5. Geography

Marketing Channels

An inter-organizational system made up of a set of interdependent

agencies & institutions involved in the task of moving products from the
point of production to the point of consumption;
Product delivery.
A fairly well established channel must be available to enable
consumers to secure the products they demand.
Nature of Marketing Channels:

vary according to the type of commodity handled, time and location.

To ensure Viability of the Channel System

Mutual understanding of channel members on

- type of channel served
- territory served
- functions of activities performed
Follow explicit rules to ensure the viability of the system ( payment
delivery, standardization, etc.)

Emergence of Marketing Channels

Product delivery is the major channel
Economic Reasons
a. increasing the efficiency of the process.
b. adjusting the discrepancy of assortments.(collection)
c. Organization of transactions
d. Facilitation of the sorting and searching process.

Choice of Marketing Channel depends on:

1. Nature of the Product

a. perishability
b. unit value
c. newness of the product
2. Nature of the Market
a. consumer buying habits
b. size of average sale
c. total sales volume
d. concentration of purchases
e. seasonality of sales

Final Consideration in choice of Channel:

1. Must consider
a. cost involved in using each channel
b. investment required
c. potential net profit from sales
2. Direct Selling

Marketing Channels of Selected Farm Products:

1. Contract-buyers – a contract is made between the producer & the buyer.

2.Wholesalers – merchant middlemen who sell to retailers & other
merchants but not to consumers.
3. Commission Agents – buy products in local areas & sell to viajeros or
assembler-wholesalers; just get commission as payment for their services.
4. Wholesaler - Retailers
– get produce in large quantities and sell to retailers on wholesale
basis as well as to consumers on retail basis
5. Assembler - Wholesalers
– they buy from producers & contract buyers, assemble the products in
large volume & transport to market centers; also known as viajeros.
6. Butcher-Retailers
- buy live poultry & livestock & sell them in dressed or carcass form.
7. Retailers – sell to ultimate consumers

D. Promotion Strategies

Promotion
– is the personal and/or impersonal process of assisting a prospective
customer to buy a commodity or to act favorably upon an idea that has
commercial significance to the seller.

Importance of Promotion:
 makes the buyers aware of alternative goods & services
 Shorten the distance between the market & the manufacturers
 regulate the level & timing of demand

Methods of Promotion
1. Advertising – any paid form of non-personal presentation of promotion of
the products
2. Personal Selling – oral presentation of the product
3. Sales Promotion – are price off, bonuses, lotteries, etc.
4. Publicity – non-personal form of promotion which aims to attract buyers by
publishing commercially significant news about the product in different media.
Some Considerations on Promotions:

1. Nature of the market

2. Nature of the product
3. Stage of the product life cycle
4. Availability of funds

PROMOTION MIX:

1. ADVERTISING- seeks to generate a favorable customer perception of

the product through creative messages via effective media.
 TELEVISION
 NEWSPAPER
 RADIO
 MAGAZINES

Problems in Food Advertising:

1. Inelastic demand for most products.
2. Food products already consumed in volume and not many people are
interested in eating more of the same items.
3. Competition among food products is primarily in price, not in emotional or
other appeals.
4. Difficulty of getting funds for advertising.

2. SALES PROMOTION - works on the principle of giving an incentive or

prize for purchasing a product
Examples:
- Contest And Prizes
- Shows And Exhibits
- Premiums And Discounts
- In-store Promotions
- Sales Incentives
- Trade Promotions

3. PUBLIC RELATIONS
- Publicity Campaigns
- Customers Services
- Community Projects
- Employee Programs

4. DIRECT SELLING
- Personal Selling
- Electronic Shopping
 FARM PLANNING and BUDGETING¹
Kerin S. Balista²

FARM PLANNING and BUDGETING

Definition
 Planning

 is a matter of forecasting. It is an attempt to state logically in conformity with

the economic principles as to what will happen in the future. Evidently planning
is to serve as a blue print for the future.

 Farm Budget

 The statement of the estimated costs and returns of the farm business plus the
anticipated results for some period of time.

 Budgeting

 is the process of determining the requirements and allocating resources to

different activities in the plan and estimating the costs and returns. The purpose
of budgeting is to compare the profitability of different kinds of enterprise.

FARM PLANNING
 is a process to allocate the scare resources of the farm to organize the farm
production in such a way as to increase the resource use efficiency and the income
of the farmer.
  Is a process of deciding in the present what to do in the future about the best
combination of crops and livestock to be raised through rational use of resources .

 is mainly a process of choice making or choosing from among competitive

alternatives. It is concerned with various adjustments the farmer makes in the
existing organizations.

FARM BUDGETING
 is a method of analyzing plans for the use of agricultural resources at the command
of the decision maker. Farm plan is a programme of the total farm activity of a
farmer drawn up in advance. Farm plan serves as the basis of farm budgeting.
Therefore farm plan can be prepared without a budget but budgeting is not possible
without farm plan.

Relationship between Planning and Budgeting

 The plan provides the basis for the budget. It can be formulated without a budget.

 The budget evaluates alternative plans from which to choose the “best”.

 Planning and budgeting have tended to become a combined process. Two or more
plans and budgets give the farmer the chance to choose the best action.

¹ A topical report presented and submitted to Professor Badu M. Panimbang, PhD. under Agricultural
Enterprise Development and Management (AT-601).
² Reporter of the topic Farm Planning and Budgeting, Financing the Farm, Farm Records and Accounts
& Farm Business Analysis
Objectives of Farm Plan and Budget
1. To estimate the possible changes in the costs and returns of the farm organization
so that the best alternative plan can be chosen.

2. To show the relative advantages of alternative farm plans for each enterprise.

3. To show the estimates for seasonal and total requirements for labour, capital and
other resources needed to carry out the plan, thus showing whether they are
feasible in view of the resources available.

Uses of Farm Plans

  Serve as a yardstick for performance and accomplishment thus stimulating the
farmers to do their best.
  Serve as a reminder of the schedule of farm operations.

 Serve as the basis for evaluation and improvement.

 Serve as a basis for credit arrangements, conservation programs, etc.

 Know how much information to gather before preparing the budget – costs involved
in gathering information must be considered.

Considerations in preparing Budget

 Understanding clearly what item should and should not be charged to the budgets.

 Include only meaningful information – only to those that are pertinent and relevant
to the preparation of the budget.

SOURCES of DATA IN MAKING FARM PLANS AND BUDGETS:

 Actual experiences of farmers and other farmers.

 Farm demonstration trials of research agencies.

 Results of various experiments / field trials of educational institutions.

 Extension agents.

 Technical field representative of agribusiness farms

STEPS IN FARM PLANNING and BUDGETING

 Taking stock of the resources available in the farm.

 Land – includes the land use pattern, irrigation and drainage, etc.

 Labor – quality and quantity of labor available to the farm business.

 Capital – buildings, cash and other liquid resources.

 Review and analyse alternatives – evaluate profitability of different enterprises and

practices/ operations available to the farm.

 Decide on the alternatives and fit them into one plan.

 Summarize the resource requirements and output expectation – putting all figures/
data, physical or monetary into one summary form.
TYPE OF FARM PLANS and BUDGET
 PARTIAL PLAN and BUDGET

 takes the whole farm as the subject for decisions;

 considers summary of all returns and expenses;

 net return/ loss indicates performance of only the part considered;

 aids in organizing the entire farm business;

 format is not standardized; and

 time consuming.

 COMPLETE PLAN and BUDGET

 takes the whole farm as the subject for decisions;

 considers summary of all returns and expenses;

 net return/ loss indicates performance of only the part considered;

 aids in organizing the entire farm business;

 format is not standardized; and

 time consuming.

The Difference between complete and partial budgeting

ENTERPRISE BUDGET
 is used to analyse the profitability of an enterprise (i.e. poultry, livestock, corn) by
estimating annual returns and costs for one unit of the enterprise. The is usually a
head for livestock or a hectare of crop. Enterprise budgeting is basically similar to
cost and returns approach, only that it is an ex-ante approach, whereas, the latter is
 an ex-post approach and is used to analyze the whole farm operation involving a
number of enterprises.

 An Enterprise budget can be organized and presented in several formats but

typically contains three sections: income, variables costs and fixed costs.

PARTIAL BUDGET ANALYSIS

 Partial budgeting

 is used to asses the economic viability of a component technology.

 only the expected changes in costs and returns associated with the alteration of
existing technology are considered.

Steps in Partial Budgeting and Data Requirements

 Is to describe carefully and exactly the technology or change in farm organization or
methods being considered.

 The technology should be spelled out in some detail.

 It should be written down at the head of the budget.

 It also should show the date of the analysis.

Components of Partial Budget

 Added Income/ Return

– additional income may be realized if the technology causes an increase in yield or

output levels (e.g. increase in food consumption, use of feed supplements etc.)
 Added Costs

– a technology may involve additional costs if it requires the purchase of additional

inputs, or new inputs will be purchased as a substitute for another. Any additional fixed or
variable costs should be included. If the technology requires the purchase of new machinery
or any fixed input, then there will be additional fixed costs. These should be average values
so depreciation should be computed using the straight line method. Opportunity cost (or
interest on investment) on new capital investment should also be included as additional
fixed costs.
 Reduced Costs

– both fixed and variable cost may be reduced by a technology. Depreciation and
interest on investment may be reduced if the technology results in eliminating or reducing
the investment in machinery, building, breeding, livestock, land, etc. In addition, variable
cost may be reduced if the technology decreases the need for some variable inputs.
  Reduced Income/ Returns

– may result when a technology causes a reduction in yield or output levels. This
could be particularly true with a technology designed primarily to reduce the cost of
production. While the technology may result in reduction of income, profit could still be
positive provided the reduction of cost is greater.

Components of Complete Farm Plan and Budget

a) Inventory – list of all available resources in the farm.

b) Personal Organization

c) Calendar of Operations

d) Schedule of labor requirements

e) Schedule of supply required

f) Summary Budget

CASH FLOW BUDGETING

 After alternatives have been analysed with respect to their economic feasibility
(profitability), the cash flow of the alternatives needs to be considered.

 An estimate is made of the cash that will be available for investment for debt
servicing and family living expenses, the amount that will be available for
investment elsewhere, and the amounts which will have to be borrowed.

 The cash flow budget is simply a detailed projection of all funds flowing into and out
of the farm business or farm family household.

 The objective of a cash flow budget is to determine if there will be enough cash to
cover the anticipated outflows.

FINANCING THE FARM

 FINANCING- is the process of acquiring funds.

 Two Methods of Financing:

1. Equity – funds coming from the owner’s equity.

2. Borrowed – funds acquired from banks, friends, cooperatives, partners, relatives

and other sources. It requires repayment without interest.
Sources of Funds
 Banks

 Joint-ventures with other like-minded people contributing some of the investor’s

funds.

 Equity capital where investors put funds into your business.

 Cooperatives

 Credit unions

 Renting or leasing

 Personal loans from family and friends

 Government loans

 Sell existing assets

 Mortgage

The Cost of Borrowing

There are different ways to calculate interest on capital so always ask: Is the rate nominal,
effective, or periodic?
Interest and repayments are not the only costs of borrowing. Other costs include:
 Loan application fees

 Loan establishments fees

 Stamp duty on loans

 Mortgage fees

 Premium imposed for risks

Several factors which practically all lenders consider and borrower should be aware:
 Management –the primary focus is on the individual, the borrower. Very likely, the
character of the borrower comes first.

 Repayment Capacity –the ability to use the desired funds profitably is difficult for a
lender to assess. The lender place some emphasis on the past business record: past
earnings are the business’ report card.
  Loan Purpose

 Loan security –the creditor’s first obligation is the success of his business or to the
people whose money he is lending.

 Financial position and progress –a creditor wants his accounts receivable to be with
farm businesses that are solvent, profitable and growing.

 The economic climate

What to expect from a Lender:

 Financial Reliability/ Responsibility –a good lender should know the business.

 Agricultural Knowledge –lender should understand agriculture and its peculiar

problems, new developments and in financing it.

 Competent and confidential consultation –Dependable Consultant

FARM RECORDS AND ACCOUNTS

There are two things a farmers needs to have for proper farm management:
 Farm Records –is a document (in most cases a book) that is used to keep account of
the different activities, events, materials, etc. regarding farm operations.

 Farm Accounts –deals only with financial of all farm operations. Deals majorly with
the farm expenditures and income and help the farmer to calculate how his
business is doing.

Importance of Record Keeping

1. It helps a farmer to keep stock and manage each aspects of the farm properly.

2. They are important for planning and budgeting. They provide a farmer with enough
information needed for planning and budgeting at every pointing time.

3. They help farmer know the progress and contributions of each aspects of the farm
to its overall success.

4. They are important for proper farm management.

5. They can be very helpful when a farmer needs to access financial aids from banks or
other financial institutions.
Types of Farm Records and their Uses
1. Daily Farm Records
-these are the records of all important activities and events that happen on the
farm. These records help the farmer keep track of past farming activities and plan for future
activities.
2. Records of Farm implements and equipment
-this is used to keep an inventory of all equipment on the farm and their quantity. It
can also contain the date of purchase of the equipment and sometimes their description.

REQUIREMENTS OF FARM RECORDS

 Must be COMPLETE, enough to give the manager sufficient information about the
business.

 Must be ACCURATE.

 Must be USED if they are to be real value to the farm manager.

Parts of Farm Record System

1. Farm Inventory.

2. Farm Earning Statement- profit (increase) and loss statement.

3. Net Worth Statement –financial statement or the balance sheet

4. Cash flow Statement –sources and uses of funds.

THE FARM INVENTORY RECORDS

• It is the most important part of any farm system, and forms the basis of all farm
accounts. It accounts at the end of the year for the possible gain or loss for the
year, cash or non-cash such as;

1. The year to year change of number in livestock and in the volume of crop on hand.

2. The change in the cash on hand for the year as a result of purchase of new
machineries or equipment.

Inventory includes:
1. Real Estate –includes land, building, fences, water system, electric system and
fixtures.
 2. Livestock –includes the list of classes of animals like milking cow, bull, calves heifer
etc.

3. Machinery and Equipment –includes the list of classes of tools and farm machines.

4. Feeds and Supplies –it includes feeds, fertilizers, herbicides, pesticides, seeds, etc.

If no records exist, taking an inventory would be the first step in organizing a complete set
of farm records. To become useful in the record keeping system, the inventory must be in
monetary value and must consist of:
1. Physical Account –consist of describing and listing each piece of property.

2. Valuation –is a process which can be completed using one of several methods to
place a value to each type of property.

METHODS OF INVESTIGATION
1. Valuation at Cost –entering in the inventory the amount actually invested in the
asset when it was acquired.

2. Valuation at Market price

3. Valuation by net selling price –the price which could probably be obtained for the
asset if marketed, less the cost of marketing

4. Valuation based on production cost –value the asset at what it would cost to
reproduce it at present prices and under present methods of production.

5. Valuation by capitalizing and earning power –can be valued through capitalization

of future

Valuation of Farm Inventory

Common Methods of Valuation
1. Net Selling Price or Net Market Price –are used for those items that are held primarily for
sale and for those items brought at the early part of the accounting
2. Original Cost less Depreciation –a methods which is appropriate for business which
provides accurate service to the business over a period of age, use or obsolescence.
3. Cost or Market Price –a method commonly used for valuing farm supplies.
4. Cost or Purchase Price –are used for items which have been purchased recently and for
which cost records are still available.
5. Replacement Cost Less Depreciation –a method which proves to be good in determining
the value of farm assets.
6. Income Capitalization –for those assets whose contributions to the income of the
business can be measured and which have a long life contribution.

DEPRECIATION
 is a term used to express a loss in the value of a property due to wear and tear and
obsolescence. It involves prorating the original cost of asset over its useful life.

Terms used in Computation:

 Useful life –this is the expected number of years by which the item will be
completely worn out.

 Salvage value or Terminal value –this represents the item’s value at the end of its
assigned life. The shorter the useful life the higher the scrap value.

Methods of Estimating Annual Deprecation

Straight Line Method –it is the most widely used and easiest to use.

Original Cost – Salvage value

Annual depreciation = -----------------------------------------
Years of useful life
 
Example
• Annual depreciation = (Original Cost – Salvage Value) x R
 The ff. gives information about a machine
length of useful life
Where: R = ------------------------------
Purchase price - P15,ooo.00
100
Salvage value - P 3,000.00
Useful life - 10 years

Answer:Balance Method –fast or accelerating method which will be used to compute for
Declining
Firstassets
farm Method: 15,000
which depreciate more – 3,000
rapidly in their early lives e.g. trucks, tractors, vehicles
etc. Annual Depreciation = ---------------------- =1,200
10
Formula:
Annual depreciation = Remaining balance x % rate selected for a given year to be
Second Method:
charged for (15,000 – 3,000) x .10 = 1,200
depreciation.

where:
Remaining balance = Remaining balance – Depreciation
for a given year for a previous year in the previous year
 Note: % rate to be charged is usually twice the rate used in the straight line method.

Example: Original cost - P12,000

Life span - 10 years
% rate charged for depreciation- 20%
Answer:
st
1 Year - 12,000 x .20 = 2,400
nd
2 RECORDING
FINANCIAL Year -FORMAT(12,000-2,400) = 9,600 x .20 =1,920
 Onerd of financial records used in ant recording system is the financial journal. It
3 Year - (9,600 – 1,920) = 7,680 x .20 = 1,536
th
displays all cash and non-cash financial transactions experienced in a farm business
4 Year - (7,680 – 1,536) = 6,144 x .20 = 1,228.80
in any
th given month. At the end of the month, the financial journal can be balanced
10 show
to Yeara true -financial(2,013.266-402.653)
position of the farm= 1,610.612
business xwhich
.20 = 322.12
will help reflect its
efficiency.
Salvage Value = 1,610.613 – 322.12 = 1,288.49
 Also at the end of each month, all cash transaction are recorded in a monthly cash
flow record to help indicate the actual cash position of the farm business. The cash
flow record has the same format as the cash flow budget.

RECORD OF FINANCIAL STATEMENTS

Types of Financial Statements
1. Simple Cost Accounting for a Product Line. A record that produces data, useful for
planning.
2. Tax Records. A record that must include information from records on revenue,
expenditure and depreciation. It reflects the economic health of the farm and provides tax
data with minimum effort.
3. Overall Records for the Agricultural Firm. Includes the tax statement records together
with the inventories and quantitative data on the development of an individual production
line.
4. Overall Records on the Farm Enterprise and Family Finances. A record that includes tax
statements and financial planning information as well as data on business finances.
5. Complete Cost Accounting. All expenditures and revenues of the agricultural firms are
recorded and posted to the accounts of the various activities or production line.

Financial Statement – Balance Sheet/ Net Worth Statement

- is a “snapshot” of an individual’s or business’ financial picture at a given date. It is
merely a listing of assets, liabilities and net worth. The accounting equation states
that assets minus liabilities equals net worth.

- it is to illustrate the liquidity and solvency of a business.

Components of Balance Sheet

 ASSETS –something a business owns or controls (e.g cash, inventory, plant and
machineries)

• Current Assets. Consist of cash or assets which could be readily converted

into cash through the normal operation of the business during the year.
Included are:

 Accounts receivable is the balance of money due to firm for goods

or services delivered or used but not yet paid for by customers.

 inventory held for sale

 cash items (marketable securities, bonds and stocks, and values of

life insurance.)

• Intermediate Assets. Consists of resources or production items with a useful

life of one to ten years. Most of these are used to support production. (e.g.
trucks, equipment, machinery and breeding livestock).

• Fixed Assets. These are long-term assets which are permanent and consist
primarily of real estate and fixed improvements.

 Liabilities

 Something a business owes to someone (e.g. creditors, bank loans etc.)

  is an obligation that a business owes and its settlement involves the
transfer of cash or other resources.
 Three groupings – current, intermediate and long term are used to
compare liabilities with assets.

Current Liabilities
- These liabilities are due or payable on demand or at stipulated maturities within the
operating year, normally a twelve-month period.

- These includes: notes and accounts payable, rents, taxes and interest, plus that
portion of principal or intermediate and long-term debt due within the next twelve
months.

Intermediate-term Liabilities
- This includes normal estate debts and contracts written with the purpose of meeting
other seasonal needs. Term of loans are normally for a period greater than twelve
months but less than ten years. (e.g. notes for improvements to real estate,
equipment purchases, additional to breeding and dairy stocks and other major
adjustments in the farm operation.

Long-term Liabilities
- These are assets financed for periods in excess of ten years. (e.g. mortgages and
land contracts on real estate less the principal due within twelve months.

Net Worth
- is computed by subtracting total assets. It shows the owner’s equity in the business
and in other personal property, should the business be sold or liquidation.

- is an estimate of the amount of money a person has before taxes.

Net Worth = Total Asset – Total Liabilities

Profit and Loss Statement

- includes all receipts and expenses of the business during a specified period – usually
on year – together with adjustments in accounts payable and receivable.

- This is a summary of both the cash and non-cash financial transactions of the farm
business.

- The Profit and loss statement is a useful analytical tool, particularly when
statements from a number of years are available for comparative purposes. It
reports the return (or loss) to resources used in production. The relationship
 between expenses and income over time are also shown, indicating whether
increased efforts to control costs are warranted.

FARM BUSINESS ANALYSIS

- the process of retrieving, organizing, processing, and analyzing information used in
farm business decision making - is a critical ingredient in the management of the
modern farm. Managers must be able to quickly respond to changes in the prices of
the inputs they buy and the products they sell if they are to maintain farm
profitability in today's rapidly changing marketplace. Producers are no longer
isolated from changes elsewhere in the economic system.

Four Major groups

 Measure of financial position
 Measure of size
 Measure of efficiency
  Measure of marketing performance

Financial Position
- There are several measures used in the analysis of the financial position of the
business which can be found in the balance sheet. Some of the data included in the
analysis are gross margin budget, current ratio and percentage return on
investment.

- The analysis of the income statement will also provide some measure used in
analyzing the financial position. The pro-rating of net income of the business is
concerned primarily with the general analysis of the management performance and
income measured in terms of return on capital, labor and management resources.

Percent Return on Investment is one measure of financial position of the farm business. It
measures the profitability of the enterprise. It shows the return per peso investment.
It is computed as:
Net Farm Income
% Return of Investment (ROI)= --------------------------------------- - x 100
Total Amount of Investment

Return on Investment (ROI)

-is a performance measure used to evaluate the efficiency of an investment or
compare the efficiency of a number of different investments. ROI tries to directly measure
the amount of return on a particular investment, relative to the investment’s cost.

Analysis of a Balance Sheet

- A balance sheet summarizes much useful data about the financial position of the
farm business. One useful analysis which can be derived from the balance sheet is
the ratio analysis. Ratio analysis puts the assets and liabilities as well as the net
worth data in comparative terms.

- Current ratio is one measure of the short-term liquidity of the business-the extent to
which the farm business can pay its short-term debt with cash or other assets easily
converted to cash. It is computed as:

Current Assets
Current Ratio = -----------------------------------
Current Liabilities
- Rule of thumb. A farm business should have roughly twice as many current assets as
current liabilities. If it does not, it may be forced to sell its fixtures, equipment, or
other fixed assets to meet demands for payment from creditors.
 Current Assets P 11,000
Example: ------------------------- = ---------------- = 1.1
Current Liabilities 10,000

QUEENNIE CORCINO

I. The Concept of Entrepreneurship

a. Definition of Entrepreneurship
b. Factors Influencing Entrepreneurship

II. Characteristics of Entrepreneurship

a. Qualities of Entrepreneurship
b. Entrepreneurial functions
c. Classification of Entrepreneurs

III. Difference between

a. Entrepreneur & Manager
b. Entrepreneur and Entrepreneurship
c. Entrepreneur and Enterprises
d. Entrepreneur and Administrator
o Entrepreneur & Intrapreneurship

IV NATURE OF SUCCESSFUL AGRIBUSINESS

V REASONS AGRIBUSINESS FAIL

VI APPENDIX I Best Practices of Agri-entrepreneurs in the

Philippines
 INTRODUCTION

The ultimate measure of a man

Is not where he stands
In moments of comfort and convenience
But where he stands
At times of challenge and controversy.

- Martin Luther
King.

The words entrepreneur, intrapreneur and entrepreneurship have

acquired special significance in the context of economic growth in a
rapidly changing socio-economic and socio-cultural climates,
particularly in industry, both in developed and developing countries.
Entrepreneurial development is a complex phenomenon. Productive
activity undertaken by him and constant endeavor to sustain and
improve it are the outward expression of this process of development
of his personality.

WHO IS AN ENTREPRENEUR?
An entrepreneur is a person with a dream, originality and daring, who
acts as the boss, who decides as to how the commercial organization
shall run, who co-ordinates all activities or other factors of production,
who anticipates the future trend of demand and prices of products.

An entrepreneur is one of the important segments of economic growth.

Basically he is a person responsible for setting up a business or an
enterprise. Infact, he is one who has the initiative, skill for innovation
and who looks for high achievements. He is a catalytic agent of change
and works for the good of people. He puts up new green-field projects
that create wealth, open up many employment opportunities and leads
to the growth of other sectors.

The entrepreneur displays courage to take risk of putting his money

into an idea, courage to face the competition and courage to take a
leap into unknown future and create new enterprises/ business. This
creative process is the life blood of the strong enterprise that leads to
the growth and contributes to the national development.

The entrepreneur will always work towards the creation and

enhancement of entrepreneurial society.
The best entrepreneur in any developing country is not the one who
uses much capital but an individual who knows how to organize the
employment and training of his employees.
 THE CONCEPT OF ENTREPRENEURSHIP

Entrepreneur Entrepreneurship Enterprise

Person Process of action Object

Fig 1. Concept of Entrepreneurship

ENTREPRENEURSHIP DEFINED:

Entrepreneurship is an elusive concept.

“Entrepreneurship is based on purposeful and

systematic innovation. It included not only the
independent businessman but also company directors
and managers who actually carry out innovative
functions.”
Schumpeter

In the above definition, entrepreneurship refers to the functions performed

by an entrepreneur in establishing an enterprise. Just as management is
regarded as what managers do, entrepreneurship may be regarded as
what entrepreneurs do. In other words, entrepreneurship is the act of
being an entrepreneur. Entrepreneurship is a process involving various
actions to be undertaken to establish an enterprise. It is thus, process of
giving birth to a new enterprise. Entrepreneurship is composite skill, the
resultant of a mix of many qualities and traits- these include tangible
factors as imagination, readiness to take risks, ability to bring together and
put to use other factors of production, capital, labour, land, as also
tangible factors such as the ability to mobilize scientific and technological
advances. A practical approach is necessary to implement and manage a
project by securing the required licenses, approvals and finance from
governmental and financial agencies. The personal incentive is to make
profits from the successful management of the project. A sense of cost
consciousness is even more necessary for the long-term success of the
enterprise. However, both are different sides of the same coin.
Entrepreneurship lies more in the ability to minimize the use of resources
and put them to maximum advantage. Without any awareness of quality
and desire for excellence, consumer acceptance cannot be achieved and
sustained. Above all, entrepreneurship today is the product of teamwork
and the ability to create, build and work as a team. The entrepreneur is
the maestro of the business orchestra, wielding his baton to which
the band is played.
The basic two elements involved in entrepreneurship are as follows;-

Entrepreneurship

Innovation Risk- bearing

INNOVATION
Innovation, i.e. doing something new or something different is a
necessary condition to be called a person as an entrepreneur. The
entrepreneurs are constantly on the look out to do something different
and unique to meet the requirements of the customers. They may or
may not be inventors of new products or new methods of production
but they possess the ability to foresee the possibility of making use of
the inventions for their enterprises. In order to satisfy the changing
preference of customers nowadays many enterprises have adopted the
technique of innovation. The customers taste and preferences always
keep on changing, hence the entrepreneur needs to apply invention on
a continuous basis to meet the customers changing demand for
products.

RISK- BEARING
Entrepreneurship is the propensity of mind to take calculated risks with
confidence to achieve a predetermined business or Industrial objective.
The capacity to take risk independently and individually with a view to
making profits and seizing the opportunity to make more earnings in
the market-oriented economy is the dominant characteristic of modern
entrepreneurship. In fact he needs to be a risk taker, not risk avoider.
His risk bearing ability enables him even if he fails in one succeed. The
Japanese proverb says “Fall seven times, stand up eight”. Though
the term entrepreneur is often used interchangeably with
entrepreneurship, yet they are conceptually different. The relationship
between the two is just like the two sides of the same coin. Thus,
entrepreneurship is concerned with the performance and co-ordination
of the entrepreneurial functions. This also means that entrepreneur
precedes entrepreneurship.

QUALITIES OF ENTREPRENEURSHIP

The qualities that contribute to the success of an entrepreneur are as

follows: -
1. Risk Taking: - Entrepreneurs are moderate risk takers. They
enjoy he excitement of a challenge, but they do not gamble.
Entrepreneurs avoid low- risk situations because there is a lack
of challenge. They avoid high risk situations because they want
to succeed. They like achievable challenges. They do not tend
to like situations where the outcome of a quest depends upon a
chance and not on their efforts. They like to influence the
outcome of their quest by putting in more efforts and then
experiencing a sense of accomplishment. A risk situation occurs
when an entrepreneur is required to make a choice between two
or more alternatives whose potential outcomes are not known
and must be evaluated in advance, with limited information. A
risk situation involves potential gain and potential loss. As the
size of the business expands the problems and opportunities
become more numerous and complex. Business growth and
development require an entrepreneur not to be afraid of taking
decisions and certain risks. Most people are afraid to take risks
because they want to be safe and avoid failure. An entrepreneur
always takes a calculated risk and is not afraid of failure.

2. Self- Confidence: - A man with self – confidence has clear

thoughts and well- defined goals to achieve in his life. An
entrepreneur gets into business or industry with a high level of
self- confidence. He is able to evaluate his competencies and
capabilities in a realistic manner. He can set realistic and
challenging goals. He is confident of achieving these goals. He
possesses a sense of effectiveness, which ultimately contributes
to success of his venture. He puts forward his case confidently
and gets needed help from concerned agencies/ authorities.

3. Optimist: - An entrepreneur is able to visualize the hidden

opportunities in the environment and translate them into
business realities. An entrepreneur exhibits a positive and
optimistic attitude towards such opportunities. The entrepreneur
approaches his task with the hope of success and not with a
fear of failure. In the process of accomplishing his task he may
also fail but the failure experience does not change his thinking.
He is always an optimist in his outlook. The positive outlook
develops a drive in the entrepreneur to attempt new things and
innovate.
4. Need for achievement: - The need to excel known as
achievement is a critical factor in the personality of an
entrepreneur. People with high need
for achievement have desire for success in competition with
others or with a self- imposed standard of excellence. They try
to accomplish something new and try to innovate themselves in
long-term goals. They try to accomplish challenging tasks. They
know their own strengths and weaknesses, the facilitating
factors and constraints in the environment and the resources
needed to accomplish their tasks. If the objectives are
accomplished they feel elated.

5. Need for independence: - The need for independence is the

prime characteristic that has driven the entrepreneurs to start
their own business. These entrepreneurs do not like to be
controlled by others. They do not wait for direction from others
and choose their own course of action. They set their own
challenging goals and put efforts to achieve this goal. The
independence provides opportunity for trying out new ideas and
helps them achieve their goals.

6. Creativity: - Entrepreneurs are highly creative people. They

always try to develop new products, processes or markets. They
are innovative, flexible and are willing to adopt changes. They
are not satisfied with conventional and routine way of doing
things. They involve themselves in finding new ways of doing
the things for the better.

7. Imaginative: - Successful entrepreneurs possess a high

degree of imagination and foresightedness. Entrepreneurs have
a great vision. Knowing the present and the past the
entrepreneur is able to predict the future events the business
more accurately than others. It is because of their visionary
nature and power of imagination that helps them in anticipating
problems and evolving actions strategies for such problems.

8. Administrative ability: - A successful entrepreneur is always

a good administrator. He knows the art of getting things done by
other people without hurting their feelings of self- respect. He
has strong motivation towards the achievement of a task and
puts in necessary efforts in getting things done by others.

9. Communication ability: - Communication ability is the ability

to communicate effectively. Good communications also means
that both the sender and the receiver understand each other
and are being understood. An entrepreneur who can effectively
communicate with customers, employees, suppliers and
bankers will always succeed in their business.

10. Clear objectives: - An entrepreneur has clear objectives as

to the exact nature of the business, the nature of the goods to
be produced and the subsidiary activities to be undertaken. A
successful entrepreneur has the objective to establish the
product to make profit or to render social service.

11. Business Secrecy: - An entrepreneur who is successful

always guards his business secrets. Leakage of business
secrets to trade competitors is a serious matter; therefore an
entrepreneur should carefully guard it. An entrepreneur must be
able to make a proper selection of his assistant since most of
the time it is the assistant who leaks the trade secret.

12. Emotional stability: - The most important personality

factors contributing to the success of an entrepreneur are
emotional stability, personal relations, consideration and
tactfulness. An entrepreneur must maintain good relations with
the customers if he wishes to enjoy their continued patronage.
He must also maintain good relation with his employees, whom
he shall motivate to perform their jobs at a high level of
efficiency. An entrepreneur who maintains good human relations
with customers, employees, suppliers and the community has a
better chance to succeed in his/ her business.

13. Open-mindedness: - Open- mindedness means a free and

frank approach in accepting one’s own errors and change for
the better. An entrepreneur must be willing to learn from his past
experience, mistakes and moulds himself for better.

14. Technical knowledge: - Technical knowledge implies

knowledge about the product, process or technology used in
manufacturing. An entrepreneur who has reasonable level of
technical knowledge will always be successful. Technical
knowledge is easy to acquire if the entrepreneur tries hard to
acquire it.

15. Patience: - Patience means ability to wait. Patience also

means doing the work and waiting for the result. A certain
amount of patience is necessary in any type of vocation. An
 entrepreneur should not wait for actions but can certainly wait
for result for his efforts.

16. Hard working and energetic: - Ability and willingness to work

hard is an important quality of an entrepreneur. A person having
physical and mental stamina to cope with the hard work and
human relation is fit to become a successful entrepreneur. By
carrying out well- planned and systematic work, success is always
the end result.

17.Good organizer: - Entrepreneurs are good organizers of

resources like men, machines, materials and money needed to
start and run the business smoothly. They can convince the
employees, investors, customers and co- ordinate the activities
of individuals and groups in the accomplishment of business
objectives. An entrepreneur works like a coordinating force
among the resources, mould and manages them effectively.

INTERDEPENDENT SECTORS

As stated agribusiness encompasses all operations involved in the

production of farm inputs, the use of these farm inputs in the cultivation of
crops or raising of livestock, the various handling and processing of
agricultural commodities, and the transfer of these commodities to the
end-users. Interspersed among these operations are the various support
services that provide “logistics, coordination, financing, manpower,
technology, information, policies and programs, incentives and other
services” that lead to the achievement of a successful agricultural
business enterprise.

There are five major sectors making up the whole agribusiness System.

1. THE INPUT SECTOR:

This is the first subsystem from which all other agribusiness subsystems
emanate. Here, all inputs (e.g. fertilizers, seeds, machineries, etc) are
manufactured, imported or distributed.

2. THE PRODUCTION SECTOR :

Inputs are directly used for the production of an agricultural commodity as

end-product in itself or as a raw material for the production of other
products.
3. THE PROCESSING SECTOR :

The commodities from the production subsystem are transformed into

various products. The levels of transformation depend upon the level of
processing, which can be as simple as washing and grading to as
complex as chemical alteration.

4. THE MARKETING SECTOR :

This subsystem is concerned with the transfer of goods from source to

end-user. It includes all handling procedures and infrastructures that move
the commodities from one point to another. The marketing subsystem may
take the following routes:

1. Transfer of agricultural inputs from manufacturers to farm input users.

2. Transfer of commodities from production site to processing site
3. Transfer of commodities from processing site to end-consumers

The following diagram shows a graphical presentation of the major routes

taken by the agribusiness marketing subsystem:

5. THE SUPPORTING SECTOR :

The supporting sector consists of all the key players that provide services,
however, optional, but crucial to the success of an agribusiness venture.
These services are provided by institutions such as government agencies,
commercial associations, credit and financing, research organizations and
cooperatives.

ENTREPRENEURIAL FUNCTIONS

An entrepreneur is said to perform the following functions:

• Assumption of risk: - Risk bearing or uncertainty bearing is the

most important function of an entrepreneur which he tries to
reduce by his initiative, skill and good judgment.

• Business decisions: - The entrepreneur has to decide

To enter the industry this offers him the best prospects

To produce goods that he thinks will pay him the most
To employ those methods of production which seem to
him the most profitable.
 To effect suitable changes in the size of the business, its
location that are needed for the development of his
business.
• Managerial Functions: - The entrepreneur performs the
managerial functions such as

Formulating production plans

Overseeing finances
Dealing with the purchases of raw materials
Providing production facilities
Organizing sales

In large establishments these management functions are delegated

to professional managers an entrepreneur performs many useful
functions such as
• Undertakes a venture
• Assumes risk and
• Earns profits
• Identifies opportunities to start business either as a
manufacturer or a distributor.

The entrepreneurship exists in every field of economic endeavor.

Entrepreneurship has also been developed in the trading sector. A
manufacturing entrepreneur demonstrates his entrepreneurial
talents by bringing out new products while a trading entrepreneur
performs his entrepreneurial functions in creating demand for the
business he deals.

Deciding the Raising Planning

Project. Finance Production

Risk - Managing
Taking Enterprise

Innovation Earning Profits

 Entrepreneur

Fig.2 Entrepreneurial function

CLASSIFICATION OF ENTREPRENEURS

The entrepreneurs have been broadly classified according to

• Types of business
• Use of professional skill
• Motivation
• Growth
• Stages of development

ENTREPRENEURS ACCORDING TO TYPES OF BUSINESS

• Business entrepreneurs are those individuals for a new

product or service and then translate the same into business
reality. Tap both production and marketing resources to develop
a new business opportunity. Setup big establishment or small
unit such as printing press, textile processing house, advertising
agency, readymade garments or confectionery. In majority of
cases, entrepreneurs are found in small trading and
manufacturing business. Entrepreneurship flourishes when the
size of business is small.

• Industrial entrepreneurs are essentially a manufacturer who

identifies potential needs of customers and products or service
to meet the marketing needs. He should have the ability to
convert economic resources and technology into a profitable
venture.

• Corporate entrepreneur is an individual who demonstrates his

innovative skill in organizing and managing corporate
undertaking. He plans, develop and manage a corporate body.

• Agricultural entrepreneur are the ones who undertake

agricultural activities such as raising and marketing of crops,
fertilizers and other inputs of agriculture. They are motivated to
 improve agriculture through mechanization, irrigation, and
application of technologies for dry land agricultural products.

ENTREPRENEURS IN TECHNOLOGY

• Technical entrepreneur is the one who is essentially a

craftsman. He develops improved quality of goods because of
his craftsmanship. He concentrates more on production than on
marketing. He demonstrates his innovative capabilities in matter
of production of goods and rendering of services.

• Non- technical entrepreneur are those who are not concerned

with the technical aspects of the product in which they deal.
They are concerned only with developing alternative marketing
and distribution strategies to promote their business.

• Professional entrepreneur is interested in establishing a

business but does not have interest in managing or operating it
once it is established. He sells out the running business and
starts another venture with the sales proceeds.

ENTREPRENEUR AND MOTIVATION

An entrepreneur is motivated to achieve or prove his excellence in job

performance. He influences others by demonstrating his business
acumen.

• Pure entrepreneur is an individual who is motivated by

psychological and economic rewards. He undertakes
entrepreneurial activity for his personal satisfaction in work, ego
and status.

• Induced entrepreneur is one who is induced to take up an

entrepreneurial task due to policy measures of the government
that provides assistance, incentives, and concessions and other
facilities to start a venture. Enter business due to financial,
technical and other facilities provided to them by the state
agencies to promote entrepreneurship.

• Motivated entrepreneur: they come into being because of the

challenge involved in developing and marketing a new product
for the satisfaction of consumers. If the product succeeds, the
 entrepreneur is further motivated for launching of newer
products.

• Growth and entrepreneur are those who take up a high growth

industry which has substantial growth prospects. Super growth
entrepreneurs are those who show enormous growth or
performance in their venture.

ENTREPRENEUR AND STAGES OF DEVELOPMENT

• First generation entrepreneur is the one who starts an

industrial unit by his innovative skill. He is the one who
combines different technologies to produce a marketable
product or services.

• Modern entrepreneur is one who undertakes those ventures

which go well with the changing demand in the market. He
undertakes those ventures that suit the current market needs.

 Classic entrepreneur is one who is concerned with

maximizing the economic returns at consistent level. He is
concerned more about the survival of the firm with or without
an element of growth. Apart from the above, there are
entrepreneurs who can be classified into innovative and
imitative categories.

 Innovating entrepreneurs are generally aggressive in

collecting information, analyzing and experimenting attractive
possibilities into practice. They are quick to convert old
established products or services by changing their utility, their
value, their economic characteristics into something new,
attractive and utilitarian. They can see the opportunity for
introducing a new technique of production process or a new
commodity or a new service or even the reorganization of an
existing enterprise. They are very commonly found in
developed countries while there is dearth of such
entrepreneurs in underdeveloped countries. They are always
creative and bringing in innovation in their work.

 Imitative entrepreneurs are ready to adopt and are more

flexible in imitating techniques developed by others. They
exploit opportunities as they come and are mostly on a small
scale. He is more of an organizer of factors of production
than a creator. In the context of a poor country, he is
 definitely a change agent and hence he is important in
underdeveloped countries.
DIFFERENCE BETWEEN

A. ENTREPRENEUR & MANAGER

No. ENTREPRENEUR MANAGER

The main motive of an The main motive of a manager
entrepreneur is to start a is to
venture render his services in an
by setting up an enterprise. He enterprise
understands the venture for his already set up by someone else.
personal gratification.
An entrepreneur is the owner of A manger is the servant in
the enterprise. the
enterprise owned by the
entrepreneur.
An entrepreneur being the owner A manger is a servant does not
of the enterprise assumes all risk bear any risk involved in the
and uncertainty involved in enterprise.
running the enterprise.
The reward an entrepreneur A manger gets salary for the
gets for baring risks involved in services rendered by him in the
the enterprise is profit which is enterprise.
highly uncertain.
Entrepreneur himself thinks over A manager simply executes the
what and how to produce goods plan prepared by the
to meet the changing demands of entrepreneur. Thus, a manger
the customers. Hence, he acts as simply translates the
an innovator also called as a entrepreneur’s ideas into
change agent. practice.
An entrepreneur needs To On the contrary a manger
possess qualities and needs to
qualification like high possess distinct qualifications in
achievement motive, originality terms
in thinking, foresight, risk- of sound knowledge in
bearing, ability and soon. management,
theory and practice.

B. ENTREPRENEUR AND ENTREPRENEURSHIP

NO ENTREPRENEUR ENTREPRENEURSHIP
1. Refers to a person Refers to a process
2. Is a visualizer Is a vision
3. Is a creator Is a creation
4. Is an organizer Is an organization
5. Is an innovator Is an innovation
6. Is a technician Is a technology
7. Is an initiator Is an initiative
8. Is a decision- maker Involves decision making
9. Is a planner Involves planning
10. Is a leader Involves leadership
 C. ENTREPRENEUR AND ENTERPRISES
Entrepreneur is the fourth factor of enterprise

ENTREPRENEUR

LABOUR ENTERPRISE CAPITAL

LAND
The entrepreneur and enterprise are Inter- linked. Enterprise is an
offshoot of an entrepreneur. Its success is dependent on the
entrepreneur.

D. ENTREPRENEUR AND ADMINISTRATOR

NO ENTREPRENEUR ADMINISTRATOR
1 Entrepreneurship are Administrations are associated
associated connotations of with planning, professionalism,
enterprise, with notions of rationality and predictive
organization, opportunism, management process
individuality
2 An entrepreneur puts An administrator of a large
emphasis on the organization would hold
entrepreneurial activities of attitudes related to the
management process, so his administrative orientation of
hold attitudes related to the management process.
entrepreneurial
E. ENTREPRENEUR orientation.
& INTRAPRENEURSHIP
NATURE OF SUCCESSFULAGRIBUSINESS :

Today the business has become very competitive and complex. This is mainly
due to changing taste and fashion of the consumers on the one hand, and
introduction of substitute and cheaper and better competitive goods, on the
other. The old dictum “produce and sells has changed overtime into “produce
only what customers want”. In fact, knowing what customers want in never
simple. Nevertheless, a farmer operator/farmer manager has to give proper
thought to this consideration in order to make his business a successful one.
The important requisites for success in a modern business are :
1. Clean objectives : Determination of objectives is one of the most
essential pre requisite for the success of business. The objectives set forth
should be realistic and clearly defined. Then,
all the business efforts should be geared to achieve the set objectives.

2. Planning : In simple words, planning is a pre-determined line of action.

The accomplishment of objectives set, to a great extent, depends upon
planning itself. Planning is a proposal based on past experience and
present trends for future actions. In other words, it is an analysis of a
problem and finding out the solutions to solve them with reference to the
objective of the farm.

3. Sound organization : An organization is the art or science of building up

systematically whole by a number of but related parts. Just as human
frame is build up by various parts like heart, lever, brain, legs etc. similarly,
organization of business is a harmonies combination of men, machine
material, money management etc. so that all these could work jointly as
one unit, i.e. “business” “the agribusiness”. Organization is, thus such a
systematic combination of various related parts for achieving a defined
objective in an effective manner.

4. Research : As indicated earlier, today the agricultural production

philosophy “produce what the consumer want”. “Consumers” behavuiour
is influenced by variety of factors like cultural, social, personal and
psychological factors. The business needs to know and appreciate these
factors and then function accordingly. The knowledge of these factors is
acquired through market research. Research is a systematic search for
new knowledge. Market research

enable a business in finding out new methods of production, improving the

quality of product and developing new products as per the changing tastes
and wants if the consumers.

5. Finance : Finance is said to be the life-blood of business enterprise. It

brings together the land, labour, machine and raw materials into
production. Agribusiness should estimate its financial requirements
adequately so that it may keep the business wheel on moving. Therefore,
proper arrangements should be made for securing the required finance for
the enterprise.

6. proper plant location, layout and size : The success of agribusiness

depends to a great extent on the location. Where it is set up. 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 labour, nearer to the market etc. Hence the business men
must take sufficient care in the initial stages to selected suitable location
for his business.

7. Efficient management : One of the reasons for failure of business often

attributed to as their poor management or inefficient management. The
one man, i.e. the proprietor may not be equally good in all areas of the
business. Efficient businessman can make proper use of available
resources for achieving the objectives set for the business.

8. Harmonious relations with the workers : In an agribusiness

organization, the farmer operator occupies a distinct place because
he/she is the main living factor among all factors of production. In fact, it is
the human factor who makes the use of other non-human factors like land,
machine, money etc. Therefore, for successful operation of business,
there should be cordial and harmonious relations maintained with the
workers/ labours to get their full cooperation in achieving business
activities.

REASONS AGRIBUSINESS FAIL

1. Lack of Knowledge:
This is, in fact, one of the major reasons many agribusinesses fail. A lot of
people think venturing into agribusinesses do not require much training.
Some crop farmers think agriculture is all about making ridges, planting
seeds and then wait until harvest to start raking millions into their bank.
Most livestock farmers, on the other hand, are not any different from the
crop farmers above. They think livestock farming is all about getting young
animals and feeding them until maturity so that they can sell them out to
start making money too. A lot of poultry farmers think this way yet they
don’t know the fundamentals of keeping poultry commercially.Their focus
is usually on the profit, instead of taking out time to learn about their
business before venturing into it. Never presume you know it all.

2. Bad Location:
Site selection is an important factor to consider before starting your
agribusiness. The things to consider while making the decision for
choosing an appropriate location include; proximity to water sources,
proximity to markets, access roads to the farm, soil fertility, pH levels, etc.
Location matters a lot to agribusinesses and failure to select a good site is
the first step to failing in agriculture.

3. Improper Planning
 Before starting any agribusiness, you must sit down and calculate the
costs involved. Many agribusinesses fail at startup because the owners
did not plan properly before starting out. Planning is all about deciding in
advance what to do, how to do it and when to do it so that maximum
efficiency can be attained.
Items involved in the planning are; financial breakdown of inputs,
expansion plan, sources of fund, transportation, marketing strategy,
management board etc. In addition, supply chain and distribution channels
must also be planned.
Almost everything in agribusiness is planned. Farmers plan when to by
their inputs so that they can harvest at a favorable time of the year when
they can sell at high prices. They make a lot of profit from selling in peak
periods or festive periods because demand is high at those times.

4. Poor Customer Relationship

You will continue to lose more customers if you do not maintain a good
relationship with your customer. You will also miss business opportunities
that should come to you through referrals. Always do all you can to ensure
that your customers are happy with you and your products. Although, that
does not mean you should burn out or suffer a loss just to please them.
Good customers will continue to encourage and give you all the support
you need to scale up your business and make more money.

5. Premature Scaling
At the first taste of success, most agribusiness startups tend to scale up
their business operation immediately. While this is not bad at all, it is an
unwise idea to be followed immediately. Before scaling your business,
ensure you have increased your customer base to a point where your
current capacity cannot handle demand. Having a large customer base
will prevent you from incurring losses in form of post-harvest wastes. Post-
harvest wastes may accumulate when your production capacity is more
than demand for your product.

6. Lack of Core Values

What are you known for? Many startups do not have core values they can
capitalize on. They are very dynamic, and such businesses cannot be
trusted because they will always cause pain. Practice good values such as
integrity, good morals, timely delivery, and the likes of it.

You should be known for something. Capitalize on good business ethics.

Your core values should be written in your business handbook and
handed down to every employee. Be strict with this because it makes or
mar businesses.
7. Wrong Partner/Team
Ensure you pick someone who shares the same values as you. Pick
people who are passionate about what you do. People who are hard
working and self-motivated to work. Select people who are disruptive
thinkers and executors. with people or observing people execute a task.

8. Use of Business Funds for Personal Gains

A lot of small-scale farmers and startups fall victim of this. Once they start
seeing revenue coming in from sales, they begin their spendthrift almost
immediately. Another practice from most farmers that result to their failure
is the eating of their farm products during harvest. While harvesting crops
that can be eaten on the spot, some farmers (or workers) turn their
harvest into breakfast, lunch and sometimes, dinner.
This habit is non-professional and could make your business crash at any
time. Discipline must be inculcated to curb this challenge. The business
owner must learn to be frugal in spending. In addition, maintain a good
financial report of all expenses and revenue of the business. It will give
you a clear picture of what is coming in, and what is going out.

9. Selling on Credit
Another strong reason many agribusinesses fail is that of leniency of the
farm owner or management.  Starting a business relationship with any
buyer who is not willing to pay promptly is a bad idea. You may run into
bankruptcy in a very short time if you are not careful.

Ensure that all buyers pay on delivery. If you have customers who prefer
to by on credit, ensure they pay within three days or before your next
delivery to them. Be sure that these debtors can be trusted to pay back.

To be on a safe side, totally avoid credit sales especially as a startup. Try

to maintain those customers who will pay on the spot so that your money
doesn’t get stuck in the hands of people who are out to destroy
businesses with debt.

Cash flow is essential for the survival of any business and credit sales is a
good way to tie money down, leading to more expenses than revenue and
profit.

10. Poor Farm Management

Many agribusinesses fail because of the problem of poor farm
management. Plants and animals are living things, the same way you take
care of yourself is the same way they should be taken care of also.
Maintain a good hygiene on the farm. Ensure you wear clean clothes to
avoid the spread of disease. Separate sick animals from the healthy ones
and then treat the sick ones properly.

Irrigate your plants when necessary. Apply fertilizers and manure to

supply plant nutrients. Weed the farm when due to avoid competition with
plants.  Nothing should be neglected.

Farming is serious business. It is not a part-time job unless you don’t

really take it seriously. Make every day count on your farm and learn
people management skill to be able to manage your workers properly.
 APPENDIX I
Best Practices of Agri-entrepreneurs in the Philippines

Glenn N. Baticados, MM, LIF

Director, Center for Technology Transfer and Entrepreneuership
University of the Philippines at Los Ba

gnbaticados@up.edu.ph

ABSTRACT

The future challenges facing agriculture will require a paradigm shift from a
production orientation to a market-centric orientation. There should be a
mindset shifts from a traditional perspective of agriculture of production to a
market-centric agribusiness model. Philippine agribusiness and food
marketing systems are changing steadily in a positive way. Agriculture as a
whole is a dynamic sector, offering many opportunities for entrepreneurship
along the entire agribusiness value chain. But young people shun away from
agriculture because they have a misconception about what is agriculture or
agribusiness. In the Philippines, agriculture is often associated with poverty,
risks, and hard work. Recent studies proved otherwise. The 15% drop in
poverty are due to the entrepreneurial activities ranging from agriculture-
related trades among poor households in rural areas to lower-end services
among urban poor, along with businesses pursued by the non-poor.
Furthermore, innovation in technological applications, agri-products, and
business models have been attracting the Filipino youth to agriculture.
Harnessing and enabling the entrepreneurial spirit and skills of young people
to become successful agri-entrepreneurs will require a mindset shift, tailored
support, access to adequate and affordable financing, and the appropriate
enabling environment. This can only be achieved through the development of
localized, innovative models and initiatives in engaging and capacitating the
youth on agri-entrepreneurship. In the end, The transformation of the
Philippine Agriculture and the development of an inclusive agribusiness value
chain can only be realized by catalyzing an entrepreneurial and innovation
environment that starts on the farm.

Keywords: Agri-entrepreneurship, , Agribusiness, Agriculture, Youth

 

INTRODUCTION

From agricultural production to agribusiness models

Agriculture today is more than just a farmer simply planting a crop, growing
livestock, or catching fish. It takes an ecosystem and several actors to work
together to produce and to deliver the food we need. It is this dynamic and
complex ecosystem that will equip agriculture to cope with the competing
challenges of addressing food safety and food security, creating inclusive
livelihoods, mitigating climate change and sustainably managing natural
resources. Advances in agri-biotechnology and farming practices and
methods have enabled farmers to become more productive, growing crops
efficiently in areas most suitable for agriculture.

The future challenges facing agriculture will require a paradigm shift from a
production orientation to a market-centric orientation. Sustainability of
agriculture cannot be treated separately and independently. Agricultural
sustainability involves the integration of the whole agri-value chain from the
acquisition of inputs to farming to marketing and up recycling of agricultural
wastes. It requires the integration of the whole value chain system from value
creation, delivery, and capture. Thus, there should be a mindset shifts from a
traditional perspective of agriculture of production to a market-centric
agribusiness model.

Agribusiness integrates all the components of the agri-value chain system

from inputs to end products. Agribusiness as an economic sector, has the
greatest impact on the national income of the Philippines serving as an
economic backbone of the country. Philippine statistics shows that focusing
on agri-production alone will only yield to 9 to 11% GDP. But if we integrate
agri-production with agri-manufacturing or agro-processing and agri-services,
its impact on the Philippine GDP increases to 38 to 40%.

Agribusiness can generates hundreds of jobs, produces major commodities

for domestic and international consumptions. It brings rural progress by
promoting economic activities on the countryside. And Agribusiness has the
potential to serve as a catalyst to sustain agricultural production and
ultimately, reduce rural poverty significantly. (insert here case in Africa)

But promoting the mindset shift from agriculture production to agribusiness

means that the different actors - government, academe, and the industry
should work together and to innovate continuously. Promoting innovation in
agribusiness must start from the education of the youth towards agribusiness
management employment and the promotion of inclusive agri-
entrepreneurship. Such broadened collaboration will result in the creation of a
fully integrated and innovative agri-value chain system that will not only
assure the supply of inputs and goods but as well as human capital with
relevant industry competencies.
Agri-entrepreneurship in the agribusiness value chain

Philippine agribusiness and food marketing systems are changing steadily in

a positive way. As always perceived in the past decades, the Philippines with
each rich natural resource has the agricultural potential not only to feed itself
but also to produce a surplus that can contribute to global food security.
However, fulfilling this potential requires looking at the needs of the Filipino
farmers as part of food systems and supply chains and considering
agricultural productivity, food security, food safety, and nutrition towards a
balanced investment on the different sectors of the economy to achieve social
stability and alleviates poverty.

Even with rural to urban migration occurring in the Philippines brought about
by the surge of business process outsourcing companies (BPOs) and call
centers, there are still many young people living in the countryside. 
According to the International Labour Organisation (ILO) report 1  in 2013,
youth are two times more likely than adults to be unemployed. This is brought
about by the mismatch between the labor supply and demand for skills. A
2017 study by India-based employment solutions firm Aspiring Minds showed
that only one out of three Filipino college graduates is “employable,” which
means about 65 percent of graduates in the country do not have the right
skills and training to qualify for the jobs they are applying for 2.  

The high unemployment rate for the youth in rural areas presents both an
immense challenge and great opportunity. Generally, young people shun
away from agriculture because they have a misconception about what is
agriculture or agribusiness. In the Philippines, agriculture is often associated
with poverty, risks, and hard work. The condition of farmers in rural areas also
discourages the youth from pursuing a college education in agricultural
courses. What is more alarming is that even Filipino farmers would dissuades
their children to get into agriculture as a career.

But in reality, agriculture as a whole is a dynamic sector, offering many

opportunities for entrepreneurship along the entire agribusiness value chain.
The growing population in urban centers and the rise of the middle classes
with a projected growth of 72%, are demanding more nutritious, varied and
processed food. This trend in shifting consumer preference results to new
jobs creation and opening various entrepreneurial opportunities in agricultural
communities and for the enterprising youth. Not only population in metro-
cities are growing but also  populations in many municipalities and towns
around the country are also increasing. These new market growths provides
opportunities closer to farming communities which can generate new local
jobs along the agribusiness value chain.
Given the growing markets in the country and the shifting costumer
preferences, there is a need to renew a generational interest on agri-
entrepreneurship and to developed young innovation-driven farmers to
replace the current farmers expected to retire in a decade or so. This can be
done by stimulating entrepreneurial activities in agriculture, through targeted
agricultural entrepreneurship education Entrepreneurship shifts attention from
producing more of the same things to producing value-added goods and
services through managed agricultural risks. To encourage opportunity
seeking and value creation in this sector, there is need to train current
farmers to become more entrepreneurial and to educate future generations to
become agricultural entrepreneurs (Santiago and Roxas, 2015) 3.

The 2018 Philippine Economic Update (PEU), "Investing in the Future," by the
World Bank stated that the steady economic growth for more than three
decades have reduced poverty in the Philippines. But because it still is among
the highest in Asia, poverty continues to be a major challenge. But the 2018
PEU report also found a positive news regarding the reduction in poverty 4.  

The 2018 PEU report further stated that the 15 percent drop in poverty are
due to the entrepreneurial activities ranging from agriculture-related trades
among poor households in rural areas to lower-end services among urban
poor, along with businesses pursued by the non-poor. Entrepreneurial income
from agriculture-related activities offers an opportunity to reduce rural poverty
if efforts are make to address productivity constraints, access to finance,
extension services, and climate change.
These agri-entrepreneurs may not have been trained formally, but they all
have an instinct for innovation and business opportunity – that unique mindset
that can spot and explore opportunities for socio-economic benefits. Turning
entrepreneurial spirit into a business primarily requires access to financing,
the provision of relevant education or vocational training together with
business management training, and better links to markets for individuals and
groups.
Awakening the ENTREPRENEURIAL SPIRIT of the Filipino Youth

The Filipino youth is 19.4 million strong with a growth rate of 2.11% annually.
Comparing to the rest of the world, Filipinos are younger with a median age
of 23 years old. This median age of 23 years old is equivalent to the age of
a recently graduated from college and generally considered as the most
productive stage in a person’s life.

The Montpellier Panel Report (2014) described young people as, “dynamic,
inquisitive and challenging. Everywhere in the world they create a distinctive
culture, are innovative and often invent new forms of independent work.”
The report stated also that young entrepreneurs are also more likely to hire
fellow youths and pull even more young people out of unemployment and
poverty. They are particularly responsive to new economic opportunities
and trends and are active in high growth sectors. Further, entrepreneurship
offers unemployed or discouraged youth an opportunity to build sustainable
livelihoods and a chance to integrate into society 5.
Yet, there are many roadblocks to entrepreneurial success. Young
entrepreneurs are always challenged by the limited access to finance, low
levels or mismatch competencies. This is further complicated by the limited
access to markets and inapplicable institutional policy and support.

Innovation, often regarded as a pre-condition for successful entrepreneurship,

is usually positively related to an entrepreneur’s level of education in most
developed and emerging countries 6.  As Phil Hogan, the European
Commissioner for Agriculture and Rural Development said, “Innovation is not
only driven by technological advances. It is also through novel ways of
organizing farmers and connecting them to the information they need. Many
smallholder farmers around the world still farm the same way their ancestors
did thousands of years ago. Traditional farming approaches may continue to
work for some, but new practices can help many to substantially improve
yields, soil quality and natural capital as well as food and nutrition security.
The farming community needs improved access to new technologies, new
business models and new forms of cooperation.”

The introduction and application of new emerging technologies and

information and communication technologies in agriculture open new doors
for the youth to explore agri-entrepreneurship along the agribusiness value
chain. There is a re-surging interest in modern and sustainable agricultural
and a renewed support for agri-entrepreneurship brought about by the
partnership among the academe-government-industry on building a working
innovation and entrepreneurial ecosystem. This has slowly enticed many
young people to try agri-entrepreneurship as a career. Thus, innovation in
technological applications, agri-products, and business models have been
attracting the Filipino youth to agriculture.

Engaging and capacitating the youth on agri-entrepreneurship

Although the Filipino youth literacy rate has been increasing since 2003 to
98.11% up from 95%, youths in the rural areas who are engaged in
agricultural production are generally poor mainly due to limited access to
quality secondary and college education which then places them at a severe
disadvantage when choosing a career. Therefore, targeted support (such as
tailored trainings, access to technology, and mentoring) and an enabling
environment that allows young people in the rural areas to develop
professionally could help them to reach their full potential. Adapting education
curricula and skills training in rural areas to particular needs would be an
important step in supporting the rural youth in becoming agri-entrepreneurs
along the agribusiness value chain.

Below are some innovative models and initiatives in the Philippines in

engaging and capacitating the youth on agri-entrepreneurship:

PhilRice Infomediary Campaign: Youth engagement initiative 7

The campaign uses the school as the nucleus of agricultural extension.

Students serve as “infomediaries” who facilitate access to information on
cost-reducing and yield-enhancing technologies on rice. The idea is to reach
out to the individual households of rice farmers through their children who go
to school. These young people must be mobilized to serve as information
providers in their rice-farming communities. As infomediaries, they can either
read publications, send queries, or search information on rice and share what
they found to their farmer-parents or any farmer in their community.

The Campaign aims to achieve the following: 1. To create alternative

communication pathways in agricultural extension; 2. To bring back the love
for rice farming and its science among young people; and 3. To promote
agriculture as a viable career option for college.

Since 2012, the Campaign has been a collaboration between the Technical-
Vocational Unit of the Department of Education (DepEd) and the Department
of Agriculture-Philippine Rice Research Institute. In the last quarter of 2013, a
partnership agreement between PhilRice and the CGIAR Research Program
on Climate Change, Agriculture, and Food Security (CGIAR-CCAFS) was
signed. Hence, since last quarter of 2013, the DepEd and CGIAR-CCAFS
have been the two major partners of the Campaign. The Campaign has 108
sites nationwide as of 2015. From this number, 81 are TecVoc high schools.
Most of these schools have already been integrating lessons on cost-reducing
and yield-enhancing rice production technologies. More recently, focus has
been given to climate smart rice agriculture in their school curriculum.

In 2015, the Campaign was among the featured youth engagement in

agriculture projects worldwide in the 42nd session of the United Nations
Committee on World Food Security in the Food and Agriculture Organization
Headquarters in Rome, Italy (UN CFS, 2015).

Approach
The Campaign heavily uses action research to its advantage. There are
plenty of reasons for doing this. First, the campaign is initiated by PhilRice, an
organization that is at the forefront of generating knowledge on rice farming.
Crucial to its function is conducting aggressive research. Second, the
implementers are also keen on influencing policies, not just implementing a
one-shot campaign. To make effective recommendations, a strong research
component is a must. Third, while knowledge generation and policy
recommendations are important, there are issues and problems that need
prompt actions from the government and private sector. Hence, the
Campaign is also bent on implementing solutions.

MFI Foundation, Inc.: Farm Business Schools (FBS) Model8

Mr. Jose Rene C. Gayo hatched the farm business school concept back in
the 1990s. Mr. Gayo is an agribusiness graduate of Siliman University and
the founding dean of the UA&P School of Management.
MFI-FBI was formed to address the need for a post-secondary family farm
school program. The family farm school, on which the new institute builds,
offers a high school curriculum on the basics of agriculture, adapted by the
Philippines from France and Spain in 1988. MFI has partnered with the
Management Association of the Philippines (MAP) and the University of Rizal
System to offer the ladderized BS Entrepreneurial Management major in
Farm Business. Its first batch of students was accepted into the program in
2009 at the MFI Farm Business Institute, a 60-hectare farm in Jala-jala, Rizal,
Philippines. At the MFI FBI, students live on-campus and are given intensive
on-farm training along with management-related courses. The students are
encouraged to start profit-making projects during the course of their study.
Approach

Aspiring agri-entrepreneurs will live in the 60-hectare MFI Farm Business

In/stitute (MFI-FBI) in Jala-Jala, Rizal and for 24 hours a day in some weeks
of the year, they will be tasked to manage their farm businesses, whether
these involve livestock, poultry, aquaculture, crops or agroforestry.

In the farm campus, students will dedicate 30% of their hours to classroom
instruction, leaving 70% for hands-on application of agri-entrepreneurship
practices. A first in the Philippines, the spacious MFI-FBI is situated in the
town of Jala-Jala, a lakeshore town along Laguna de Bay in the province of
Rizal.

MFI-FBI offers Technical Education and Skills Development Authority-

accredited program which will lead to a Bachelor of Science in
Entrepreneurship degree under the ladderized program. It incorporates a
three-year diploma course in Entrepreneurship, major in Farm Business.

The Gawad Kalinga Foundation (GK): The Social Enterprise Model 9

GK is a non-government organization that sprang from a desire to help build

community. It began with volunteers building houses for the poor and
eventually evolved to include education, health, environment, and livelihood
(Habaradas & Aquino, 2010) 10.  In 2011, GK officially launched the GK Center
for Social Innovation (CSI). Its target is to generate 500,000 social
entrepreneurs who will create five million jobs in agriculture, technology, and
tourism⎯ending poverty for five million⎯by 2024 (Meloto, 2011)11.  GK
launched the program in the GK Enchanted Farm, which serves as a
business incubator for enterprises in agriculture. The 34-hectare farm in
Angat, Bulacan, is the first of 24 such sites that the CSI hopes to establish in
major provinces.
Approach

The GK Enchanted Farm are made up of three components: 1. “University

Village” for sustainable community development; 2. “Silicon Valley” for social
entrepreneurship; and 3. “Disneyland” for social tourism (GK, 2014) 12.  For its
first site, GK invited families to relocate to an unproductive farmland, where
volunteers built their homes in an adjacent area. Then, GK invited young
college graduates to start enterprise using the farmland produce as the main
ingredients of their products or to employ the community members. In
exchange, the entrepreneurs could sell their farm-processed goods in the
village farm, which attracts thousands of local and foreign tourists weekly
through various activities organized by GK. From the social innovation
concept arose Bayani Brew, a brand of healthy drinks; Golden Duck,
producer of turmeric soaked salted duck eggs; Gourmet Keso, producer of
artisan cheeses; Theo&Philo Artisan Chocolates, producer of artisan
chocolates; and Human Nature, producer of personal care products. The
CEO of GK, Antonio Meloto, claims that the GK Enchanted Farm is the first
farm village university in the world. The GK model uses its village farms as a
live business incubator for budding entrepreneurs from middle-class families
in urban areas.

The young entrepreneurs are required to follow fair-trade policies, and by

doing so are able to market their produce as GK brands. As their businesses
prosper, the communities they work with prosper as well. Meloto envisions
that the community workers will develop entrepreneurial skills due to their
exposure to the young entrepreneurs. Once they have saved enough, the
community workers can start their own enterprises (Meloto, personal
communication, August 20, 2012). Already, community workers have begun
to venture into small home-based businesses (Dehesa, 2013) 13. 

Kapatid Agri Mentor ME Program (KAMMP). Collaboration Model of Agri-

entrepreneurship

KAMMP is program developed through the collaboration of Go Negosyo, the

Department of Agriculture through Agriculture Training Institute (ATI) and
leading agri-entrepreneurs in the country to equip agri-entrepreneurs with the
proper production technique and to align the agri-entrepreneurs’ mindset and
values to successfully run an agri enterprise.
KAMMP also teaches agri-entrepreneurs with practical knowledge and
strategies to expand their business. Agri-entrepreneurs will also be given the
chance to consult mentors about their current business status. And lastly,
KAMMP aims to nurture a community of dynamic, competitive, and
sustainable agri-preneurs14.

Approach

KAMMP is using an eight-module program on different functional areas of

entrepreneurship. KAMMP program is a three-day session covering the eight
modules namely: Entrepreneurial mind setting, marketing, basic accounting,
farm operation management, agri supply and value chain, finance, obligations
and contracts, and business plan development. The modules are designed to
strengthen our farmers’ business acumen.
KAMMP is targeting the younger generation to see that there is money and
success in agriculture. Its mission is to empower the youth to pursue
agriculture in order to secure the country’s future. It envisions to develop the
next generation of agri-entrepreneurs and farmers who will feed the whole
nation.
CONCLUSION

Markets are the basis of rapidly developing agribusiness value chains that
provide opportunities for entrepreneurship and employment for the Filipino
youth and the growing unemployed populations. Although young people often
see agriculture as associated with poverty and risk, the sector is full of
opportunities waiting to be harnessed. Harnessing and enabling the
entrepreneurial spirit and skills of young people to become successful agri-
entrepreneurs will require a mindset shift, tailored support, access to
adequate and affordable financing, and the appropriate enabling environment.
This can only be achieved through the development of localized, innovative
models and initiatives in engaging and capacitating the youth on agri-
entrepreneurship. In the end, the transformation of the Philippine Agriculture
and the development of an inclusive agribusiness value chain can only be
realized by catalyzing an entrepreneurial and innovation environment that
starts on the farm.
RESOURCES:

1. International Labour Organisation, Global employment trends for youth: A

generation at risk. (2013)

2. https://www.philstar.com/business/2017/10/05/1745836/only-1-out-3-
graduates-employable-study   shows#x2IAFkjlxQe79263.99

3. Santiago, A., & Roxas, F. (2015). Reviving farming interest in the

Philippines through agricultural entrepreneurship education. Journal of
Agriculture, Food Systems, and Community Development, (4), 15–27.
http://dx.doi.org/10.5304/jafscd.2015.054.016

4. Author. Philippine Economic Update: Investing in the Future, World Bank

Manila Office. (2018).

5. Glatzel, K., et’al. Small and Growing: Entrepreneurship in African

Agriculture, Montpellier Panel Report, Agriculture for Impact. (June 2014)

6. Herrington, M. and Kelley, D. African Entrepreneurship: Sub-Saharan

Regional Report, (2012)

˙7. http//:www.infomediary4d.com

8. https://www.mfi.org.ph/news/mfi-jalajala-expands-agribusiness-educ-
programs/

9. Santiago, A., & Roxas, F. (2015). Reviving farming interest in the

Philippines through agricultural entrepreneurship education. Journal of
Agriculture, Food Systems, and Community Development, (4), 15–27.
http://dx.doi.org/10.5304/jafscd.2015.054.016

10. Habaradas, R. & Aquino, M. (2010). Gawad Kalinga: Innovation in the city
(and beyond) (Working Paper Series 2010-01C). Manila: De La Salle
University-Angelo King Institute. Retrieved from
http://gk1world.com/innovation-in-the-city-%28and-beyond%29

11. Meloto, T. (2011). P-Noy at the GK Enchanted Farm. Mandaluyong City,

Philippines: Gawad Kalinga Community Development Foundation. Retrieved
from http://gk1world.com/p-noy-at-the-gk-enchanted-farm
12. Gawad Kalinga. (2014). About the Gawad Kalinga Enchanted Forest.
Mandaluyong City, Philippines: Author. Retrieved from
http://www.gk1world.com/gk-enchanted-farm

13. Dehesa, T. (2013). The journey out of poverty. Mandaluyong City,

Philippines: Gawad Kalinga Community Development Foundation. Retrieved
from http://www.gk1world.com/journey-out-of-poverty

14.https://www.philstar.com/business/2017/07/12/1718944/equipping-agri-
entrepreneurs#mht3VPKrOSIR8uf5.99
 AGRICULTURAL
MARKETING
Reporters: Michael Jhon L. Javier & Sunshine Jane B. Colcol

Basic Marketing Concepts

Marketing

A series of services involved in moving the product from the

point of production to the point of consumption.

The process of moving the product from the point of production

to the point of consumption.

Point of production

the point of first sale by the farmers.

May be done at the farm, farmer’s house, along the road,

mountain trail or assembly market

Services performed by the producer before the point of first sale

are production services and are not included in the definition.

Point of consumption

The point of last purchase or sale

Transaction occurs between the buyer and the seller

Market

a place where buyers and sellers meet to exchange goods and

services

A group of buyers and sellers with the facilities for trading with
each other.
 A large geographic area wherein a set of supply and demand
forces operate to set up prices.

Services

a function performed on a product that alters its form, time,

place or possession characteristics.

services performed involved costs and add value to the product

(value added) and somebody has to pay for it.

The Marketing Services

1. Processing
2. Transporting
3. Storing
4. Buying and Selling

Marketing creates four types of utility in the process of making

goods and services useful:

Form utility

Place utility

Time utility

Possession utility

Form utility – created if goods possess the required properties.

 results from changing the form of raw materials and creating

something new.

 ex. hogs that are slaughtered and cut into parts

Place utility – created when products are made available where they
are most wanted.

 ex. Shippers who bring hogs to Metro Manila from Mindanao,

then from wholesalers, retailers then to consumes.

Time utility – created when products are made available when they
are most wanted.
  ex. Meat wholesalers who freeze some pork products for later
use.

 Meat is made available from periods when they are plenty to

periods when they are scarce.

Possession utility – created when goods are placed under the control
of those who decide to use them.

Marketing function

 A specialized activity performed in accomplishing the marketing

process.

Types of marketing functions

Exchange function

Physical function

Facilitating function

Approaches to the Study of Marketing

Commodity Approach

Institutional Approach

Functional Approach

Structure-conduct-performance Approach

Commodity Approach

product oriented rather than marketing function oriented

May cover the characteristics of the product, demand and

supply, behavior of consumers and prices.

Institutional Approach

analysis of the various agencies involved in the marketing

process.

Answers the “who” in the marketing process.

 Functional Approach

Attempts to answer “what” in the query “who does what?”

Marketing function – a major specialized activity performed in

accomplishing the marketing process

Structure-conduct-performance Approach

Considers the jobs that must be done

Helpful in evaluating marketing costs of various middlemen

Elements of Market
1. Buyers
2. Sellers
3. Trading facilities
Characteristics of the Four Basic Market Model
MARKET MODEL
CHARACTERISTI Pure Monopolisti Oligopoly Pure
CS Competitio c Monopol
n Competitio y
n
Number of Firms A very large Many Few One
number
Type of Product Standardize Differentiate Standardized Unique
d d or on close
differentiated substitute
s
Control over Price Very easy, Relatively Circumscribed Blocked
no obstacle easy by mutual
interdependen
ce
considerable
with collusion
Non-price None Considerabl Typically a Mostly
Competition e emphasis great deal, relations
on particularly advertisin
advertising, with product g
brand differentiation
names,
trademarks,
etc.
Example Agriculture Real trade, Steel, AT & T
dresses, automobiles, local
shoes, farm utilities
detergents, implements,
soap, many
toothpaste household
appliances

Problems in Agricultural Marketing

• Perishability

• Seasonality

• Bulkiness

• Heterogeneity

The 4 P’s to consider

1.Product
2.Price
3.Place/Distribution
4.Promotion

I. Product Strategy
a.) … revolves around the choice of the right group of product

Products may be grouped into:

• raw/fresh
• Semi-processed
• Processed

b.) …choice of the right product mix

• Wide (lot of product lines)
• Deep (several products w/in each line)
• Consistent (products produced are related)

c.) Product Branding Strategy

*Brand- a letter, word or symbol used to identify a product

Branding is uncommon in Agriculture because:

• Not affordable
 • Lack of product differentiation
• Short shelf life/ market exposure
• Perishable

d.) Packaging Strategy

Packaging - it is the total presentation of the product (known
as the silent middleman).
• Some characteristics of a good package
• Attractive
• Informative/immediate (answers what
consumers ask , tells about the product)
• Dependable (sustain quality or shelf life)

Benefits from packaging:

• Protection
• Convenience
• Enhancement/promotion
II. Pricing Strategy
Three things to consider:
1. Demand
2. Cost
3. Competition
Steps in price setting:
1. Set pricing objectives

2. Determine demand

3. Determine costs

4. Analyze competitor’s price

Some Pricing Strategies

1. Manufacturer’s strategies:
- skimming the market
- moving down the demand curve
- extinction pricing
- formula pricing
- tie-in pricing
2. Retailer’s Strategies
- competitive
- psychological
- unit pricing
- price lining
- special price
III. Place/Distribution Strategies
Distribution Factors:
 1. No. of potential buyers
2. Complexity of product
3. Sales & distribution experience
4. Geography

Marketing/Distribution Strategies
• Route through which a product & its title or ownership flow from
production to consumption.

Channel consists of:

1. Producer & consumer

2. Producer, intermediaries, consumer

Choice of the Marketing Channel

the most efficient channel at the lowest cost is influenced by:

Nature of the product

Nature of the market

Nature of the product

Perishability

Unit value

Newness of the product in the market

Nature of the Market
Consumer buying habits

Size of the average scale

Total sales volume

Concentration of the purchases

Seasonality of sales

Factors in Selecting a Middleman

1.Experience and reputation
2.Future growth potential
a. access to markets that entrepreneur wants to reach
b. carries adequate stocks of the entrepreneur-seller
c. provides services to clienteles (credit, delivery, etc.)
d. effective promotional program
e. pays his bills on time

Types of Middlemen
Merchant middlemen – take the title to and therefore own the
products they handle

Buy and sell for their own gain.

Contract buyers

Grain millers

Wholesalers

Assembly wholesalers or viajeros

Financer wholesaler or bodegeros/cuartejera

Shippers

Wholesalers

Wholesaler/retailer

Retailer
 Agent middlemen – acts as representative of their clients.

-do not take title to and therefore do not

own the products they handle;
-income is in the form of fees and
commission
Commission agent

Normally take over the physical handling of the

product;

Arranges for the terms of sale, collection,

deducts his fees and remits the balance to the
principal.

Broker

Usually does not have physical control of the

product;

Ordinarily follows the instructions of his

principal closely and has less discretionary
power in price negotiations than the
commission agent.

IV. Promotional Strategies

Importance of Promotion:
1.It makes the buyers (consumers and industrial) aware of the
alternatives goods and services that exist.
2.Promotions shorten the distance between the market and
the manufacturers by keeping buyers well-informed about the
different products.
3.Promotions also help regulate the level and timing of
demand.
Promotional Methods
1. Advertising
2. Sales promotion
3. Personal selling
 4. Publicity
Some Considerations on Promotions
1. Nature of the market
2. Nature of the product
3. Stage of the product life cycle
4. Availability of funds
Decisions in Advertising
1. Objective selling
2. Budget decision
3. Message decision
4. Campaign evaluation

Marketing Margin
• difference between prices at different levels of the
marketing system

• difference between what the consumer pays and what

the producer receives for his produce ( Price Spread)

Components of Marketing Margin

1. Wage- return to labor

2. Interest – return to borrowed capital

3. Rent –return to land & buildings

4. Profit – return to entrepreneurship & risk capital

Types of Margins
a. Absolute Margin= Selling price – Buying price

b. Percentage Margin= (Absolute Margin/Selling Price) x

100%

Percent Make-up= (Absolute Margin/Buying Price)

x 100%

Breakdown of Consumer’s Peso

• This phase applies to the series of figures
representing the absolute margins of different types of
middlemen or assignable to different marketing
functions, divided by the retail price,
 or
Absolute Margin at any two levels
Final Retail Price or Consumer Price

Where: Final Retail Price or Consumer Price = Farm Price + Mktg Margins of all
Middlemen

1. Farmer’s Share = (Farm Price/Final Retail Price) x 100%

Farmer’s Share = (10/20) x 100% = 50%

2. Middleman’s share = (Middlemen’s Absolute Margin / Final Retail Price)X

100%

a. Wholesaler Share (WS) = (WS Absolute Margin/Final Retail

Price)X100 %

b. Contact Buyer Share (CB) = (CB Absolute Margin/ Final Retail

Price)X100 %

c. Retailer Share (R) = (R Absolute Margin/ Final Retail Price)X100 %

a. WS Share = {(25-20)/28} x 100% = 17.85%

b.CB Share = {(20-10)/28} x 100% = 35.71%
c. R Share = (3/28) x 100% = 10.7%
d. Farmer’s share = (10/28) x 100% = 35.71%

Theory of Price Controls

Principal purpose: Keep prices from rising.

Recall: High prices discourage consumption and encourage

production particularly in a competitive economy where
economic forces operate.

Assume that the market for meat is initially at equilibrium at

P* and Q*.
Assume further that income increases because of a wage
increase (recall again the slogan “ITAAS ANG SWELDO,
IBABA ANG PRESYO!!).

Result: Consumers demand for meat will shift to the right

(D2), i.e. consumes purchase more meat than previously at
each price.

Consumers notice that most meat counters are emptied

faster.

Due to the increase in demand, retailers attempt to purchase

more carcass beef.

Given the fixed supply of cattle, the retailers must pay higher
prices for cattle.

The higher prices are passed on to consumers.

The rising prices have two effects:

It encourages producers to expand output.

It discourages consumption eventually resulting to a

new equilibrium price at P2 and quantity Q2.

The Marketing Plan

 “if you don’t know where you are going you may end up somewhere elese”-Casey
Stengel

The Role of your Marketing Plan is to give the potential investors:

 A description and analysis of the business situation
 A proposed marketing plan for your business
 A proposed financial plan to start your business
Benefits of having a Marketing Plan
 Understanding past marketing decisions and outcomes better
 Understanding target market(s) better
 Planning marketing strategies with more precisions
 Obtaining funding
 Providing direction for everyone in the organization
 Tracking progress more effectively
 REFERENCES

https://www.slideshare.net/deloresbarnhill/the-marketing-plan-15165653
Piadozo, M.E. Agricultural Marketing. University of the Philippines Los Bańos.
University of Southern Mindanao Compilation. 2016.
 Republic of the Philippines
SULTAN KUDARAT STATE UNIVERSITY
Graduate School
ACCESS. EJC Montilla, Tacurong City

POST HARVEST TECHNOLOGY

(Value Adding of Agricultural
Commodities)

COMPILED BY:

REPORTER:

JOSEPH M. ELPIDANG JR.

Post-Harvest Technology (Value – Adding of Agricultural
Commodities)

 Post-harvest technology is inter-disciplinary "Science and Technique"

applied to agricultural produce after harvest for its protection, conservation,
processing, packaging, distribution, marketing, and utilization to meet the food
and nutritional requirements of the people in relation to their needs. It has to
develop in consonance with the needs of each society to stimulate agricultural
production; prevent post-harvest losses, improve nutrition and add value to
the products. In this process, it must be able to generate employment, reduce
poverty and stimulate growth of other related economic sectors

Importance of Post-Harvest Technology

Importance of Post-harvest technology lies in the fact that it has capability to

meet food requirement of growing population by eliminating avoidable losses
making more nutritive food items from low grade raw commodity by proper
processing and fortification, diverting portion of food material being fed to
cattle by way of processing and fortifying low grade food and organic wastes
and by-products into nutritive animal feed. Post-harvest technology has
potential to create rural industries.

VALUE ADDING TECHNIQUE FOR CROPS AND ANIMAL

What is – Value-Added Agriculture

 Adding Value - Process of changing or reforming a product
from its original state to a more valuable store.
 Refers most generally to manufacturing processes that
increases the value of primary agricultural commodities.

BUT - RAW Commodities already have value?!

 Many raw commodities have vale in their original state.
  They are raised by n agricultural producer, and then sold by
that producer for further processing.
 Corn, wheat weaned calves market lambs watermelons, etc.
All have value. They are worth something

Money
Could producer get MORE Money for their products if they:
 Grew products differently
 Physically change their product before selling them
 Coordinated with an agribusiness to change the way their
product was marketed?

Adding Value in a Changing Agricultural World

 It’s important to identify value added activities that support
investment in research, processing and marketing.
 Additional opportunities for adding value include.
 Applying biotechnology
 Food engineering (raw products o consumable forms)
 Restructuring food distribution system.

Capturing vs Creating Value

 Adding value to a product can be accomplished in a number of
different waste, but generally falls into one of two main types.
 Creating Value

Innovation
Industrial Innovation
 Capturing Value

Coordination
 Creating Value – occurs with actual or perceived value to a
customer for a superior product or services.

Innovative new products

Enhance a product’s characteristics
Enhance services
Create brand names
Develop unique customer experiences
 Creating Value through Innovation – Improving existing processes
procedures, products and services or creating new one.
 Market unique or brand products
  Produce identity-preserved or specialty crops
 Combine family activities or recreation associated
with direct on farm marketing
 Creating Value through - Industrial Innovation Processing traded
crops into nonfood end uses
 Ethanol from corn
 Biodiesel from jathropa
 Particle board from straw
 Capturing Value Changing the distribution of value in the food/fiber
production chain.
 Meant to capture more of the consumer through

Direct Marketing
Vertical Integration
Producer Alliances
Cooperative Efforts
 Direct Marketing
 Selling products directly to the costumer
 Selling beef animals on the hoof
 Selling homemade soaps & lotions to the general public
 Vertical Integration – One producer or business owned products from
beginning to end. This producers or business doesn’t sale the product until
the consumer purchase it.
 Producer Alliances Individuals / companies from the same level of the
food chain consolidated in order to produce and market superior product.
 Cooperative efforts Individuals or companies pool their products I order to
increase bargaining power.
 Minimizing Cost
 Before producers can explore value added processing and
marketing they must minimize production cost.
 Only low cost and efficient producer will survive.
 Adding value cannot take the place of good management.

6 Key Components for Adding Value

1) Changing physical state of products
2) Producing enhanced value products
3) Differentiating products
4) Producing more products that improved efficiency up to the supply
chain
5) Owning assets up to supply chain
  Changing physical state / form of products
 Milling wheat into flour
 Making strawberries into jam
 Making coconut into butter
 Feeding Alfalfa into a biomass generator

 Producing products in ways enhance value

 Growing organic crops
 Producing antibiotic and hormone – free beef
 Producing free-range chickens

TODAYS Agricultiure includes:

 FIRST determining what consumer wants in their food products.
 THEN creating those products

Agriculture is moving towards a global economy

The international market for value added product is growing.
 Consumer have increase health, nutrition and convenience needs
 Food processors want to improve productivity.
 Technology in able to produce what consumer wants.

Producers who add value will become more than commodity producers
 They will be preparing food for end users.
 Quality, variety and packaging are important.
 Price is not as important as quality.

They will be producing consumable products – (steaks, hamburger, bread,

etc.)

PRINCIPLE OF VALUE – ADDING FOR AGRICULTURAL COMMODITIES

AND ADVERTISING
VALUE ADDING
Is a concept that occurs when something of small value is changed to
become more valuable before it is sold, giving profit to the operator?

Example of value adding:

Low Value Value Adding High Value

Mango on tree 20 pesos Pick, store and Mango in the market 80
pesos
Transport to market
Comment
Mango on a tree has low value
Value adding consists of picking storing, and transporting to market in the
above case. P60 is added to the mango compared to only P20 each from
production.
Conclusion. More income can be earned from production.
Other advantages include income earned very quickly. Higher incomes can
be generated by increasing the volume, little risk compared to production.

Low Value Value Adding High Value

Mango on tree 20 pesos Pick, store and Mango in the market 80
pesos
Transport to market
*Value adding by picking and processing into jam
Palay Milling Rice sold at the market
*Value adding by milling palay and turning low value products into high value
Chicken Cooked-lechon manok Sell lechon
manok
*Value adding by cooking chicken meat and selling cooked product
Value Adding can be simple or complex and can consist of many
different things, but the principle is important. Profit can be earned by taking a
low product and somehow turning it into higher value product. The extra value
is kept by the person who adds value.
Low value products------ Value Adding --------High VALUE Product
----------Market
SOME ADVANTAGES OF VALUE ADDING

1. Can generate some income in one day or in a very short time

and so provide a regular income (Productions – only get paid at
harvest)
2. Separates income from production and hence access to land.
Anyone, even poor landless people can earn an income using
the concept of value adding.
3. Low risk etc.) If market is identified and a good quality product is
made, income is almost assured if management is good (for
product based activities, risk can be associated with pest and
diseases, drought, floods etc.)
4. Prices are known since market has been researched.
5. High volume and turnover is possible thus increasingptofit
6. Can adapt to market changes quickly to keep earning an
income Production is more or less set until after harvest.
Promotion of Agricultural Products and Advertisement Preparation
Added value does not necessarily mean monetary value,
though it can. Added value in marketing means customers
receive something that has value to them. This can be true even if
it is no cost to you or the company. Added value can mean repeat
customers, brand loyalty and choosing your product over the
competition. Understanding your customer base and what is
important to them is key to deciding what you can give to them
that they will regard as a value.

Free Shipping

Free shipping is something that can be extremely appealing to

customers and could make the difference between whether they buy from
you or from your competitor. Companies often receive highly discounted
shipping rates, so it is not very much loss of revenue to provide customers
with frees shipping, especially if you set a benchmark of a certain purchase
price point to receive the free shipping. Many big-box stores offer free
shipping to their retail store locations. This makes sense in that they already
have shipments and trucks scheduled, so the cost to them is minimal, while
the convenience factor is huge for the consumer.

Discounts and Referral Rewards

Another added value option is to offer customers discounts on their

next order as a part of their order receipt. Although this technically does
cause some loss of revenue, it could lead to future orders when there would
not have been otherwise and gives you the opportunity to foster brand
loyalty. In addition, offering a discount or coupon to those who refer a
customer to you helps to expand your customer base. In the long run, this
can prove much more financially beneficial than losing a little bit of revenue
in the short term.

Packaging and Presentation

A professional packaging and presentation of your product can lead

to added sales. Customers may compare your product packaging to others
on the store shelf and opt to buy your product over the competitors if the
packaging is more visually appealing. A polished product presentation can
indicate a high-quality product as well, motivating customers to choose your
items.

Collateral Materials
 Customers can find immense value in collateral materials
accompanying your products. This could include in-depth instructions on
how to use the products, tips and tricks for use, clean-up and prep, and
suggestions for other uses of your product that the customer might not have
thought of. You could also include pamphlets with customer testimonials,
photos of how to set up the product and even recipes, if applicable. The
printing would be of minimal cost to you and could be the added value
necessary to create loyal customers.

Transportation and Distribution of Agricultural Products

Transport takes a very important place in every industry,

including agriculture. In order to produce food, farmers need certain
resources, such as seed, fertilizers, pesticides, packaging materials, and
many others. ... Furthermore, transport is a burning component of post-
harvest crop management.

Classification of Transportation System

Traditional

Manual Method of transportation, used on every farm, usually includes

very short distances like transition from the field to the storage located in the
farm.

Mechanized and Advance Transport

Includes longer distances that require the less of certain means of a

transport.

Types of Trailers used in transporting Agricultural Products

1. Grain Hopper – transport bulk commodity like grains.

2. Refrigerated Vans – also called a “reefer: used to transport
commodities that needs to be kept frozen like the fruits, vegetables
and dairy and meats products.
3. Tank Trailers - transport food grade products, chemicals and
petroleum.
4. Livestock’s Haulers – responsible for getting livestock to their
destination safely.

Bottleneck in the Cash Crop Distribution

1. High Transport Cost

Transport Cost is relatively high because of institutional

problems related to sea freight and lack of infrastructure. It is high
because of poor road condition, inadequate port facilities, and sea
freight cost.

2. Limited Access to capital credit for trading and marketing especially for
fruits and vegetables.

3. Inadequate Storage especially on cold storage facilities causing

spoilage rate for some commodities.

4. Lack of material information.

5. Lack of market outlets.

6. Poor management and marketing skills of farmers and farmers’

cooperative which is attributed to weak institutional structures of the
cooperative.

DISTRIBUTION CHANNEL IN RURAL MARKET

The objective of distribution is “to meet the everyday needs of people

everywhere”. This is meet through an extensive distribution system that
covers the diverse geographical boundaries of the country.

Distribution Channel

- Distribution network covering over 3400 distributors and 16 million

outlets
Producer/Farmer Producer

Producer/Farmer

Consumer Retailer Distributor

ZERO- LEVEL CHANNEL Consumers Retailer

ONE LEVEL CHANNEL
TWO LEVEL
CHANNEL