Ag
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Description 
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The purpose of this web site is to present ideas about managing an agribusiness, whether the business involves production agriculture (farming or ranching), supplying inputs to agricultural producers, or processing the agricultural commodities into consumer products. These materials include 1) a discussion of several management topics, 2) an overview of the agriculture industry, and 3) a review of economic resources needed to operate a business. The materials draw from a combination of managerial topics and economic concepts. As discussed in subsequent sections, economic resources are described in a way that differs from most texts.
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Agricultural Management -- An Introduction
During this first segment of the course, the roles and responsibilities of managers are addressed, including decision making, strategic planning and building relationships. Management skills and tools also are discussed, such as communication, leadership, facilitating change, and the impact of ethical considerations. In addition, analytical processes/tools are reviewed, including financial statements, enterprise analysis, and partial budgeting. The concepts of depreciation, opportunity cost, and present value are embedded in this discussion. The final topics of this section review establishing collaborative arrangements; this includes an introduction to supply chain management, defining business ownership, a review of co-owned business structures, and negotiating agreements. This section begins with a brief overview of managing in the agriculture/food industry.
As these materials are discussed, search for answers to the following questions:
- What is the definition of management?
- What does a manager do; that is, what are the activities or functions of a manager?
- What does it take to be a manager? What "skills" does a manager need? What "tools" does a manager use?
- How does one acquire these skills? How does one learn to use these tools?
This section of the course on management is divided into subtopics:
- Overview of Managing in the Agriculture/Food Industry
- Decision Making and Strategic Planning
- Skills for Managers
- Financial Statements
- Selected Economic Concepts
Agricultural Management – the topics studied in this course will not be new to most of you; you have been introduced to them in previous courses, such as Introductory Agricultural Management, AGEC 242. Even though many of the same topics will be covered, the goal is to discussed them in greater depth and with more application.
Let's begin by suggesting a definition of agricultural managememt and let's do this by considering each word.
Agriculture – producing agricultural commodities; processing agricultural commodities into food; providing inputs to produce agricultural commodities, also processing agricultural commodities into feed, fuel, and other bio-products.
But is feed only an intermediary product that is really used to produce food??
Does it work to define agriculture in the 21st century as "capturing sunshine in the form of agricultural commodities and processing those commodities into food, fuel, and other bio-products?"
Management is decision making, usually in a business setting.
Business managers make decisions on a wide range of questions or issues; for example, what good or service should the business produce and offer for sale, how should the product be produced (that is, what technology should the business use to produce its product), and how much should be produced.
Managers also decide how the product will be marketed, how the business will finance its operations, when the products should be sold, when the business should be expanded or altered, what human skills are needed to operate the business, how risks and uncertainties of the business should be addressed, ... and the list goes on.
For example, see the discussion of functional plans (appendix to step 5 of business planning materials) for additional thoughts on the variety of issues addressed by farm managers. Similar lists could be developed for other business managers.
Agricultural Management – making decisions for a business involved in capturing sunshine as agricultural commodities and processing them into food, fuel and other bio-products.
What do we know about businesses? People own and operate (manage) business for a purpose, such as earn a profit, gain net worth, enjoy the work. We will come back to these points again.
What can we say about business in economic terms?
- Some businesses face perfect competition and some face imperfect competition
- We will review the characteristics of perfect competition and imperfect competition.
- We will also review the Implications of perfect competition (no economic profit?) and implication of imperfect competition (opportunity for economic profit?).
As a business manager, what type of business do you want? Do we want to suggest that a business that faces imperfect competition, rather than perfect competition, has an opportunity to earn an economic profit which is consistent with the purpose of owning and operating a business? This point will be reiterated throughout the course.
What do we know about decision making?
- It is a multi-step process
- The process differs for each person but there are common steps; for example, identify the decision that needs to be made, gather relevant information, analyze the information, make the decision by identifying the alternative that best achieves the business goals, implement the decision, review the outcome of the decision, and determine whether changes are needed to better achieve the business' goals.
- How does one make a decision? Goals are a critical factor in decision making; that is, choose the alternative that will best achieve business goals?
- What are business goals? Let's review what was already said – earn profit, gain net worth, enjoy the task. What else does a business need to achieve? Pay bills on time and expose the business to only an acceptable level of risk. These business goals will be reiterated throughout the course.
What else do we know about decision making for businesses?
- A business uses economic resources – land, labor, capital, and entrepreneurial ability.
- How about how about describing economic resources as land, labor, capital, information, and risk? How would we define each of these? A case study is offered to help illustrate this explanation.
- What return does one receive for providing these resources? How does the answer to this question differ based on whether you are considering the traditional list of economic resouces or the alternative list?
- Have we introduced the idea that "if a person wants to earn profit, they must take risk?"
- Does the discussion of economic resources help define "business ownership?"
What are the trends in the ag industry?
Advancing technology (production, information, transportation); increased reliance on information; importance of controlling economic resources; understanding how to direct human resources; understanding consumer demand; recognize the integration of businesses; the impact of environmental concerns; food safety; food availability and cost; appreciate the implications of globalization.
Review Farm Management in the Twenty-First Century; Kay, et al, Chapter 1
- As your read chapter 1, carefully consider the importance that a manager knows the "environment" in which the business operates. The manager needs to understand the internal operations of the business and the external forces that impact the business. Chapter 1 discusses several topics in both of these categories.
- Topics
to think about: New Technology, Information Age, Financial Management,
Human Resources, Producing to Meet Consumer Demands, Collaboration, Environmental
and Health Concerns, and Globalization
- What do these topics have in common? Can you identify what each of these topics have in common?
- Why are these topics important today? Were they important in the past? If no, what has changed to cause the topics to be important today?
- HINT -- Are agricultural producers and other agribusinesses becoming less "independent?"
- These topics will be revisited throughout the course, but now is the time to beginning think about them.
- New Technology -- What impact does technology have on agricultural producers and other agribusinesses? What impact does technology have on consumers?
- When considering these questions, briefly describe the TYPES of technology you are thinking about? HINT -- does it help our thought process to think about technology as production/processing technology, communication technology, and transportation/storage technology?
- Economic theory suggests that advances in production technology allow businesses to produce more output from the same quantity of input. Is production increasing as technology advances? What does additional production mean for consumers? What does additional production mean for the businesses that are adopting the technology? What does additional production mean for businesses that do not adopt the new production technology?
- What does advancing communication technology mean for producers who use that technology? What does advancing communication technology mean for consumers? What does advancing communication technology mean for businesses who do not use it? Does economic theory help answer these three questions?
- What impact does advances in food processing, storage and transportation technologies have on consumers? What impact does it have an agricultural and food businesses? What impact does it have on businesses that do not adopt the technology?
- Information Age -- what does "the information age" mean? Is information becoming more available?
- How does information impact consumers? How does information impact producers -- both directly and indirectly? What impact does information have on the level of competition?
- What business strategies might producers consider adopting as a result of increased availability of information?
- What are the sources for the information that consumers and producers use?
- Financial Management/Controlling Assets -- why would a manager want to "control" assets? Why do business managers need to manage the business' finances?
- Human Resources -- how can a manager enhance the productivity of the business' workers? Is addressing human resources a more pressing issue today than it may have been in the past? Why?
- Contracting and Vertical Integration -- is this a risk management strategy? Is this a strategy for managing information? Why?
- Producing to Meet Consumer Demands -- will consumers buy what is available or will consumers buy what they want? Why? How does this impact businesses? What determines what products consumers can access (HINT -- think about the points you considered under the topic of New Technology)?
- Does agriculture involve more than producing food?
- Environmental and Health Concerns -- do concerns about environment, health and safe food pose a challenge for producers or an opportunity? Why?
- Cost of Food and Fuel -- how might agricultural managers respond to the recent outcry about rising consumer prices for food and fuel?
- Globalization -- what is causing the global economy and what is the consequence of a global economy? HINT -- review the points considered in the discussion about New Technology; also review the thoughts developed as part of Producing to Meet Consumer Demands.
What do we know about the agriculture industry? Many different types of activities and many different types of businesses. What are some of the characteristics of agriculture/food industry?
- What are some of the characteristics of production agriculture? Biological processes and weather (production risk?); reliant on land resource; often closely-held businesses; generally facing perfect competition.
- What are the characteristics of other agribusinesses? Do they rely on private or proprietary information and technology? Do they face "less than perfect competition?" Do they face the risk that their differentiated product may not align with consumers' tastes and preferences?
- How do these characteristics of the ag/food industry impact a manager's decision making process?
- The food industry is a "team" or "system's" approach. For example see Microsoft's Customer Model; note pages 4-5.
- "Now more than ever, competitive advantage comes from the ability to transform ideas into value -- through process innovation, strategic insights and customized services. We are evolving toward a diverse yet unified global market, with customers, partners and suppliers that work together across cultures and continents. Business is becoming more transparent, with a greater need to ensure accountability, security and privacy within and across organizations.
"All of these changes are giving people new and better ways to work, but they also bring a new set of challenges: a deluge of information, constant demands on their attention, new skills to master and pressure to be more productive.
"A recent study showed that 56 percent of workers are overwhelmed by multiple simultaneous projects and interrupted too often; one-third say that multi-tasking and distractions are keeping them from stepping back to process and reflect on the work they're doing. In the United Kingdom, it's estimated that stress accounts for nearly one-third of absenteeism and sick leave.
"Finding the information people need to do their jobs is to [sic] difficult. The software innovations of the 1980s and 1990s, which revolutionized how we create and manipulate information, have created a new set of challenges: finding information, visualizing and understanding it, and taking action. Industry analysts estimate that information workers spend up to 30 percent of their working day just looking for data they need. All the time people spend tracking down information, managing and organizing documents, and making sure their teams have the data they need, could be much better spent on analysis, collaboration, insight and other work that adds value."
Summary -- these topics will be revisited throughout the course.
The questions for us to consider are "how do managers make decisions" and "how do we prepare ourselves to make management decisions." As discussed in the next section, decision making can be described as a process.
The next section describes Decision Making and Strategic Planning.
Last Updated December 30, 2008
Email: David.Saxowsky@ndsu.edu
This material is intended for educational purposes only. It is not a substitute for competent professional advice. Seek appropriate advice for answers to your specific questions.
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