THE BUSINESS OF AGRIBUSINESS
It is exciting and diverse. It is changing quickly. It relies on the weather, uses an
incredible array of technology, is tied in every way to our natural resources, and
embraces the world. If you eat, you are involved in it as a consumer of its final products.
If you farm, you are involved in it as a producer of the raw materials that ultimately make
their way to the end consumer. It is the extremely efficient, very complex, global, food
and fiber production and marketing system.
This system is vast, and it is fascinating: the next time you walk through your local
grocery store, think about the number and type of diverse activities involved in growing,
harvesting, transporting, processing, and distributing food throughout the 50 states in
the United States, and, more broadly, our world. The process by which a 260-pound hog
moves from Carroll County, Indiana to a suburban superstore in Los Angeles (now in the
form of a hot dog in a pre-packaged children’s meal) is very complex, yet it occurs every
day in the food production and marketing system.
This food production and marketing system is made up of thousands of
businesses, ranging from the small cow-calf producer in western Kentucky, to some of
the largest corporations in the world. And it is management that drives and directs the fi
rms, farms, and food companies that come together in the food production and
marketing system. A retail supermarket, a major corn processor, the local farm supply
store, and a family farmer: each have a person or a group of people responsible for
making sure that things get done. These are the managers. Their titles range from chief
executive officer to president to foreman to son or daughter or spouse. However,
wherever they are found within an organization, managers are responsible for assuring
successful completion of the functions, tasks, and activities that will determine an
organization’s success.
The responsibilities of managers in agribusiness are highly varied and can range
from ordering inputs for the year ahead, to hiring and fi ring individuals, to making the
decision to sell a multi-billion-dollar international subsidiary. A chief executive offi cer,
for instance, is responsible for the overall activities of a large, diversified food or
agribusiness fi rm. In such fi rms, teams of managers are likely responsible for
specialized areas within the fi rm. On a smaller farm business, one individual may
assume roles ranging from chief executive officer, to manager, to laborer, managing
multiple projects at different levels simultaneously.
To better understand the form and process by which managers perform the tasks
that are required to create and sustain a viable business, the practice of management
can be broken down into four key functions:
1. Marketing management
2. Financial management
3. Supply chain management
4. Human resources management
Ultimately, no matter how large or small the fi rm, managers have responsibilities
in each of these areas. These four functions of management are explored in some detail
in this book. However, it is important to have a basic understanding of each area as we
develop our understanding of agribusiness management.
Marketing Management
Marketing, in a broad sense, is focused on the process by which products fl ow
through the U.S. food system from producer to final consumer. It involves the physical
and economic activities performed in moving products from the initial producer through
intermediaries to the final consumer. Marketing management involves understanding
customer needs and effectively positioning and selling products and services in the
marketplace. In agribusiness, marketing management is a key function within each of
the sectors of agribusiness: the food sector, the production agriculture sector, and the
input supply sector. Marketing management represents an integration of several
different activities: selling, advertising, web page design, promotions, marketing
research, new-product development, customer service, and pricing — all focused-on
customer needs, wants, and, ultimately, the quest for customer satisfaction.
It is this function of management that is most closely focused on the end-user, or
the consumer/customer of the product or service produced. It is often argued that
without satisfied customers effectively reached through marketing and sales, no
business could successfully operate. Thus, marketing management plays a
fundamentally important role in most food and agribusiness firms. Marketing
management is focused on careful and planned execution of how, why, where, when
and who sells a product or service and to whom it is sold. Decisions here include what
products to produce, what services to offer, what information to provide, what price to
charge, how to promote the product, and how to distribute the product.
This management function is closely tied to the customer’s decision processes,
and buyers differ widely in the food production marketing system — from teenagers for
a food manufacturing firm, to a soybean processor for a farmer, to a large integrated
swine business for an animal health fi rm. The ways in which agribusiness buyers — all
the buyers just mentioned and many more — make a purchase decision continues to
evolve and change.
