The Multi-Level Perspectives of Agribusiness

Walter Amedzro St-Hilaire

• Publisher: WSPC
• Year: 2018
• eBook ISBN: 9789813271098
• Topic: Business
• Subtopic: Agribusiness
• Index: Business

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What is the business configurations in agribusiness system? Is not the power likely to focus on a restricted number of big manufacturers, and on a much more limited number of distributors? How to design the future role of the SME and producers? The book identifies the challenges of modern agribusiness in their globalities. The author anticipates stakeholder strategies and addresses socio-economic, political and management challenges: the changing environment of Agribusiness, the sectoral structure, challenges, and the requirements for successful execution of Agriproduction or changing strategies for existing the food distributors, as well as provides some recommendations.

Globally, The Multi-Level Perspectives of Agribusiness is a guide to sectoral perspectives knowledge for the future leaders of Agribusiness. It brings us to understand that, the attraction of investors is not due to the typical averages of the sector, but to the characteristics of its' specific actors. The winners are the well-informed companies in this sector, which the Competitive Intelligence Approach and Industrial Planning make the difference.

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--> Contents:

• Introduction
• The Global Agribusiness System
• The Demography and Resources
• Being Liberal and Rule?
• The Agribusiness Model
• Industries, Distribution, Logistics
• The Future of the Agribusiness Sector
• The Sector has been Able to Change
• The Production and the Contemporary Challenges
• Agribusiness New Revolution
• Conclusion
• Glossary
• References

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Readership: Students and researchers of agribusiness and marketing courses; business professionals; environmentalists; and general public interested in agribusiness.
-->Agribusiness;Agribusiness System;Agribusiness Model;Competitive Intelligence Approach;Industrial Planning;Agriproduction00

CHAPTER 1

THE GLOBAL AGRIBUSINESS SYSTEM

The agro-production mentioned in the introduction strongly evolved. People gradually organized themselves another way to produce and consume their food. In classifying jobs whether they are “production” or “services,” it is possible to accentuate the phenomenon of the increase of activities in the service sector that occurred in the world economic dynamics: more than half are in services.

By analyzing the accounting figures at the international level, it is easy to notice that the agricultural supply and the equipment worldwide count millions of companies generating hundreds of billion dollars of sales; the agribusiness also gathers as many companies for billions of dollars of turnover; while the processing industries add up even more businesses a gigantic turnover in billions of dollars.

Other services would consist of hundreds of thousands of companies. The final food expenditure amounts to several hundred billions on average by industrialized countries, which is sold by two to three hundred thousand companies on average per country. The three quarters of sales are the fact of distribution, and the remaining quarter comes from catering.

Some older statistics allow us to detail the nature of the companies of this group. In the agricultural supply in the strict sense, most of the microcompanies disappeared and the sector is dominated by a strong oligopoly of a handful of companies. We will come back on the difficulties of enumeration of the agricultural companies. But the majority is unipersonal, whereas a certain number of companies make the two thirds of agro-production.

There is an important artisanal sector of agribusiness, while we count some companies with more than ten employees throughout the world. Forty percent of the sales is realized by companies of more than five-hundred employees in the world, who gather 30 percent of the staff of the sector; 55 percent of the sales by small- and medium-sized enterprises (SMEs) from ten to five hundred employees, which corresponds to 50 percent of the staff of the sector; 5 percent of the sales is the fact of very small companies of less than ten employees who add up 20 percent of the staff of the sector.

The international distribution remains characterized by numerous small shops in every country and by a very strong oligopoly of a number of groups. It is the ascendancy of craftsmanship that marks the restoration, where there are, however, some big specialized groups. How are these figures going to evolve the next years?

Concerning the relative weight of products and growth observed on food markets, “where to find some growth?” is leitmotif of the professionals. Seventy-five percent of the market in the developed countries corresponds to mass-market products which growth is low: 0–1 percent a year. The “greedy” products represent 20 percent of the global market and grow between 5 and 10 percent, whereas “healthy” products, in the developed countries, progress from 15 to 20 percent a year partially for a market share of 5 percent.

Crossing these observations, it is necessary to note that “basic items” with much segmented organoleptic characteristics, come from diversified territorial origins and are the object of mass industrial processes; the social history of the product is often irrelevant except sometimes because of marketing and the price remains low. Local products worldwide are much “typified” with a clearly specified territorial origin and result from a “normalized” craft process; the social history of the product is very present and the price is high. The “innovative” products in this domain have relatively neutral tastes and the territorial origin is generally unimportant. However, they result from an advanced technology and if, by definition, their history does not exist, and their price is very high. We see indeed, the possible strategies of development appear. However, these considerations are essentially specific to each country, regional at most.

Four stages of evolution exist therein and in the domains of agriculture, handwork, agro-industry and services. By comparing different production systems all over the world (both on the historical and geographical plan) considering the repartition, in the purchase price of food products, the value resulting from producers, manufacturers and from services, we can determinate two distinct consumption modes: at home or out-of-home dining. Four stages of evolution so are to be defined: agriculture (self-subsistence, poverty); handwork: differentiation, urbanization; agribusiness (production and mass production); and agro-tertiary (service and segmentation).

To illustrate the share of operators in the final price paid by consumers and make it more accurate in the analysis, we can refer to the following examples: the least developed countries such as Tanzania and Bangladesh are at the agricultural stage, and at the artisanal level, there are low-income developing countries such as Bolivia, or with an intermediary income such as Brazil; the countries of the Organization for Economic Co-operation and Development are the agribusiness stage. In developed countries in general, added value of agribusiness and of the industry of agro-production are equal and the share of catering was then 20 percent, other countries then are still at the agro-tertiary stage.

We anticipate that the agro-tertiary stage cannot be generalized at the planetary level; however, most of the observers claim that the major part of the developed countries will follow the agro-tertiary model. In reality, nothing is less safe, because the orientation of the food request depends on a very important number of factors. Some are under the direct influence of the actors, whereas the others depend on strategies adopted by public authorities: prices, taxes, subsidies; information, training; innovation; organization; governance at the level of the company, in that of the States, and in the supranational scale.

However, it is not easy to find a way in all these groups, especially as the “distance” increases between the production of the agricultural raw materials and the consumption of the food made from them. For a long time we favored a linear representation worldwide; the origin being the farmer producer, and the consumer destroyer of the final product.

We used the concept of vertical coordination of flows, that of the sector, which connects by contract each actor. Today, the image of food chain is often adopted, in particular by the logisticians who speak of “supply chain” to call up all the connections uniting the supplies necessary for the delivered product to satisfy the demand of the final customer. This one has become the king, sometimes, it is the concentric vision that is preferred.

Therefore, the consumer would not be the terminal element of the chain anymore. From now, he would be on in the center and the “shelves” would connect him to each operator of the food set: agribusiness, agro-food supply, agribusiness, agribusiness industries, logistics, distribution channels, and professional and public institutions.

Each of these evocations provides a descriptive representation that highlights such or such actor; and it is true that, in certain countries, at least where the agribusiness was very “valued” to a certain extent, these were often considered as the “central core.” It resulted in “farm-centric” designs, not very explanatory of phenomena and contemporary stakes. Doubtless, it is necessary to observe it from another angle to discover something other than an “upstream” (animal feed, chemistry, fertilizers, phytosanitary and animal health para-chemistry, oil products, machinery and agricultural equipment, building and civil engineering, and transports and supply services) and a downstream output of agribusiness (Food industries reaching the final consumer via the mass-market retailing) or nonfood (wood, furniture, paper, cardboard, textiles, clothing, biofuels, and “green chemistry”). The idea of a “system,” unfortunately a little more complicated, would allow a more realistic approach to the mechanisms of functioning.

The “system” approach, widely used in the life sciences and in the social sciences, allows to understand in particular that any modification of an element modify other elements.

Thus, the agribusiness system can be considered as a finalized system (satisfaction of the function of food consumption); a biological system (due to the nature of its products); an opened system (multiple relations with basic natural resources: earth, climate, socioeconomic, and cultural environment); a complex system (several hundred thousand millions of economic agents involved, in the agribusiness world, the agro-production industry, the distribution, the peripheral services, and industries); a partially determined system (the production system is influenced by the random variations of the agro-climatic environment and the volatility of the physical and financial markets); a system with multiple centers of order (companies and governmental institutions); a mixed regulation system (the market, the public authorities, and the international agreements).

The “effective” system is the one described at the beginning of this chapter and summarized as the production of agricultural raw materials; transformation, industrial or craft, of raw materials; packaging of consumed products whether fresh or transformed; distribution of products with differentiated incorporation of services; logistics (transport and storage, transshipments); manufacturing of goods and services necessary for the network described (peripheral activities: machines and equipment, packaging, insurances and financing, research and development, training and regulations).

This first “effective” subsystem works thanks to the subsystem of “information,” symbolized by bar codes, to be replaced by “intelligent” labels (radio frequency identification). These new information and communication technologies accelerate the connections between the actors, especially between the industrialists and the retailers. “Loyalty cards” complete the device. More than a way to pay, they are a tool to know the consumer behavior in detail. They authorize very fine analyses, and more than daily, of the sales of stores. So, it is possible to anticipate the programming of assembly lines, to optimize transport on purchases and on sales, to minimize stocks, to synchronize commercial transactions, to decrease the financial expenses on circulating capital, etc.

The performance of the actors of the effective system will depend more and more on their ability to enter the information system. Here, there is a very important field of exploration, in particular for the producers, who could free themselves from the distance to the final consumer. The other way around, it is all the stakes in the traceability, thus in the safety and in the responsibility, that is raised.

The subsystem of decision weaves many relations with the first effective subsystem and the subinformation system. It is extremely diverse, reacting to the market signals (mainly the prices), obeying in — or putting pressure on — professional organizations (it is lobbying: historically; agricultural professional organizations are very numerous and very multiplied, from the European level to the local level; changes along the lines of simplification are to be expected).

The subsystem of decision must respect the legal standards as well or the rules that voluntarily prevail on the professionals, in the domains of quality and sanitary safety, for example.

Institutions intervene strikingly in these relations, in particular through the competition law. Thus, we can recall that the merger acquisitions in the sector only authorized on certain conditions not to create an abuse of dominant position, or that the new groups so established were obliged to get rid of several stores in the zones where industrial networks became too dense.

And, naturally, we could evoke the recent modifications concerning the commercial practices (prohibition of resale at a loss or “false” commercial cooperation).

By successive images, a conceptualization of the agribusiness system was elaborated on one hand and, on the other hand, it is now possible to get an idea of its processes of functioning.

We “touch” its representation and we are ready to admit that it invents its own transformations to remain viable. Sensitive areas appear where unpredictable evolutions cannot be predicted but can be approached by likely scenarios.

None of them will occur exactly as imagined; however, the simple effort of mental construction required to build the scenarios prepared for action. And this one has more chances to be relevant in front of the effective modifications that will arise.

Some fields appear as criticisms. The subsystem “agro-food supply” is particularly concerned by the environmental aspects: “chemical” agribusiness, pesticides, genetically modified organism (GMO), etc.

The model of agro-production is called out: Is the productivity agribusiness sustainable and can the producers get a decent income? Naturally, these questions concern rich countries most of the time; they are more rarely at the global “systematic” level, mainly because it is not easy to design. Nevertheless, an answer is required, because partisan forces are at work.

The food safety worries transformers (craftsmen and industrialists) as well as the retailers, whatever are their formats: hypermarkets, supermarkets, minimarkets, hard discounters, independent craftsmen, and operators of the short marketing circuits for farm and food products.

The consumers, also taxpayers, worry about their health, so, consequently, as public authorities. They worry about the sustainability of their culinary heritage or are alarmed by the standardization of foodstuffs.

In brief, a real public debate takes shape, and thus a strategic and economic debate. It is established, for everyone, in the local sphere and quickly reaches “global” considerations no one gets.

Nobody can, however, extract of this problem. It is at the same time a very intimate problem (what do I risk by ingesting such food?).

And in the most desperate cases (how to get me food?), a collective problem (even the agri-food producer feeds on food from elsewhere!).

The agribusiness system of countries, the regional agribusiness system and the global agribusiness system are interconnected. And they are all influenced by the tension of the relationships connecting the demographic pressure (generated by people themselves) with the availability and in the renewal of the resources they need to live. To live well or to survive.

Will the world adapt itself to the new stakes in the agribusiness? Can the innovative modes of consumption be generalized at the world level?

CHAPTER 2

THE DEMOGRAPHY AND RESOURCES

The agribusiness system’s primary function is to feed the population from the natural resources available on the planet. In reality, population and resources belong to the same ecosystem: they interact. They are forces of nature whose functioning must be understood so that people can ensure their own sustainability by protecting the whole viability. Thus, it is necessary to look for the dynamic balance of these forces. What happens at the demographic plan, globally and locally?

Can we understand these evolutions to adopt proper behaviors for the future? We cannot constantly observe the indefinite increase of our population or not react, act, and anticipate in front of meteorological and climatic variations. Or remain anxious by observing the progressive exhaustion of the fossil fuels, the water, or the lands which we use to make our food.

Demographers understand better and better how our populations evolve. Malthus feared that the population grows much faster than the food. And the racing of figures might generate fears. Shall we soon be several billion? How are we going to survive? Will humanity be able to survive?

Today, according to demographers, the world population should stabilize around 2050. And, humanity ages, the birth rate decreases, the Earth population increases slower than planned. In 2040, 21 percent of the human beings will be more than sixty years old, and, as with relief: the planet will not witness a demographic explosion.

We will think well about our food problem if we report some of the well-known mechanisms. We are all familiar with the age pyramid, because we were able to observe our own populations at a moment when fertility and birth rate were simultaneously brought up.

In reality, fertility and mortality evolve and fall with the “progresses.” Thus, “transition” takes place from a population with a high fertility and mortality to a population with a low fertility and mortality. As the demographic transition becomes true, the pyramid deforms, takes the shape of a cylinder, then that of an inverted cone. Naturally, all the populations do not evolve similarly and, according to their degree of evolution, they do not face the same problems.

As in many phenomena of the “living,” the world population follows a curve “S”: at first there is a progressive increase, then a progressive braking, reach of a peak, then a decrease. The maximum of the demographic growth of the world population was reached during the decade 1960s. There was progressive adjustment of the fertility over the mortality: This one decreased at first by entailing an important natural increase; now, the birth rate decreases, so that the world population will reach a maximum toward 2050, then will decrease. It is also very important to note that some countries have already begun this decrease: In five years, seventeen developed countries became depopulated!

The map of the world populations changes: the industrialized world ages, the “differential demographic pressures” cause migrations, so many characteristics, which are going to press on the quantity of food to be supplied according to the geographical zones. So, we obviously see the very slow acceleration of the origin taking shape; then are needed less and less years so that the world population increases by a billion. From this century, the progress decreases: we are around the inflection point of the “S” curve; we began the slowing down phase to reach the summit of the curve in approximately fifty years. Then, the population should stabilize and probably decrease.

It is necessary to understand that it is the economic and social development that conditioned the reduction in the mortality at first, then that of the fertility after. The “development” appears as the key in the limitation of populations. Let us insist: to limit populations, they should reach development. But it emerges that a modification between the age groups, does not miss to influence the specific nutritional needs of given population, and thus, on the production of the necessary food, and consequently on the agro-production.

We shall also understand that there is a brief period for every population during which the proportion of adults from fifteen to sixty-five ye...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Dedication
• Table of Contents
• Introduction
• Chapter 1 The Global Agribusiness System
• Chapter 2 The Demography and Resources
• Chapter 3 Being Liberal and Rule?
• Chapter 4 The Agribusiness Model
• Chapter 5 Industries, Distribution, Logistic
• Chapter 6 The Future of the Agribusiness Sector
• Chapter 7 The Sector has been Able to Change
• Chapter 8 The Production and the Contemporary Challenges
• Chapter 9 Agribusiness New Revolution
• Conclusion
• Glossary
• References