1. Introduction to farm/ agribusiness management and decision making
Dr. John Jatoe
Dept. of Agric. Econ. & Agribusiness
University of Ghana
Legon
Farm Management by Kay, Edwards (and Duffy (various))

2. Lecture outline Functions of Management Strategic Farm Management
Tactical Decision Making
Characteristics of Decisions
The Decision-Making Environment in Agriculture
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3. Lecture objectives To understand the functions of management
To present the steps in developing a strategic management plan for a farm or ranch or agribusiness
To identify common goals of agribusiness/ farm and ranch managers,
To explain the steps in the decision-making process
To describe some unique characteristics of the decision-making environment for agriculture
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4. Table 2-1 Comparison of Low- and High-Profit Farms in Iowa
Source: Iowa Farm Costs and Returns
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5. What decisions need to be made?
What do produce?
How much to produce?
What kinds and amounts of resources to use?
What technology to use?
When to buy and sell?
How to finance?
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6. Who makes the decisions?
Farm Operator
Spouse
Landlords
Farm managers
Farm Advisors
Government
Financers
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7. Ranch/Farm Family System
Economic
Family
Personal
ECONOMIC – The family and operation are linked economically. Economic decisions/goals impact the family system, e.g., purchase of a $120,000 combine, taking an off-the-farm job, starting a new enterprise.
SOCIAL – Social life and family life are tied to the rhythm and fabric of the farm/ranch. Spending time together (or not), in-law relations, even marriage can be tied to the flow of the operation.
PERSONAL – One’s sense of identity is often tied to the land and the operation. Witness the emotions of individual producers who must sell off livestock during drought conditions.
“Economists view family operations as a business venture and all decisions must be made from that standpoint. Ag. Families view their operation as a personal venture and make decisions from that standpoint.” John Reeve, Queensland, Austrailia
Social

8. Family decision making process
Understand
The
Context
Clarify
Values/Goals
ACT
Communicate
Identify and
Manage
Resources
Decide
How To
Sean Brotherson, NDSU Extension Family Science Specialist

9. Good Managers vs. Bad Managers
Takes Pride
Neat/ organized
Plans ahead
good record keeping
has the expertise
Careless
Unorganized
shoots from the hip
No/ poor records
outdated methods
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10. Major Areas of Business Management
Planning
Organizing
Directing (leading)
Staffing
Controlling
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11. Functions of Management
Planning
Implementation
Control
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12. Planning Planning means choosing a course of action
To plan, a manager must
establish goals,
identify resources, and
allocate the resources to competing uses
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13. Implementation
Once a plan is developed, it must be implemented, or set in motion
To implement, the manager must
acquire the resources needed for the plan and
oversee the process.
Coordinating, staffing, purchasing (procurement), and supervising fit under this function.
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14. Control Control is the “feedback” function
To control, the manager must
monitor results,
record information,
compare results to a standard, and
take corrective action as needed
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15. Figure 2-1: Management flow chart based on three functions of management
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16. Strategic Farm Management
Strategic management consists of charting the overall long-term course of the business
Tactical management consists of taking short-run actions that keep the business moving along that course until the destination is reached
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17. Steps in Strategic Management
Define the mission of the business
Formulate the goals for the farm and family
Assess the resources available to the business (internal scanning)
Survey the world surrounding the business (external scanning)
Identify and select appropriate strategies
Implement and refine the selected strategies
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18. Table 2-2 Common Values Among Farmers and Ranchers
Do you agree or disagree?
1. A farm is a good place to raise a family.
2. A farm or ranch should be run as a business.
3. It is acceptable for farmers to borrow money.
4. A farmer should have at least two weeks of vacation.
5. It is better to be self-employed than to work for someone else.
6. It is acceptable for a farmer to also work off the farm.
7. It is more enjoyable to work alone than with other people.
8. Farmers should strive to conserve soil and keep water and air resources clean.
9. A family farm should be passed on to the next generation.
10. All family members should be involved in the operation.
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19. Business Mission Statement
Mission - a concise statement (25 words or less) of the goals and objectives of the business
Example - “ To produce high quality tilapia filets at a profit for retail food stores within a 60-mile radius of our production facility.”
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20. Goals Goals should be written Goals should be specific
Goals should be measurable
Goals should have a timetable
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21. Possible Goals Survive, stay in business Maximize profits
Maintain or increase standard of living
Increase equity
Maintain stable income
Pass farm to next generation
Increase free time
Increase farm size (“growth”)
Maintain or improve environmental quality
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22. Assessing Resources
Physical resources: land, buildings, fences, breeding livestock, machinery and equipment, established perennial crops
Human resources: skills of the operator and other employees, likes and dislikes of individuals
Personal Resources: Personality, Creativity, Stress Management, Communication, Cooperation, Negotiation
Financial resources: cash, other capital and available credit
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23. Surveying the Business Environment
Called “External scanning”
The major types of crops produced haven’t changed much, but their characteristics are changing e.g. hybrids, GMOs
A change may provide an opportunity or a threat
e.g. rainfall variability
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24. Identifying and Selecting Strategies
Some businesses have more potential
routes for reaching their goals than
others because resources are more
flexible
As the number of alternative uses for resources increases, so does the
complexity of the manager’s decisions
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25. Implementing and Refining
Manager must formulate action steps to implement the plan
Manager must decide which information to collect to evaluate the success or failure of the plan
Strategic management is an ongoing activity
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26. Tactical Decision Making
Identify and define the problem or opportunity
Identify alternative solutions
Collect data and information
Analyze the alternatives and choose one
Implement the decision
Monitor and evaluate results
Accept responsibility for the decision
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27. Characteristics of Decisions
Importance
Frequency
Imminence
Revocability
Number of alternatives
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28. The Decision-Making Environment
Fixed supply of land: Land base is essentially fixed, making decisions about land use, sale, or acquisition critical
Biological processes and weather: Laws of nature place limits on manager’s decisions
Small size: Often one person serves as management and labor
Perfect competition: Producers are price takers
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29. Four Basic Business Structures
Sole Proprietorship
Partnership
Corporation
Cooperative
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30. Business Structures cont’d
Sole Proprietorship
One owner makes all decisions
owner responsible for all liabilities
can have multiple employees
Partnership
Owned by two or more people
Owners are responsible for their share of liabilities
Written agreements usually specify percent of ownership, responsibilities, and decision making process
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31. Business Structures cont’d
Corporation
Owned by stockholders
Business is treated as a single entity
Stockholders not personally responsible for liabilities of the business
Returns profits in form of “dividends” to stockholders
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32. Business Structures cont’d
Cooperative
Owned by the users of the business
Elected board of directors
Profits are returned in the form of “patronage refunds” to users of the coop
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33. Summary
Good management means the difference between earning a profit or suffering a loss
The overall direction is defined through strategic planning
The strategic plan is carried out via a number of tactical decisions
Agricultural managers operate in an environment that differs from that of most other businesses
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