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Scientific Article About Agribusiness
Scientific Article About Agribusiness
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Steven T. Sonka
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INTRODUCTION
In recent years, there has been an increased interest and heightened debate
about the desirability of research, service, and teaching efforts focused on agri-
business. These discussions have occurred at the same time agricultural pro-
ducers have undergone severe financial stress and the role of the Agricultural
College has been questioned.
This article attempts to contribute to this dialogue in two dimensions. First,
the article considers alternative justifications for societal support for programs
targeted to the agribusiness sector. Based on that discussion, a number of issues
relating to the desirability of targeted programs are examined. Prior to attacking
these two goals, it is necessary that a consistent depiction of the agribusiness
sector be identified. Therefore, the next section briefly describes the agri-
business sector as it will be envisioned in the remainder of the article.
This, of course, is a general listing and finer distinctions, for example, separately
identifying wholesalers and the food service industry also could be done. Sup-
poriin}< these at tivities are firms which provide services, financing, and research
and development to the activities within the sector. Although not explicitly
shown in Figure 1, this sector operates in an international context with substan-
tial levels of both imports and exports.
This perspective of the food and agribusiness sector is not new (see, for
Genetics and
THE FOOD AND seedstock
AGRIBUSINESS
SECTOR Input
suppliers
Service Agricultural
producers
Finance
Merchandisers
Processors
R& D
Retailers
Consumers
1. The p'ood and Agribusiness Sector.
AGRIBUSINESS 307
example, Davis and Goldberg-*). However, there are important differences be-
tween this depiction and that labelled as the traditional image above. First, the
definition in Figure 1 explicitly ineludes agricultural prodtu tion as part of agri-
business, thus elimitiating the artificial and arbitrary exclusion of major commer-
cial production enterprises.
A second important distinction relates to the inclusion of con.sumers in the
diagram. In part, this is a recognition of the increasing dematid by consumers for
new products and the resulting impacts on the production, processing, and
distribution of products. Success in the sector requires an understanding of the
needs and desires of consumers in both domestic and world markets.
Associated with increased emphasis on consumers is the use of the word
"food" as part of the name of the sector. As Ries and Trouf^ note in their popular
book. Positioning;, the choice of a name is a critical step in helping outsiders
understand a firm or its products. Fwen though many of the firms in the sector are
far removed from the final product, the ultimate goal is the health, well being,
and satisfaction of consumers of food. As Padberg'' states, "If agronomy is
important., it is because of ihe bottom line—consumer purchase behavior is the
boUom line of human nutrition" (p. 887). Use of the term, "food and agribusiness
sector," stresses this point.*
*!t should be ni)tei.i that the iiiclusion of ihe wurd "food" in the sector name is not meaiil lo
eliminate the importanl nonfood activilies within the food and agribusiness sector. In fad, il serves
to highlight and separate fotKl and nonfood agribusinesses in ihe context of the special role of food
in soriely. Further, il must be repeated thai ihe goal of the use of ihis lerm is to draw attention to
the role of consumers, not lo exclude fiber and nonfood activities.
308 SONKA AND HUDSON
The following are amotig the reasons advanced for specialized scholarship in the
agribusiness area:
The points noted above are logical atid consistent in the context that they were
originally raised. They ate not, however, necessarily consistent with the depic-
tion of the food and agribusiness sector noted in Figure 1, or with the goal of
justifying public expenditures to suppoil specialized programs in agribusiness.
For example, the sector is not constrained to rural areas. And survival of depart-
ments of agricultural economics may not be a societal priority. Further, the
pnx^esses tequired to tnanage in the nonfarm parts of the sector differ markedly
from those required to tnanage farms and ranches.
Distinctive Characteristics
Existence of a managerial crisis in a sector as economically impoiiant as agri-
business, however, does raise a social concern. Figure 1 and its implied perspec-
tive of a food and agribusiness sector suggest five distinctive characteristics of
this sector:
The fact that an industry has distinctive characteristics does not itself imply
the need for targeted educational programs for its managers. In the case of the
food and agribusiness sector, however, the five characteristics suggest the need
for special managerial skills and knowledge to facilitate efficient and effective
decisions.
AGRIBUSINESS 309
We all understand ihai food is a necessity for human life. Thetcfore, assuring
adequate amounts of safe, nutritious food (e.g., food secutity) is a priotity lor all
societies and governments. But food and its consumption are integral parts of the
cultute of hutnan society. Indeed, anthropologists note that the act of cooking
food is one of the actions that uniquely defines the hutnan species.'^ Differences
across nations and cultures relative to the role and status of specific foods are
critical in undetstatiding the food and agtilmsiness sector. For example, although
wheat and rice are both food grains, rice in the Japatiese culture is far more than
just the staple food item that wheat is in western nations.'" As intertiational trade
becomes increasingly itnportaiit for both agriculttiral tomtnodities and food prod-
ucts, awareness of cultural differences associated with food becomes more crit-
ical to sector managers.
As evidenced in the Midwestern United States in summers such as that of
1988, the forces of nature can overwheltn even the sophisticated technology of
modem agricultural production systems. Production, marketing, and financial
structures to accomtnodatc normal aspects of uncertainty need to be understood
and used by managers in the sector. The potential for ittfrcquent but tnassive
deviations also must be realized. Decision makets who cteate plans based on
alternative uses of low-priced agricultural cotntnoditics, for example, must have
contingency plans available if the supply of those commodities suddenly is
limited.
Political intervention is a reality of the food and agribusiness sector. The
motivating force for that intervention, however, is not limited to maintaining farm
income. Issues such as food safety, resource conservation, safety of farm work-
ers, and the economic well-being of ruia! communities are also important. Some-
times operating at cross-purposes, governmental intcrvetition often is significant
and disruptive to operations and mattagers throughout the sector. Further com-
plications arise because of differing national atlitudes about government inter-
vention and use of differing fotms of intervention internationally.
The potential for major change because of advances in technology seems
especially likely within the food and agribusiness sector. For example, promises
associated with biotechtiology and genetic engineering have captured media
headlines in the last decade. Potentials within the processing subsector may be
as pronounced, although less publicized, than those associated with production
of crops and livestock. Major research investigations are being pursued in both
the private and public sectors. Historically, large portions of developmental
research efforts in this sector have beeti conducted within ptiblic sector institu-
tions. The management and inttoduction of new innovations in this sector, there-
fore, is subject to differing economic processes than would be the case if devel-
opmental research was confined to the private sector.
The food and agribusiness sector depicted in Figure 1 is comprised oi competi-
tive structures that differ across and within its subsectors. The relatively unique
competitive structure of the production sector is widely recognized. Other sub-
sectors are quite fragmented. At the same time, many food and agribusiness
firms are tnultinational in scope, having activities in several subsectors as well as
in other industries. As Porter and others have shown within the last decade,
organizational structure can have major influences on competition within an
industry.'' Managers within the food and agribusiness sector must operate within
the competitive structure of their subsector while understanding and accounting
for the implications of alternative structures in other subsectors.
310 SONKA AND HUDSON
The five distinctive characteristics just noted do not include several issues
normally listed as being of major importance. For example, international trade is
not listed. That is because international trade is vitally important to a number of
sectors of the economy. For a manager in the food and agribusiness sector,
however, distinctive features of international trade telate to: the context of differ-
ing cultural attitudes about food in which it occurs; the range of political influ-
ences affecting trade; and the potential for sudden shocks to supply either
domestically, among competitors, or within customer nations.
These five characteristics all relate to the remote and task environments,
within which firms in the food and agribusiness sector operated. '^ Increasinglv,
changes in that environment art- sources of concern to sector decision makers.
Therefore, targeted education programs should provide students an understand-
ing of the current environmenl. and more importantly, of possible future states of
the environment.'' Further. Figure 1 illustrates the long and diverse chain of
linkages that connects the sector to it.-^ ultimate consumers. Targeted programs
should define the dynamics of these litikages to students. Sector specific re-
search also could profitably focus on ihe sector's dynamic environmertt.
In summary, the above discussion proposes that the uniqueness of food, the
physical and social attributes of the food and agribusiness sector and its vast
economic scope provide important justifications for targeted agribusiness educa-
tronal programs. This justification is consistent with legislation that defines the
Land Grant system's research mission to promote ". . . the efficient production,
marketrng, distribution, and utilization of ptoducts of the farm as essential to the
health and welfare of our peoples . . . " and ". . . the maximum contribution by
agriculture to the welfare of the consumer. . .".'*
The focus on food proposed here differs from the narrow perspective of produc-
tion of basic food commodities with price as the primary measure of performance.
As Beattie notes, this perspeclive has declined as a societal concern. '•'"' Today's
societal food agenda highlighls a consumer who demands an increasing and
changing variety of food products. Those products also must be attractive to a
consumer concerned about food safety, both in terms of the manner in which they
are produced and their long-term effect on humarr health. This agenda also
includes economic vitality of the sector as it contributes to domestic employment
and trade balances.
The previous section asserts that the existence of a number of distinctive charac-
teristics of the food and agribusiness sector underlies societal interest in academ-
ic programs targeted to agrrbusiness. These characteristics impede the effective-
ness of managerial decision making within this economically imporlarit sector. In
this section of ihe artrclc. that premise will be used to comment upon the nature
of such targeted programs. Specifically, the issues of 1) economics as the sole
underlying disciplinary paradigm and 2| agribusiness versus agribusiness man-
agement as alternative focal points for targeted programs will be considered.
Prtor to entering this discussion, it is important to stress that the following
remarks do not imply that all. or even the preponderance of, educational efforts
AGRIBUSINESS 311
in the food and agribusiness area will be conducted within targeted programs.
Rather it is likely that many, perhaps most, of the sector's future managers will
receive academic instruction in liberal arts or general business programs. Simi-
larly, much of the applied problem solving needed by the sector's participants
will be obtained from researchers in general business programs and/or consul-
tants in the private sector.
These caveats arise simply because of the large scale and diversity of the
sector and the reality that targeted programs will serve only a fraction of the total
population of future tnanagers in the nation.'** Therefore, targeted programs
should be envisioned as serving a niche within the total marketplace for manage-
rial education and research. A niche mentality may be uncomfortable for many in
the agricultural education establishment who are used to viewing agricultural
decision makers as a captive market. The niche view is more consistent with
today's reality and c an offer a promising role of service to society if efforts and
expectations are linked to that reality.'^
SUMMARY
This article has addressed the ongoing dialogue about the efficacy of targeted
agribusiness efforts by pursuing two interlinked goals: 1) considering alternative
justifications for targeted programs in the agribusiness area, and 2) examining
several issues relating to alternative types of agribusiness ptograms. The argu-
ments presented are based on a broad sector definition that stresses the role of
the final consumer of food, even though many of the sector's linked subsectors
arc far removed from the ultimate consumer.
Five distinctive characteristics of the food and agribusiness sector are deline-
ated. These distinctive features imply special problems for decision makers in
the sector. Therefore, coupled with the economic importance of the sector, these
characteristics provide a premise for societal support of targeted educational
efforts. That ptemise hinges on the capability of targeted programs to improve
managerial effectiveness within the sector. Because these features relate to the
remote and task environments of the food and agribusiness sector, an improved
understanding of the current and future state of that environment must be key
attributes of targeted programs.
Within agricultural ecotiotnics, part of the typical discussion as to the desir-
ability of agribusiness programs includes consideration of the role of economics.
Here economics is identified as one of the several critically important disciplin-
ary foundations for effective scholarship in agribusiness management. Tension
between advances in economic theory and the needs of the applied scholar
concerned with agribusiness management exist, but does not appear to be greatly
different than similar concerns expressed in numerous areas where economics is
applied.
Because of the importance of this sector and its distinctive features, scholarly
efforts devoted to improving management within food and agribusiness firms
should be tremendously exciting. The sector's environment is dynamic and
vibrant, even when the resulting changes dictate periods of adversity for its
participants. The challenge of integrating patadigms from more than one disci-
pline builds on a successful heritage within agricultural economics. The lessons
learned from those past activities should provide an important role for agri-
cultural economists if scholars from a number of tnanagerial disciplines are to
combine their skills to better serve the needs of the sector's managers.
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