Assignment #6

1. Explain the difference between a product- or sales-oriented firm and a market-

oriented firm. Why is this difference important to an agribusiness manager?
Sales Oriented – When sales growth slows, many firms will adopt a new approach
to marketing which centers around intensifying the sales effort. Organizations that
focus primarily on communicating the benefits of their products are called sales-
driven. This approach may involve taking the firm’s core product to a new level, and
introducing a number of variations or extensions to serve existing customers better
or serve an entirely new group of customers. It may involve a search for new
geographic markets where the firm has not been before. The sales-driven
organization may add more sales people and ask them to work harder selling the
features and benefits of the firm’s products and services. Or it may spend increasing
amounts on promoting the firm’s products through a variety of advertising activities.
- Focus on marketing the sale
- Communicates benefits of products/services
- Reach the people and they will buy
Market Oriented – Ultimately, the firms are looking to establish a deep and lasting
relationship with the customers. It is one with a good product and a good sales
effort, but also one with a clear understanding of what type of customers it is trying
to serve and what these customers want and need from the firm both now, and over
the lifetime of the relationship. It is a firm that takes ideas like “the customer is king”
and “getting close to the customer” very seriously. Invest in market research to
better understand their customers, then use the information generated to guide
decision making.
- Focus on what the customer needs/wants
- Develop and provide solutions for the customer
- Understands what type of customer most values their offerings
- Combines good product and good sales effort – plus incorporates customer
understanding

2. How can an agribusiness manager evaluate the strengths and weaknesses of their
organization? Why is it important to understand what an agribusiness does well, and
to understand those areas where performance is not as strong?
An agribusiness manager evaluates the strengths and weaknesses of their
organizations by integrating all business activities and resources logically to meet
customers’ needs and to generate a profit. A SWOT analysis (strengths,
weaknessness, opportunities, threats) is an objective evaluation of the firm’s
strengths and weaknesses and its opportunities and threats. The focus of this
analytic phase is to uncover business opportunities and challenges and to
understand what advantages the firm brings to the market and where the firm is at a
disadvantage. A good SWOT analysis helps you better understand your
weaknesses and threats. Admitting and understanding those weaknesses can best
allow alignment of marketing messages, positioning and pricing to minimize their
effects. Ultimately, a firm understanding of weaknesses and threats can help you
best position your products and services and mitigate risks in presenting to
prospects and customers.
 Based on an assessment of market opportunities and an evaluation of the firm, an
agribusiness will select a target market (or target markets) — a group/s of customers
who will respond in similar fashion to a given offer. Consistent with the needs of the
target market, the firm will define what position it wants to take in the market. Here
the focus is deciding what the firm wants to be known for among the target
customers.

3. Select three different products — one marketed online, one in a newspaper, one
from a farm magazine. Describe the market segment targeted for each product.

Marketed online: branded food companies to market products aimed at the “healthy
lifestyle” segment (Healthy Choice), the “gourmet” segment (Opus One wine), or the
“young and rebellious” segment (Red Bull), among many others. Such segmentation
approaches require a variety of demographic, behavioral, and psychological data to
construct — all tied back to some common set of needs the group is seeking in the
product or service.
Marketed in a newspaper: Victoria's Secret and their teenage-targeting brand
PINK. Victoria's Secret primarily targets women, while their brand PINK is targeted
more toward teenage girls and women. However, the brand has also long marketed
itself to men - usually husbands or boyfriends of women who are looking to purchase
gifts. Given the brand's pricing, Victoria's Secret also targets a relatively affluent
segment with additional income to spend on lingerie or mid-price undergarments.
Uses demographic segmentation.
From Farm Magazine: Feeds (dairy, beef, pork, poultry) use different market
segments with different needs. Dairy farmers maybe classify as small, medium, or
large. This marketing segmentation use for farm market is called operating
characteristics.

4. Using the food and agricultural trade press, or an online source, identify a firm
communicating tangible value in its message and one communicating intangible
value. Compare and contrast these messages and how the firms are actually
communicating these two different messages.

Assignment #7
1. Pick a food product or an agricultural input. Use the total product concept to break
the product down into the generic product, the expected product, the value-added
product, and the potential product. In what other ways could the food business or
agribusiness add value to the product you have chosen?

Sample product: Fertilizers

Generic Product – bulk fertilizers and crop protection products

Expected Product – include a standard customer application service, standard

agronomic recommendations, grid soil sampling, a 30-day credit policy, some
minimum set of equipment available for rent, standard complaint-handling service, a
web site with basic information, and a clean and neat facility.

Value-added Product – retail customers may expect the standard custom

application service as part of the expected product.
Potential Product - include investing in a new information management system to
allow the firm to track comprehensive yield, fertility, and weed and pest data by field
for customers. Or, it might mean acquiring a multiple-nutrient variable rate applicator
guided by a global positioning system (GPS) which will allow the firm to apply
precise levels of fertilizer on an as-needed basis as the rig moves across a field

Sample product: Dairy Products

Generic Product - When it comes to dairy and dairy products, cows typically come
to mind. However, certain breeds of goats and sheep are also dairy animals. Each
type of animal offers its own advantages and disadvantages to the production of
value-added dairy products. Dairy cattle are probably the most widely recognized
animal when it comes to dairy production and dairy products. If you currently have a
dairy operation and are considering making the transition to producing value-added
dairy products, you likely have dairy cows.

Expected Product – Dairy cattle produce a large quantity of milk compared to goats
and, so you must be prepared to either produce a lot of your value-added item or
find and secure a market for any milk you don't plan to use in your value-added
enterprise.
Goats or sheep can be a viable alternative dairy animal for someone wishing to
enter into dairy production. Both of these animals produce a lot less fluid milk than
dairy cows. The lower milk production can be both an advantage and a
disadvantage. The percentage levels of fat and protein in goat and sheep milk are
also higher than cows' milk, which offers advantages in certain types of dairy
production, such as cheese and yogurt.
The equipment needed to milk goats and sheep is certainly different from that used
to milk cows. This can be a drawback for someone wishing to transition from cows to
goats or sheep.

Value-Added Products
 Cheese is probably the most popular and well- known value-added dairy
product. Hundreds of cheese varieties are produced, ranging from soft
cheeses (mozzarella, ricotta, etc.) to hard cheeses (cheddar, Colby, Swiss,
etc.). Consider taking a cheese-making course before deciding on this type of
enterprise.
 Yogurt is becoming more popular as people become aware of the health
benefits of two probiotics in yogurt that aid digestion, Lactobacillus bulgaricus
and Streptococcus thermophiles. Flavored and drinkable yogurts are among
the leading yogurt products.
 Butter is a fairly traditional dairy product, with organic butter presenting a new
twist on this product. The production of butter demands a large amount of
 milk fat, usually making dairy cows the choice animal. However, goat milk and
sheep milk have greater percentages of fat, so these animals can be used if
small quantities of butter are to be produced.
 Ice cream is a very popular value-added dairy product. Penn State offers a
popular Ice Cream Short Course for those interested in learning about ice
cream production.
 Bottled milk is regaining the popularity and appeal it once had. Some people
like the feeling of knowing the farm and conditions under which the milk they
are purchasing was produced. On-farm bottling requires only the equipment
necessary for the bottling if selling raw milk. Glass or plastic containers can
be used, with glass offering the appeal of environmental friendliness and
nostalgia.

Potential Product
 Organic foods are increasing in popularity among consumers primarily due to
the perceived health benefits these foods offer as well as the perception that
organic production methods are better for the environment. The term
"organic" indicates that an item was produced without the use of synthetic
pesticides or herbicides, genetic modification, added hormones, or antibiotics,
and animals are fed only organic feed. For a product to be labeled organic,
the farm must be certified organic by an approved certifier. With careful
planning, the time required to fully transition livestock to organic production
can be around two years. The potential payoff from organic production can be
substantial. Some consumers are willing to pay considerably more
(sometimes 100 percent or more) for an organic item over a conventionally
produced item.
 rBST-free milk production is an emerging issue. rBST (recombinant bovine
somatotropin) is a hormone naturally produced by cows. While there is no
scientific evidence of differences between milk produced by cows given rBST
and those not, consumers are beginning to voice a desire for milk and other
dairy products from non-rBST-treated cows.
 Products from grass-fed animals are garnering interest among consumers.
Grass-fed beef products are among the leaders. Some consumers' interest
comes from a feeling of a healthier animal and product.

2. Based on your personal experiences and observations, how do salespeople vary

from industry to industry? Why do we see these differences? Discuss some of these
differences for:
a) a salesperson at an electronics superstore
b) a field salesperson at an agricultural cooperative
c) a car salesperson
d) a loan officer at a bank
e) a salesperson for an advertising agency

Answer: The difference is in the knowledge and skill required. The difference is in
the knowledge and skill required. The differences are observed in their line of work.
 This can include their decision making and what they do. Some salesperson is seen
to be more persuasive than others, depending on the target. For example, you will
find a salesperson that deals with home utensils or cheap things will persuade more
people to acquire their products since almost everyone can afford their products.

1. a salesperson at an electronics superstore – Must be up-to-date with the

information regarding the latest electronics goods. This consists of prices,
offers, technical features, delivery, service warranty and sales promotion.
2. a field salesperson at an agricultural cooperative – must have knowledge about
land. This includes all the government rules and regulations and about sales
and purchase procedures.
3. a car sales person – needs to possess information of not only one brand of
cars which he/she is selling, but all others. Must be able to compare the brands
and convince customer to purchase. Must be able to facilitate car loans. And
know about purchase of cars both new and old.
4. A loan officer at a bank – must have a comprehensive knowledge of lending
products, banking industry rules and regulations, and the required
documentation for obtaining a loan. The loan officer is the direct contact for
most borrowers applying for a loan from a financial institution. The entire
process can be handled over the internet, but most consumers probably still
prefer a well-informed human on the other side of what is, after all, a costly and
complex transaction. In fact, one reason why banks continue to have so many
branch offices is that they need to bring loan officers face to face with potential
borrowers.
5. a salesperson for an advertising agency – also called advertising sales
representatives, sell advertising space to businesses and individuals. They
contact potential clients, make sales presentations, and maintain client
accounts. Advertising sales agents work outside the office occasionally,
meeting with clients and prospective clients at their places of business. Some
may make telephone sales calls as well—calling prospects, attempting to sell
the media firm’s advertising space or time, and arranging follow-up
appointments with interested prospects. A critical part of building relationships
with clients is learning about their needs. Before the first meeting with a client,
a sales agent gathers background information on the client’s products, current
clients, prospective clients, and the geographic area of the target market.
The sales agent then meets with the client to explain how specific types of
advertising will help promote the client’s products or services most effectively. If
a client wishes to proceed, the advertising sales agent prepares and presents
an advertising proposal to the client. The proposal may include an overview of
the advertising medium to be used, sample advertisements, and cost estimates
for the project.

3. Compare and contrast the role of a salesperson for a large food or agricultural input
manufacturer with that of a local salesperson for a dealer or retail organization.
 A salesperson for a large food or agricultural input manufacturer uses three basic
systems used by most agribusinesses. Each system differs in the extent and type of
involvement of the middleman. In each system, all marketing functions are
performed. That is, products are owned, transported, financed, and stored. But in
each system these functions are performed by different parties. the manufacturer
sells directly to the farmer or food customer. The original manufacturer or producer,
who owns and controls the product until the final user purchases it, performs all
marketing functions. This system has the advantage of ensuring that the product will
be priced, promoted, and sold in ways that are acceptable to the manufacturer. This
method is used widely by smaller local or regional farm input manufacturers, who
can develop their own sales force as they grow, and by catalog merchants, local
market fruit and vegetable operations, and farmers’ markets in the food market.
While sale person for a dealer or retail organization is who makes a margin on the
products sold, and benefits the manufacturer by having the local dealer’s knowledge
and presence in a given area. Although the manufacturer cannot control the sales
areas of dealers, giving some dealers this right and refusing it to others can
strategically limit the number of dealerships. To maintain the right to sell the
manufacturer’s products, dealers may agree to maintain certain levels of service to
customers and promote the products in special ways. There may even be a
contractual agreement, sometimes called a franchise, spelling out the
responsibilities of both the dealer and the distributor.

4. What are the advantages of a manufacturer’s selling directly to a farmer rather than
to a distributor?

- the manufacturer sells directly to the farmer or food customer.

- The original manufacturer or producer, who owns and controls the product until
the final user purchases it, performs all marketing functions.
- ensuring that the product will be priced, promoted, and sold in ways that are
acceptable to the manufacturer.
- This method is used widely by smaller local or regional farm input manufacturers,
who can develop their own sales force as they grow, and by catalog merchants,
local market fruit and vegetable operations, and farmers’ markets in the food
market.

Assignment #8
1. What is the purpose of a marketing audit? Why is it important to have outsiders
involved in marketing audits?
Marketing audit is an objective examination of a company’s entire marketing
program. The marketing audit examines the firm’s marketing objectives and its plan
for accomplishing these objectives in light of its resources, the market conditions,
and its distinctive strengths and weaknesses. Every agribusiness and certainly all
publicly owned companies have financial audits performed regularly by outside
auditors to ensure that there are no discrepancies or oversights that could cause
serious problems for the business and/or investors in the business.
2. Why are sales forecasts particularly difficult to make in food and agribusiness firms?
Because in a food service firm, forecasts may be hourly as the firm works to
schedule food preparation to accommodate daily patterns. Longer-range sales
forecasts are important for capacity and research and development decisions. In
general, the longer the time period forecasted, the less accurate the forecast is likely
to be. However, forecasting short-term volatility can be a major challenge as well.
3. What is meant by derived demand? Explain why the demand for animal health
products is a derived demand.

Derived demand – is the demand for most farm inputs such as animal health
products and fertilizer.
This means that the demand for a specific type of product or service depends greatly
on the demand for another product or service for which it is used. The demand for
fertilizer, for example, is a function of the demand for the crops it helps produce.
When the manager of a fertilizer plant in the Midwest is projecting the demand for
nitrogen, the corn market is carefully considered. The manager knows that the price
farmers anticipate for corn in the next season will greatly affect the number of acres
of corn they will plant and the amount of fertilizer they will want to buy.
Consequently, agribusiness managers are careful students of the market for
whatever products their supplies help to produce.

4. Give some of the reasons why customer maps often show customers clustered in
particular areas. What can be done about this situation?
It can be done through market mapping. It is common, for example, for much of the
sales volume in a small agribusiness to be concentrated in limited geographical
areas or among relatively few accounts. At the same time, other geographic areas
have relatively little market penetration with many potential accounts left for
someone else to serve.
In any given market, there may be physical reasons for an imbalance in market
penetration. An interstate highway may make access to some areas difficult. Certain
types of farms may be concentrated in some parts of the market area. More often,
however, friends, relatives, or just well-established customers seem to predominate
in one local area. Salespeople tend to spend less time in areas with which they are
less familiar. In short, many agribusinesses have undiscovered market potential near
them, if they were just able to discover and cultivate this potential.
One way of discovering these areas of untapped potential is through a market-
mapping technique. This exercise can be done by hand in smaller firms. All current
customers are pinpointed on a map of the market area. It is a good idea to color-
code customers by volume of business, type of products purchased, or other
informative characteristics when developing this map.
A market map can also be developed using any one of a number of computer
software
products designed specifically for this purpose. Recent developments in computer
mapping software and geographic information systems (GIS) make it possible to
download a variety of data on market characteristics such as number of pigs on
 feed, number of households with at least 2 children, etc. Once this mapping has
been completed, visual observation provides a great deal of information about weak
and strong areas. When this mapping technique is first used, it is often a real
revelation for marketing and management people. The market map suggests areas
in which sales efforts should be targeted. When effort is concentrated in a new area
and new customers are obtained, it may be possible to expand the firm’s presence
in that area rapidly.

Assignment #9
1. Why is financial data important to the agribusiness firm and the agribusiness
manager?

Because financial data represents a composite of how the firm, and its management,
has performed over the past year. It is a guideline to measure the relative success or
failure of the firm over this period of time. Financial data are also needed to properly
evaluate a firm’s performance. The successful agribusiness manager must
understand what the firm did (or did not do) that led to the resulting bottom line, and
the successful manager uses this understanding to improve the bottom line in the
future. This is what the study of financial management is all about.

The successful manager understands the financial operations of the firm well
enough to use this information as a tool for improving firm performance. Although
the bottom line provides a benchmark for comparison, successful agribusiness
managers must understand the interrelationships of other accounts on the balance
sheet and the income statement to properly manage the business.

Without financial information, agribusiness managers at any level find it difficult to

successfully pursue the goals and objectives of the organization. Each agribusiness
enterprise therefore must accumulate historical records of financial information that
are vital for its continued success.

2. Define the difference between current and long-term liabilities. Why is this distinction
important?

Current liabilities are obligations due within one year or the normal operating cycle
of the business, whichever is longer. These liabilities are generally paid with current
assets. Some examples include accounts payable, which are amounts due to
vendors, short-term bank loans, employee benefits, and accrued income taxes.
Non-current or long-term liabilities are debts of the business that are due beyond
one year or the normal operating cycle of the business. Long-term debt is an
example of a long-term liability and may include: leases, bank notes, bonds payable,
and mortgage loans. Other examples of long-term liabilities include: pension benefit
obligations, post-employment benefits, and deferred taxes.
 The distinction is important because Any part of the principal for a long-term debt
that falls due within one year from the date of the balance sheet is recorded as part
of the current liabilities of the business.

3. What is the difference between gross margin and net income, and how are those
two measures related?
Gross margin or gross profit represents the difference between net sales and total
cost of goods sold. The gross margin is the money that is available to cover the
operating expenses and the interest expense and still leave a profit. Net income
(profit) before taxes is the amount that remains after taking into account any non-
operating revenue or expenses. Non-operating revenue would include any revenue
derived from other sources, such as interest or dividends earned on outside
investments. Net income (profit) after taxes, or net profit as it is sometimes
called, simply takes into account the federal business profits tax

Gross profit helps investors to determine how much profit a company earns from
the production and sale of its goods and services. Gross profit is sometimes referred
to as gross income.

On the other hand, net income is the profit that remains after all expenses and
costs have been subtracted from revenue. Net income or net profit helps investors
determine a company's overall profitability, which reflects on how effectively a
company has been managed.

Gross profit is calculated by subtracting revenue or net sales from a company's cost
of goods sold while net income is the result of subtracting all expenses and costs
from revenue, while also adding income from other sources.

Formula:
Gross Profit = Net Sales – Cost of Goods Sold
Net Income = Gross Profit — Operating Expenses — Other Business Expenses —
Taxes — Interest on Debt + Other Income

4. Managers may have other business objectives besides making a profit. What are
three examples of these objectives? Discuss how these objectives compete with the
profit objective.

Other objectives, such as producing a quality product or service, rewarding the

employees of the business, helping the business grow, striving for environmental
stewardship, and promoting a positive public image for the firm as a “citizen” of the
community. These types of objectives are common to all business organizations,
from the huge food company to the rural, small-town feed dealer. Such objectives
are usually not accomplished by means of a single, brilliant tactical maneuver, but
rather through the consistent use of resources to their greatest potential over a long
 period of time. The consistent use of resources to meet the firm’s objectives requires
managers to have useful and timely financial information and records.

Assignment #10
1. Suppose an agribusiness firm has decided it must increase capital. What are three
ways to accomplish this? Would the method selected be different for: (a) a
corporation, (b) a partnership, or (c) a proprietorship? Why? Defend the “best”
selection for each business form.

There are three sources from which the manager may raise the funds needed to
eoperate an agribusiness: (1) external sources of financing, (2) borrowing, or (3)
funds generated by profits and retained in the business.

Preferred stock is the stock to which a corporation shows preference. In the event of
the liquidation of the corporation, the owners of preferred stock would be repaid
before holders of common stock.

Partnerships may secure more capital by selling portions of their business to others
who are willing to risk their money in the business. These others may be either
general or silent partners. A general partner assumes the same rights and liabilities
as other partners, while a silent partner has restricted rights and liabilities. Or an
owner may simply lend money to the business just as any outside creditor would, if
that owner does not wish to commit any additional funds on an equity basis.

2. What are the three general classes of loans? Give two examples of a firm needing
each type of loan, and list the specific asset or type of capital acquisition you have in
mind.

3. Why is trade credit important to consider as a way to finance an agribusiness?

It is the credit advanced by suppliers and vendors of the agribusiness firm. If the
agribusiness is creditworthy, most suppliers and vendors will allow credit terms. The
manager can often negotiate for longer credit terms than are usually offered. In other
cases, a supplier may be willing to sell to an agribusiness on consignment. This
means that the business does not have to pay for supplies until it is able to actually
sell them. The agribusiness manager should make sure that suppliers and vendors
are extending maximum terms, and that the procedure for paying accounts payable
takes every advantage of all credit terms extended.

Assignment #11
1. What are the major steps in the decision-making process? What are some of the
problems decision-makers encounter when trying to use this process?

2. Is volume–cost analysis better used as a short-term or long-term planning tool?

Why?
3. Explain the difference between variable costs and controllable costs. Give an
example
of each of these types of costs.

4. What are the major assumptions made in determining the breakeven point? Which
of
these assumptions do you feel is likely the most restrictive in practice? Why?

Assignment #12
1. Why are capital investment choices so important to the agribusiness manager? Why
are these decisions more complex than most operating decisions?

2. What are the advantages and the disadvantages of the payback period method of
evaluating capital investments?

3. Why is net cash flow used in the net present value method rather than net income
from a pro forma income statement prepared using accrual accounting?

4. What are the similarities and the differences between the net present value method
and the internal rate of return method?

Assignment #13
1. List and describe some of the activities that an operations manager may be engaged
in. How would you describe the agribusiness operations manager’s role? How does
this role relate to the systems approach outlined in Figure 14.1.2 ?

2. Why is Frederick Taylor called “the father of scientific management?”

3. What are some of the factors that may be considered in determining the optimal
capacity for a food or agribusiness firm?

4. For either a job you have held, or for a job held by someone you know, carefully
explore the design of the job. Evaluate both the social environment and the physical
environment of the job you have selected.

Assignment #14
1. Why is supply chain management important in an agribusiness firm? Describe the
various functions and responsibilities of supply chain management.

2. What are some of the objectives of an efficient supply chain management system?
How have these objectives changed over time?
3. What are the principle activities of purchasing? Explain some of the factors to
consider in selecting a supplier.
4. Why might inventory levels be minimized and why might some level of inventory be
acceptable?
5. What are the advantages and disadvantages of a MRP system? A JIT system? In
your opinion, which would be better for a fast-food restaurant?

Assignment #15
1. Discuss the functions of human resource management.

2. At what point should an agribusiness hire a full-time HR manager? What are the
specific reasons a firm should invest resources in a full-time HR manager?
3. What are the key elements of a good job application?

4. Explain the steps involved in job orientation. Think about the most recent job you
have held. Were these steps followed when you were introduced to the job? Which
ones were followed and which ones were not? How could the organization you
worked for have improved their job orientation process? (If you have not had the
opportunity to have a job that had some type of orientation process, do this question
as an interview with a friend who has.)

5. Discuss the objectives of evaluating employee performance and how such an

evaluation should be conducted.

6. What are some examples of “formal in-house” training, and why is training
important?

7. What are the pros and cons of promoting employees from within the agribusiness
firm?

8. What is the purpose and format of an exit interview?

Assignment #16
1. Explain the importance of agricultural sector, agro-food industries to the Philippines'
economy.

2. Describe the current agricultural situation and how it affects the farmers and
agribusiness owners.

3. Explain the key factors of production and productivity and compare the evolution in
land, labor and total factor with that in China, India, Indonesia, Malaysia, Thailand
and Vietnam.

4. Assess the progress in terms of farm incomes, poverty alleviation and combatting
undernourishment and malnutrition.

5. Evaluate the Philippine agro-food sector’s integration with international markets and
assesses its export and import performance.
6. Identify the strengths and weaknesses in the agro-food supply chain and describe
the changes in agriculture’s upstream and downstream sectors.