abm 101 pre mt notes

8/3/2019 ABM 101 Pre MT Notes

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MANAGEMENT

Management is a very commonly used term, by people in various sectors.It has wide applications across many sectors. In the last two decades

several management courses with specific reference to a sector; viz.,hospital management, retail management, tourism management,education management etc., have come into existence. This is atestimonial to the expanding application of management for the effectiveand efficient functioning of several diversified institutions.

Since Industrial Revolution there have been tremendous developments inmanagement as a science. The definitions of management by some of thewell known experts are presented.

Management is defined as the process by which a cooperative group

directs action towards common goals. Joseph Massie

To manage is to forecast and to plan, to organize, to command, toco-ordinate and to control. Henry Fayol

Management is a multi purpose organ that manages a business andmanages managers and manages worker and work. Peter F.Drucker

Management is the use of people and other resources toaccomplish objectives of the firm. Louis E Boone and David LKurtz

Management is the process by which managers create, direct,maintain and operate purposive organizations through systematic,coordinated and cooperative human effort. Dalton E Mcfarland

Management is the process of designing and maintaining anenvironment in which individuals, working together ingroups, accomplish their aims effectively and efficiently.

Harold Koontz and Heinz Wiehrich

Management functionsa. Planning: It is the process of selection of objectives of the firm and

deciding the course of action to achieve them.

b. Organizing: It is the process of assigning tasks and authority andresponsibility to enable employees to accomplish organizationobjectives.


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c. Staffing: It is the process of recruiting employees for variouspositions in the organization and train them to achieve theobjectives of the organization

d. Directing / Leading: It is the process of influencing, motivating, anddirecting people towards achieving the organizational goals

e. Controlling: It is the process of monitoring the progress of anorganization for achieving its objectives

Management Hierarchya. Top Management: Chief Executive Officer, Chairman, President,

Board of Directors, Managing Directorb. Middle Management: Division managers, Zonal managersc.Junior Management: Regional managers, area managers

This description generally varies with the size of the firm.

Tasks at various levels of Management

a. Top Management Develop and review strategies and long range plans Evaluate overall performance of the firm and ensure cooperation of

all employees Involved in selection of key personnel (top and middle management) Consults subordinate managers on subjects or problems of general

scope

b. Middle Management

Prepare medium range plans Establish department policies

Employee performance appraisal

Review reports and counsel subordinates

Select personnel (middle and junior management)

c. Junior Management

Prepare short range plans

Review performance of subordinates

Supervise daily operations

Maintain close contact with employees in operations

Management hierarchy and functions

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Managers at different hierarchy have to execute all the managerialfunctions, but the extent of role played in each of these functions varieswith each level in the hierarchy. Top management has greater role inplanning, organizing and controlling and the junior management havegreater role in leading. The middle management has significant role in all

these functions. Besides, the scope of these functions also varies with thelevel of management. The Top Management does planning for the entireorganization, middle management plans activities that are to be executedby them within their region / zone and the junior management plans forthe domain that is in their control / area of operations.

Managerial skills

Managers require at least four skills Technical skills technical knowledge to do the job

Human skills - ability to work with people, team work

Conceptual skills - ability to see the organization as a whole; bigpicture

Design skills - ability to analyze and solve problems

Managerial Hierarchy and Skills

All the four skills are required for managers at various levels ofhierarchy, but their share varies. At the junior management level, themanager is mostly at the operational level and should be well conversant

with the technologies for executing the job, ex: seed productiontechnologies, so that he can guide his subordinates. As the managersmoves up in the hierarchy, he has to manage more and more people, sohuman skills are more required. At top most level the manager should beable to look at the industry big picture, forecast future trends intechnology, market needs, and government policies and should be able todesign strategies for the firm to be successful in the long run. Hence

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conceptual and design skills are required in greater proportion at topmanagement level.Managerial Roles

Interpersonal Figure head

LeaderLiaison

Informational Recipient

Disseminator

Spokesperson

Decisional Entrepreneur

Disturbance handler

Resource allocator

Negotiator

BUSINESS ENVIRONMENT

Business firms operate in a given context with reference to time andspace. The context in which they operate is construed as the environment. The environment comprises of micro and macro environment. Microenvironment is constituted by the firm and its suppliers, distributors,competitors, customers and public. It includes all units where theindividual firm can exert direct influence through its actions. Macro

environment comprises of elements which can influence the behaviour ofthe firms. It includes, economic environment, social, political,technological, demography and legal.

Micro environmentSuppliers: It comprises of firms that provide raw materials (seeds,fertilizers fruit pulp) and other inputs such as electricity, fuel, packingmaterial, etc and services such as transport, market information, storageetc. They can influence the firm through pricing, supply of materials,supply schedule, delivery mode, payment schedule etc.

Distributors: It comprises of firms that distribute the produce to theretailers and consumers. They can influence through the distribution costs,market reach, promotion, margins etc.

Competitors: It comprises of firms producing the same or similarproducts for the same consumer segment. They will compete for themarket share and respond to the promotion programmes, pricing, releaseof new products etc.

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Customers: They are the ultimate buyers whose needs the firm is tryingto fulfill.

Public: People matter because the actions of the firm affect society

pollution, anti-cultural, anti-social, unethical management practices,product supply, irrationally high prices etc.

Macro environmentFour major constituents of the macro environment are; economic

environment, political environment, technological environment and socialenvironment.

Economic environment Tax structure and policies that influence money supply, interest

rates for lending and deposit, subsidy, export / import duties etc form a

part of the economic factors that affect the functioning of the firm.Reduction in direct tax results in increase in disposable income of theconsumer and the consumers demand will increase. Reduction in indirecttax reduces the price of the product, enabling more consumers to buy theproduct. The CRR and SLR can influence the money supply in the economyand in turn the demand for commodities. Decrease in CRR and SLR rateswill increase money supply and therefore increase demand. Fall in lendingrates (PLR) motivates consumers to buy products by availing loan,(demand increases) but increase in deposit rates will motivate consumerto save money and it leads to reduction in spending.

Direct Tax Affects disposable income of people (income tax)

Indirect tax Affects price of the commodity / service (Sales tax /service tax / VAT)

Cash reserveratio (CRR)

Amount of funds banks have to keep with RBI 6.5per cent of net demand and time liabilities

StatutoryLiquidity Ratio(SLR)

Amount which the bank should have in the form ofcash, gold and government securities 24 per centof total demand and time liabilities

Income

growth

Gross Domestic Product, per capita income

Inflation Increasing trend in price of commodities

Interest rates Deposit rates saving behaviour

Primary Lending Rates (PLR) increases demand forcredit

Subsidy Favourable for industry

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In democratic countries the government is run by political partieswith distinct ideological differences which influences polices towardsprivatization, liberalization, extent of foreign direct investment, exportpromotion, taxation, etc. All these policies affect the functioning andultimately the profitability and growth of the firm. A stable government

with considerable majority in the parliament will be able to successfullyget the approval of the elected representatives and enact new Acts, rulesand regulation. Terrorism and wars cause diversion of fund for protectingcountry and less funds for infrastructure creation and business promotion;consequently there is a decline in the pace of development. Pressuregroups are active with regard to genetically modified crops, pollution andcultural erosion. They would create hurdles to hinder the production andperformance of businesses that cause above mentioned damages to thesociety.

Ideology Capitalism / socialism / communism

Democratic Dictatorship / Monarchy

Stability ofgovernment

Conducive climate and policies

Terrorism /wars

India, Pakistan, Sri Lanka, - diversion fundsmeant for development

Laws andregulations

Labour laws, Child labour, Liberalization,globalization, privatization, disinvestment ofpublic sector companies, export and importpolicies, foreign direct investment

Pressure groups Human rights, environmentalists,fundamentalists,

TechnologicalNations progress to a greater extent depends upon its ability to

develop new products and the entrepreneurship, which commercializesnew ideas and products. This becomes more vital with theimplementation of Intellectual Property Rights (IPR). IPR promotespatenting of products and processes (there are many versions such asgeographical indication, trade mark, copy right). If a business does not

own IPR, then it has to pay license to the owner. Investment in researchand development by private and public sector has a great impact ontechnological developments. This investment is influenced by governmentpolices. Technological developments in communications have givengreater competitive advantage to firms and also dissemination of marketinformation and creation of awareness among consumers, facilitatinginformed decision making.

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Productdevelopment /Innovation

Research and development Public and privatesector investment

Patenting Intellectual Property Rights laws andimplementation, number of patents

Communicationsystems

Support services, networking

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EARLY APPROACHES TO MANAGEMENT

The Industrial Revolution, which began in Europe in the mid-1700s,was the starting point for the development of management concepts andtheories. The rapid growth in the number of factories during this periodand the need to coordinate the efforts of large number of people in the

production process necessitated the development of managementtheories and principles.

Robert Owen: Human Resource Management Pioneer

Robert Owen (1771-1858) was a successful British entrepreneur inthe early 19th century. He was one of the earliest management thinkers torealize the significance of human resources. He believed that workers'performance was influenced by the environment in which they worked. Heproposed legislative reform that would limit the number of working hours

and restrict the use of child labor. At his own factories, he introduced astandard working day of 10.5 hours and refused to employ children underthe age of ten. Owen recommended the use of a "silent monitor" to openlyrate an employee's work on a daily basis. Owen believed that the openratings will instill pride and encourage healthy competition.

Charles Babbage

Charles Babbage (1792-1871) was an advocate of the concept ofdivision of labor. He was impressed by the idea ofwork specialization, orthe degree to which work is divided into various tasks. He believed thateach factory operation should be thoroughly understood so that the

necessary skill involved in each operation could be isolated. Each workercould then be trained in one specific skill and made responsible only forthat part of the operation. He observed that work specialization couldapply not only to physical work but also mental work. Babbage felt thatwork specialization would reduce training time and improve (throughconstant repetition of each operation) the skills and efficiency of workers.

Babbage believed that the interests of employees and managementwere closely linked. He therefore devised a profit-sharing plan under whichbonuses were given for useful suggestions contributed by employees andwages were based on the profits generated by the factory.

Andrew Ure and Charles Dupin: Management Education Pioneers

Andrew Ure (1778-1857) and Charles Dupin (1784-1873) were theearly proponents of the study of management. Ure, who taught at GlasgowUniversity, published The Philosophy of Manufacturing, in which heexplained the various principles and concepts of manufacturing. In 1819,Dupin was appointed as a management professor in Paris, which markedthe beginning of an illustrious career.

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Henry Robinson Towne (1844-1924)

Towne, emphasized the need to consider management as a separatefield of systematic study on the same level as engineering. Townesuggested that management be studied as a science and that principlesbe developed that could be used across various management situations.

CLASSICAL APPROACH

Classical management thought can be divided into three separateschools: scientific management, administrative theory and bureaucraticmanagement.

Scientific ManagementScientific management became increasingly popular in the early

1900s. In the early 19th century, scientific management was defined as"that kind of management which conducts a business or affairs bystandards established, by facts or truths gained through systematicobservation, experiment, or reasoning.

Frederick Winslow Taylor

An engineer and inventor, Taylor first began to experiment with new

managerial concepts in 1878. He ventured to tackle a grave issue faced bythe organization - the soldiering problem. 'Soldiering' refers to the practiceof employees deliberately working at a pace slower than their capabilities.According to Taylor, workers indulge in soldiering for three main reasons:

1. Workers feared that if they increased their productivity, other

workers would lose their jobs.

2. Faulty wage systems employed by the organization encouraged

them to work at a slow pace.

3. Outdated methods of working handed down from generation togeneration led to a great deal of wasted efforts.

Taylor felt that the soldiering problem could be eliminated bydeveloping a science of management. In essence, scientific managementas propounded by Taylor emphasizes:

1. Need for developing a scientific way of performing each job.

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2. Training and preparing workers to perform that particular job.

3. Establishing harmonious relations between management and

workers so that the job is performed in the desired way. .

The two major managerial practices that emerged from Taylor's

approach to management are the piece-rate incentive system and the

time-and-motion study.

Piece-rate incentive system

Taylor felt that the wage system was one of the major reasons forsoldiering. To resolve this problem, he advocated the use of a piece-rateincentive system. The aim of this system was to reward the worker whoproduced the maximum output. Under this system, a worker who met theestablished standards of performance would earn the basic wage rate setby management. If the worker's output exceeded the set target, his wageswould increase proportionately.

Time-and-motion study

Taylor tried to determine the best way to perform each and every job.To do so, he introduced a method called "time-and-motion" study. In a"time-and-motion" study, jobs are broken down into various small tasks ormotions and unnecessary motions are removed to find out the best way ofdoing a job. Then each part of the job is studied to fmd out the expectedamount of goods that can be produced each day. The objective of a time-and-motion analysis is to ascertain a simpler, easier and better way ofperforming a work or job.

Frank and Lillian Gilbreth

Frank Gilbreth (1868-1924) is considered the ''father of motionstudy." Lillian Gilbreth (1878-1972) was associated with the researchpertaining to motion studies. Motion study involves finding out the bestsequence and minimum number of motions needed to complete a task.Frank and Lillian Gilbreth were mainly involved in exploring new ways foreliminating unnecessary motions and reducing work fatigue. The Gilbrethsdevised a classification scheme to label seventeen basic hand motions -

such as "search," "select," "position," and "hold" - which they used tostudy tasks in a number of industries. These 17 motions, which they calledtherbligs (Gilbreth spelled backward with the't' and 'h' transposed),allowed them to analyze the exact elements of a worker's handmovements.

Henry Laurence Gantt

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Henry L. Gantt (1861-1919) was a close associate of Taylor isprobably best remembered for his work on the task-and-bonus system andthe Gantt chart. Under Gantt's incentive plan, if the worker completed thework fast, i.e. in less than the standard time, he received a bonus. He alsointroduced an incentive plan for foremen, who would be paid a bonus for

every worker who reached the daily standard. If all the workers under aforeman reached the daily standard, he would receive an extra bonus.

The Gantt Chart is a simple chart that compares actual and plannedperformances. The Gantt chart was the first simple visual device tomaintain production control. The chart indicates the progress ofproduction in terms of time rather than quantity. Along the horizontal axisof the chart, time, work scheduled and work completed are shown. Thevertical axis identifies the individuals and machines assigned to thesework schedules.

Limitations of scientific Management The principles of scientific management revolve round problems at

the operational level and do not focus on the management of anorganization from a manager's point of view.

The proponents of scientific management were of the opinion thatpeople were "rational" and were motivated primarily by the desirefor material gain. Taylor and his followers overlooked the socialneeds of workers and overemphasized their economic and physicalneeds.

Scientific management theorists also ignored the human desire forjob -satisfaction. Since workers are more likely to go on strike overfactors like working conditions and job content (the job itself) ratherthan salary, principles of scientific management, which were basedon the "rational worker" model, became increasingly ineffective.

Administrative Theory

While the proponents of scientific management developed principlesthat could help workers perform their tasks more efficiently, anotherclassical theory - the administrative management theory - focused onprinciples that could be used by managers to coordinate the internal

activities of organizations

Henri Fayol

A prominent European management theorist developed a generaltheory of management. Fayol believed that "with scientific forecasting andproper' methods of management, satisfactory results were inevitable.Fayol was unknown to American managers and scholars until his most

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important work, General and Industrial Management, was translated intoEnglish in 1949. According to Fayol, the business operations of anorganization could be divided into six activities.

Technical - Producing and manufacturing products.

Commercial - Buying, selling and exchange.Financial - Search for and optimal use of capital.

Security - Protecting employees and property.

Accounting - Recording and taking stock of costs, profits, and,liabilities

maintaining balance sheets, and compilingstatistics.

Managerial - Planning, organizing, commanding,coordinating and

controlling.

Fayol outlined fourteen principles of management

1. Division of work: Work specialization results in improvingefficiency of operations. The concept of division of work can beapplied to both managerial and technical functions.

2. Authority and responsibility: Authority is defined as "theright to give orders and the power to exact obedience." Authority canbe formal or personal. Formal authority is derived from one's officialposition and personal authority is derived from factors like

intelligence and experience. Authority and responsibility go hand-in-hand. When a manager exercises authority, he should be heldresponsible for getting the work done in the desired manner.

3. Discipline: Discipline is vital for running an organizationsmoothly. It involves obedience to authority, adherence to rules,respect for superiors and dedication to one's job.

4. Unity of command: Each employee should receive orders orinstructions from one superior only.

5. Unity of direction: Activities should be organized in such away that they all come under one plan and are supervised by only

one person.6. Subordination of the individual interest to the generalinterest: Individual interests should not take precedence over thegoals of the organization.

7. Remuneration: The compensation paid to employees shouldbe fair and based on factors like business conditions, cost of living,productivity of employees and the ability of the firm to pay.

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8. Centralization: Depending on the situation, an organizationshould adopt a centralized or decentralized approach to makeoptimum use of its personnel.

9. Scalar chain: This refers to the chain of authority thatextends from the top to the bottom of an organization. The scalar

chain defines the communication path in an organization.10. Order: This refers to both material and social order inorganizations. Material order indicates that everything is kept in theright place to facilitate the smooth coordination of work activities.Similarly, social order implies that the right person is placed in theright job (this is achieved by having a proper selection procedure inthe organization).

11. Equity: All employees should be treated fairly. A managershould treat all employees in the same manner without prejudice.

12. Stability of tenure of personnel: A high labor turnover

should be prevented and managers should motivate their employeesto do a better job.

13. Initiative: Employees should be encouraged to givesuggestions and develop new and better work practices.

14. Esprit de corps: This means "a sense of union." Managementmust inculcate a team spirit in its employees.

Bureaucratic Management - Max Weber

Weber observed that nepotism (hiring of relatives regardless of theircompetence) was prevalent in most organizations. He felt that nepotismwas grossly unjust and hindered the progress of individuals. He therefore

identified the characteristics of an ideal bureaucracy to show how largeorganizations should be run. The term "bureaucracy" (derived from theGerman buro,meaning office) referred to organizations that operated on arational basis. According to Weber, "a bureaucracy is a highly structured,formalized, and impersonal organization" I other words, it is a formalorganization structure with a set of rules and regulations.

Major Characteristics of Webers Ideal Bureaucracy

Characteristic DescriptionWorkspecialization

and division oflabour

The duties and responsibilities of all the employeesare clearly defined. Jobs are divided into tasks and

subtasks. Each employee is given a particular task toperform repeatedly so that he acquires expertise inthat task.

Abstract rulesand regulations

The rules and regulations that are to be followed byemployees are well defined to instill discipline inthem and to ensure that they work in a cocoordinated manner to achieve the goals of theorganization.

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Impersonality ofmanagers

Mangers make rational decisions and judgmentsbased purely on facts. They try to be immune tofeelings like affection, enthusiasm, hatred andpassion so as to remain unattached and unbiasedtowards their subordinates.

Hierarchy oforganizationstructure

The activities of employees at each level aremonitored by employees at higher levels.Subordinates do not take any decision on their ownand always look up to their superiors for approval oftheir ideas and opinions.

Limitations of bureaucratic management and administrative

theory

Webers concept of bureaucracy is not as popular today as it was

when it was first proposed. The principal characteristics of bureaucracy -strict division of labor, adherence to formal rules and regulations, andimpersonal application of rules and controls - destroy individual creativityand the flexibility to respond to complex changes in the globalenvironment.

BEHAVIORAL APPROACH

The behavioral school of management emphasized what theclassical theorists ignored - the human element. While classical theoristsviewed the organization from a production point of view, the behavioraltheorists viewed it from the individual's point of view. The behavioralapproach to management emphasized individual attitudes and behaviorsand group processes, and recognized the significance of behavioralprocesses in the workplace.

Contributions of Behavioral Thinkers to Management Thought

Name Period Contribution

Mary ParkerFollet

1868-1933

Emphasized group influence andadvocated the concept of powersharing and integration

Elton Mayo 1880-1949

Laid the foundation for the HumanRelations Movement; recognized theinfluence of group and workplaceculture on job performance

AbrahamMaslow

1908-1970

Advocated that humans 'areessentially motivated by hierarchy of

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needs

DouglasMcGregor

1906-1964

Differentiated employees andmanagers into Theory X and Theory Ypersonalities

Chris Argyris - Classified organizations based on theemployees' set of values

Mary Parker Follet: Focusing on Group Influences

Follet recognized the critical role managers play in bringing aboutthe kind of constructive change that enables organizations to function.Power, according to Follet, was the ability to influence and bring about achange. She argued that power should not be based on hierarchy; instead,it should be based on cooperation and should involve both superiors andsubordinates. In other words, she advocated 'power sharing.'

Follet also advocated the concept of integration, which involvesfinding a solution acceptable to all group members. She believed thatmanagers should be responsible for keeping a group together andensuring that organizational objectives are achieved through groupinteraction.

Elton Mayo: Focusing on Human Relations

Elton Mayo (1880-1949), the "Father of the Human Relations

Approach," led the team which conducted a study at Western Electric'sHawthorne Plant between 1927 and 1933 to evaluate the attitudes andpsychological reactions of workers in on-the job situations

The experiments were conducted in four phases:

a.Illumination experiments

b. Relay assembly test room experiments

c.Interview phase

Contributions of Hawthorne Experiments

The Hawthorne experiments, which laid the foundation for the

Human Relations Movement, made significant contributions to theevolution of management theory.

Hawthorne Studies

Pre-judgments Findings

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Job performance depends on theindividual worker.

The group is the key factor in jobperformance.

Fatigue is the main factoraffecting output

Perceived meaning andimportance of the work determine

output.

Management sets productionstandards.

Workplace culture sets its ownproduction standards.

Criticism of Hawthorne Studies

The Hawthorne studies have received considerable criticism. Theyhave been criticized on the following grounds:

1. The procedures, analysis of findings, and the conclusions reached

were found to be questionable. Critics felt that the conclusions weresupported by little evidence.

2. The relationship made between the satisfaction or happiness ofworkers and their productivity was too simplistic.

3. These studies failed to focus attention on the attitudes of employeesat the workplace.

Abraham Maslow: Focusing on Human Needs

In 1943, Abraham H. Maslow (1908-1970), a Brandeis Universitypsychologist, theorized that people were motivated by a hierarchy of

needs. His theory rested on three assumptions. First, all of us have needswhich are never completely fulfilled. Second, through our actions we try tofulfill our unsatisfied needs. Third, human needs occur in the followinghierarchical manner: (i) physiological needs; (ii) safety or security needs;(iii) belongingness or social needs; (iv) esteem or status needs; (v) self-actualization, or self-fulfillment needs. According to Maslow, once needs ata specific level have been satisfied, they no longer act as motivators ofbehavior. Then the individual strives to fulfill needs at the next level.Managers who accepted Maslow's hierarchy of needs attempted to changetheir management practices so that employees' needs could be satisfied.

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DouglasMcGregor: Challenging Traditional Assumptions about

Employees

Douglas McGregor (1906-1964) developed two assumptions abouthuman behavior, which he labeled "Theory X" and "TheoryY." Accordingto McGregor, these two theories reflect the two extreme sets of belief thatdifferent managers have about their workers. Theory X presents an

essentially negative view of people. Theory X managers assume thatworkers are lazy, have little ambition, dislike work, want to avoidresponsibility and need to be closely directed to make them workeffectively.

Theory Y is more positive and presumes that workers can becreative and innovative, are willing to take responsibility, can exerciseself-control and can enjoy their work. They generally have higher-levelneeds which have not been satisfied by the job.

Chris Argyris: Matching Human and Organizational

DevelopmentChris Argyris, a Yale University Professor, made significant

contributions to the behavioral school of management thought. Themajor contributions of this behavioral scientist are the maturity-immaturity theory, the integration of individual and organizationalgoals, and Model I and Model II organization analysis.

He believes that people progress from a stage of immaturity and

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dependence to a state of maturity and independence. Manyorganizations tend to keep their employees in a dependent state,thereby blocking further progress.

Model I and Model II organizations: Argyris classifiesorganizations as Model I and Model II organizations on the basis of the

employees' set of values. The employees in Model I organization aremanipulative and pitted against each other. They are not willing totake risks. Workers in Model II organization are open to learning andless manipulative. Their access to information gives them freedom tomake informed choices, which in turn increases their willingness totake risks. Hence, according to Argyris, managers should strive tocreate a Model II environment.

QUANTITATIVE APPROACH

These experts used some of the mathematical approaches tomanagement devised earlier by Taylor and Gantt to solve the logisticalproblems encountered by the army during the war. After the war manyorganizations started applying the same techniques to solve businessproblems. The quantitative approach to management includes theapplication of statistics, optimization models, information models andcomputer simulations. More specifically, this approach focuses onachieving organizational effectiveness through the application ofmathematical and statistical concepts. The three main branches of thequantitative approach are: (i) management science (ii) operationsmanagement and (iii) management information systems.

Management Science

The management science approach stresses the use ofmathematical models and statistical methods for decision-making.Management science techniques are widely used in the following areas:

Capital budgeting and cash flow management

Production scheduling

Development of product strategies

Planning for human resource development programs

Maintenance of optimal inventory levels

Aircraft scheduling

Various mathematical tools like the waiting line theory or queuingtheory, linear programming, the program evaluation review technique(PERT), the critical path method (CPM), the decision theory, the simulation

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theory, the probability theory, sampling, time series analysis etc. haveincreased the effectiveness of managerial decision-making.

Operations Management

Operations management is an applied form of management science.

It deals with the effective management of the production process and thetimely delivery of an organization's products and services. Operationsmanagement is concerned with: (i) inventory management, (ii) workscheduling, (iii) production planning, (iv) facilities location and design, and(v) quality assurance. The tools used by operations managers areforecasting, inventory analysis, materials requirement planning systems,networking models, statistical quality control methods, and projectplanning and control techniques.

Management information systems

Management information system focuses on designing and

implementing computer based information systems for businessorganizations. In simple terms, the MIS converts raw data into informationand provides the needed information to each manager at the right time, inthe needed form.

MODERN APPROACHES TO MANAGEMENT

Modern approaches include systems theory and the contingencytheory, which have significantly shaped modem management thought.

Systems Theory

Those who advocate a systems view contend that an organizationcannot exist in isolation and that management cannot function effectivelywithout considering external environmental factors. The systems approachgives managers a new way of looking at an organization as a whole and asa part of the larger, external environment.

The two basic types of systems are closed and open systems. Asystem that interacts with its environment is regarded as an open systemand system that does not interact with its environment is considered aclosed system.

Contingency theory

This is also known as the situational theory. According to this theory,there is no one best way to manage all situations.

Important Features of the Major ApproachesApproach Important FeaturesClassical This approach is divided into three schools - scientific

management, administrative theory and bureaucraticmanagement

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Scientific management emphasizes the scientific -study ofwork methods to improve the efficiency of the workers.Administrative theory focused on principles that could beused by managers to coordinate the internal activities oforganizations. Bureaucratic management emphasizes theneed for organizations to function on a rational basis.

Behavioral The behavioral approach to management emphasizesindividual attitudes and behaviors and group processes andrecognized the significance of behavioral processes in theworkplace.Mary Parker Follett focused on the functioning of groups inthe workplace.Elton Mayo's Hawthorne studies were aimed at evaluatingthe attitudes and psychological reactions of workers in on-the-

job situations and laid the foundation for the Human RelationsMovement.Abraham Maslow theorized that people were motivated by ahierarchy of needs.Doug'las McGregor's assumptions about human behaviorled to the development of Theory X and Theory Y which reflectthe two extreme sets of belief that different managers haveabout their workers.Chris Argyris is known for his maturity-immaturity theory.Integration of individual and organizational goals, and Model Iand Model II organization analysis.

Quantitative This approach focuses on achieving organizationaleffectiveness through the application of mathematical andstatistical concepts. The three main branches of this approachare: management science, operations management, andmanagement information systems.

Contemporary (systemsandcontingency)

The Systems Approach views organizations as a part of thelarger, external environment.The Contingency Theory states that there is no one bestway to manage all situations.

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Theory ZWilliam Ouchi, a management expert, conducted research on

both American and Japanese management approaches and outlined anew theory called Theory Z. This theory combines the positive aspectsof both American and Japanese management styles. The Theory Z

approach involves providing job security to employees to ensure theirloyalty and long-term association with the company. It also involvesjob rotation of employees to develop their cross-functional skills. Thisapproach advocates the participation of employees in the decision-making process and emphasizes the use of informal control in theorganization along with explicit performance measures. Theorganization shows concern for its employees' well-being and laysemphasis on their training and development.

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Values

Values are beliefs about what is right or wrong and what is good or

bad. Generally people do not differ in their values. All of them would agree

that corruption, nepotism, cheating, fraud etc., are undesirable practices,hence not accepted by the society. Having good values alone does not

create an impact on the performance of the organization. The firm must

be able to translate these values into an ethic, to have a positive impact

on its performance.

Ethics

Ethics is the act of the individuals to uphold values by putting them

to practice. The firm must set forth a moral code of professional behaviourto enable it to uphold the values so that it could make a meaningful

contribution to the society. Firms must take efforts to be honest, unbiased,

truthful, etc.

Pragmatic corporate ethics creates positive image and reputation for

the firm, which creates a feeling of trust that is shared by the various

groups of stake-holders. Hence, ethical behaviour is very important and

can not be left to the desires of individual employees.

Ethical issues in management

Some of the commonly observed violations of ethics are;

Excise duty and tax evasion

resource depletion and causing pollution

exploiting employees including child

labour

Adulteration and Low quality

Disinformation

Lack of transparency

share price manipulation

accounting manipulations violation of government

rules

Role of top management in business ethics

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Top management sets the tone for ethical behaviour in an

organization by communicating what is meant by ethical behaviour and

also by setting an example by practicing it. It can initiate following

activities to promote ethics in the organization.

Written code of conduct: The firm must take every effort to ensure that

every individual follows a common set of ethics regardless of position. This

underlines the relevance of a well defined written Code of Conduct that is

routinely reviewed and followed starting with the senior management.To

be meaningful it should be a brief, clearly worded, living document that

spells the organizations values.

The Tata and Sons, have used the maxim 'leadership with trust' topromote ethical conduct throughout the group, and this is borne out by its

longevity. The group's embedded values have been unity, integrity,

excellence, responsibility and understanding. Since 1999, the group has

circulated to all its employees a document called the 'Tata code of

conduct', which is simple, easy to understand and easy to follow. In its

journey towards institutionalization, the substance of the code is

constantly communicated at all levels of the organization, apart from

parties with whom the Tatas do business.

(http://indica.co.za/0_media/features/speakers_forum/20050309_business_ethics.h

tm).

Violation reporting mechanism: Top most management has a

constructive role to play in adopting ethics by setting an example and also

motivating employees to adopt the same. They should encourage

employees, customers and other stakeholders to report on violations

made by employees regarding ethical practices.

Penalties for violations: People committing breaches of the code of

conduct, where the offence is established, should be firmly dealt with and

suitably penalized, while employees who are courageously committed to

the Code of Conduct should be suitably rewarded. Establishment of

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uniform disciplinary actions in case of violations and taking preventive

steps to head off future violations, after understanding the 'root' causes of

such violations would go a long way in better adoption of ethical practices.

Commitment of top management: Business leaders are the principalarchitects of corporate conscience. They are the ones who must manage

the challenges associated with pursuing profit while maintaining integrity.

They are the ones most responsible for delivering on the moral agenda of

the corporation. That agenda includes three broad imperatives: orienting,

institutionalizing and sustaining ethical values within the corporate

culture.

Ethics counselor: A clearly designated ethics counselor / officer could beappointed to guide employees, clarify ethical issues and suggest measures

for putting values into practice. Besides, establishment of an advisory

panel would also enable employees to obtain advice regarding possible

ethical dilemmas.

Communication and training: Adopting ethical practices would go long

way through periodical emphasis on ethical practices and also by

conducting training programs to employees.

Corporate Culture

Corporate culture is described as the personality of an organization,

related to a set of shared norms, values and beliefs. Corporate culture

often guides how employees think, act, and feel. Understanding an

organization's corporate culture is important for employee's and managers

alike, as the collective culture will affect everyone in the organization in

many ways, including the number of hours worked per day and per week,

availability of options such as flextime and telecommuting, how people

interact with each other in the workplace, individual behaviors and

behaviors in groups, how people dress for work, benefits offered to

employees, office space, training and professional development

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opportunities, perks and nearly everything related to work and how those

within the organization perform it.

People interact with each other in the workplace, individual

behaviors and behaviors in groups, how people dress for work, benefitsoffered to employees, office space, training and professional development

opportunities, perks and nearly everything related to work and how those

within the organization perform it. Developing and nurturing the right

organizational culture contributes to the overall employee performance of

the organization, and help to mould new entrants. Corporate culture can

often reflect the philosophy and leadership style of the CEO. Organizations

with strong corporate cultures achieve better results because employees

could focus both on what to do and how to do it.

Since globalization and privatization in India, there has been lot of

developments in the corporate sector. Companies also recruit a diverse

workforce that appropriately reflects the demographics of their customer

base and also fulfils talent needs to keep the company competitive and

successful. The challenge lies in ensuring unity amidst diversity so as to

reap the benefits of diverse workforce. Hence it is important to foster an

environment in which employees understand and value each other and

respect their differences.

Building Culture in firms

Some of the points to be considered for designing and implementing

the right culture in the firms are;

Incorporate good traditions from different cultures: Firms to

incorporate good traditions and customs that would be acceptable to all

employees and also enrich the working environment.

Diverse workforce but common goals: Employees from different

regions and socio-cultural setting come together to work in an

organization. The culture should infuse togetherness (a sense of belonging

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in the firm) among employees and work towards a common goal (goal of

the firm).

Emphasis on human resource: Technology and other physical

infrastructure only facilitate the business process but it is ultimately the

human resource that utilizes this infrastructure for efficient and effective

business process. Hence the culture of an organization should focus on

nurturing human resource and stimulating them to contribute their best.

Learning and sharing: Employees must be willing share their knowledge

and skills with their colleagues so that the overall capacity of the

organization is enriched. Concern over performance, promotions, power of

information, etc., may prevent employees from sharing their knowledge

and skill with their colleagues, or seniors with their junior colleagues. Ideal

culture should alley such fear and promote learning and sharing among

employees, promote team play and emphasize co-operation among

employees.

Promote a sense of belonging: Employees must realize that they are

part of the team. The team by itself becomes a community and creates a

sense of belonging. An ideal culture must be able achieve this kind of

harmony among employees. Person or task oriented.Promote positive thinking: All the endeavours of the employees may

not bear fruits but they should not be bogged down by the set back.

Organizations should promote positive thinking so that employees learn

from the experience and nurture positive mindset for joining hands for

better efforts in future.

Types of corporate culture

Four types of corporate culture have been identified using two traits

of a firm namely; hierarchical (Top down organization, authoritative) or

egalitarian (democratic) and person or task oriented.Incubator Guided Missile organizations secondary to individual

fulfillmenthighly Egalitarian

task-oriented, impersonal

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existence precedes organization

aim at self-expression and self-fulfillment

personal and egalitarian

minimal structure; minimal hierarchy

emotional commitment creative, innovative

(Sweden)

team approach emphasized

cross-disciplinary

performance emphasized

loyalty to professions / projectgreater than to companyMotivation intrinsic(USA, UK, Canada)

Family Eiffel Tower

personal, close face-to-facerelationship

hierarchal ("father knows best")

power-oriented (leader is fatherlyfigure)

home-like work atmosphere

long-term relationships ofemployee to company; highloyalty

values, norms, atmosphere set byfather" or "elder brother"

Japan, Singapore, South Korea,

hierarchal

structure more important thanfunction

leader is boss (not father)

relationships specific; statusascribed

highly bureaucratic, depersonalized

rules dominate; roles before people

careers depend upon professionalqualifications

symbolic of machine age

Germany, Austria

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Spain, Italy, India

Corporate Social Responsibility (CSR)

Every firm has a social obligation to the society. They are

responsible for the impact of their actions on the society. CSR is defined as

the obligation of the firm to contribute to the welfare of the society

through its activities. The right to existence of a firm in the society

depends on its ability to fulfill its obligations to the society. Though profit

is essential for firms, their ultimate motive should be contribution to the

welfare of the society. To fulfill the CSR obligations firms generally,

contribute funds for educations activities, scholarships, creating educationinfrastructure and other social overheads like hospital, roads, cultural

functions etc. CSR as a concept has evolved over the years and it is no

more viewed as activities outside the purview of its core activities such as

creating social overheads for the society but as the central part of the

organization. This includes the following tasks;

a. Producing and supplying quality goods and services and fulfilling

consumer needs without any harm to the stakeholders

(shareholders, suppliers, buyers, government) of the firm and the

society.

b. Employment generation, employee welfare and employee

empowerment (heeding to the suggestions of employees, problems

faced by them and improving their standard of living).

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c. Due recognition for the employees for their contribution to the

success of the firm, proportionate increase in perks and pay at all

levels of employees etc.

d. Environment protection production without pollution of the

environment. Conserving natural resources.

e. Protection of the interests of the stakeholders of the firm through

better corporate governance.

f. Self regulation by private firms, especially in a liberalized economy

(monitoring themselves for their actions such as; paying taxes,

proper accounting and auditing practices, adherence to rules of the

government, not engaging child labour etc.).

Corporate Governance

Worldwide the corporation is considered to be the essential engine

driving the private sector economically. Corporate Governance (CG) is

critical to its competitive performance. Despite a long corporate history,

the phrase corporate governance remained unknown until the late

1990s in India. It came to the fore due to a spate of corporate scandals

that occurred after the first phase of economic liberalization.Corporate governance is the set of processes, customs, policies,

laws, and institutions affecting the way a corporation is directed,

administered or controlled. It also includes the relationships among the

many stakeholders involved and the goals for which the corporation is

governed. Principal stakeholders of a firm are shareholders, management,

and the board of directors and other stakeholders are labourers

(employees), customers, creditors (e.g., banks, bond holders), suppliers,

regulators, and the community at large.

Corporate Governance (CG) concerns the way in which other

shareholders can legitimately exercise influence and exert effective

control over the actions of corporate managers/promoters. The discipline

of corporate governance has developed as a way of ensuring that: (a)

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investors other than promoters receive a fair return on their investment by

protecting them against management misuse or use of the investment

capital to finance poor projects and (b) other stakeholders are assured

that their interests are properly fulfilled. CG is a system by which firms are

directed and monitored.

Importance of Corporate Governance

A good CG system

ensures the independence of the board of management offirms

clearly states the responsibilities of institutional investors orshareholders,

ensures transparency of business structure, operations andaccounts

facilitates easy and complete evaluation by financialinstitutions

discourages use of unethical practices by employees

ensures fair returns to all stakeholders

promotes efficient functioning of firms

AGRIBUSINESSAgribusiness has evolved over the years since subsistence farming. Thefarm production has been central to the agribusiness. As thecommercialization of farm production gained significance the productionand supply of farm inputs, marketing of farm output including valueaddition (processing) and services to farm sector have expanded leadingto proliferation of several independent business units. Agriculturaldevelopment has been a precursor to economic development. With thegrowth of agriculture sector, each operation became specialized and hadthe potential for business. This has led to establishment of numerous firms

that cater to various needs of the agribusiness sector. Thus, the gamut ofagribusiness enlarged including few sub systems in its realm.

DefinitionAgribusiness includes all those business and management activitiesperformed by firms that provide inputs to the farm sector, produce farmproducts, and/or process, transport, finance, handle or market farmproducts." Downey and Erickson (1987)

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The agribusiness sector comprises predominantly of four sub systems;Input supply sub system, Production sub system, Output marketingsubsystem and services subsystem.

a) Input supply subsystem: It includes all firms that provide input forfarm production, such as seeds, fertilizers, pesticides, bio-inputs,farm machinery, capital, labour etc.

b) Production subsystem: The individual farms were crops, livestock,mulberry and fish production takes place and firms that are involved

in agriculture allied activities such as sericulture, mushroom, apiaryproduction.

c) Output marketing subsystem: this includes all the firms that areinvolved in the marketing channel through which the produce fromthe farm, either in the raw or processed form reaches the consumerin the domestic or international market. The major participants aremarket intermediaries such as, wholesalers, retailers, villagemerchants, processors, exporters etc.

d) Services subsystem: It includes all the firms that provide servicessuch as market information, grading, storage, transport, farmmachinery hiring and maintenance, technology transfer,

consultancy, commodity exchanges, etc.

The globalization of markets, increasing per capita income, educationlevels etc., created new opportunities and challenges for the agribusinesssector and has led to greater specialization of activities.

Evolution of agribusiness sector

Agribusiness sector

Services Market information, transport, storage,farm machinery hiring and maintenance, technology

transfer, consultancy, commodity exchanges,

grading

Output marketing

Traders,

Processors,

Exporters

ProductionCrops, livestock,fisheries,

Agriculture allied

activities - apiary,

mushroom

Input Supply

Seeds,Fertilizers,

Pesticides,

Farm machinery

Capital, Labour

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Agriculture has come a long way from the era of shifting cultivation. Thedomestication of livestock and initiation of crop production paved way forcreation of independently owned farms, where subsistence farming wasmainly practiced. Growth of the economy, need for food security for thepopulation, opportunities for exchange and increase in demand for other

goods and services led to commercialization of agriculture. Commercialagriculture could be segmented in four distinct phases green revolution,sustainable agriculture, market led agriculture and supply chainmanagement (farm to fork). In this transformation process, several newproducts and services, firms and management systems have added to theagribusiness sector with the each stage of evolution.

Subsistence agriculture is self-sufficient farming in which farmers growonly enough food to feed their family and pay taxes. The typicalsubsistence farm has a range of crops and animals needed by the familyto eat during the year. Planting decisions are made considering what the

family will need during the coming year, rather than market prices.

Commercial agricultureGreen revolution: After independence, the farmers transformedsubsistence agriculture into commercial agriculture. Green Revolution,launched in mid sixties became a landmark in the transition of agriculturein India. The introduction of high yielding varieties in wheat and rice withimproved responsiveness to fertilizers and irrigation was collectivelyreferred to as "Green Revolution". The Green Revolution was agovernment sponsored programme to ensure availability of adequate foodfor the population (food security) through domestic production. This drive

by the government enabled farmers to increase productivity and farmincome. Adoption of improved technology was encouraged through afavourable policy environment, which envisaged; (i) increase in domesticproduction and supply of fertilizers at subsidized prices, (ii) increase insupply of quality seeds, (iii) expansion of irrigation facilities and enablinggroundwater usage through subsidized / free electricity, (iv) transferof technology on a continuous basis, (v) appropriate price policies tomotivate risk averse farmers to adopt technologies and ensure fair returnsto farmers and (vi) distribution of food grains throughout the country, forproviding food to the needy and also stabilize the markets by creation ofbuffer stock and supply through public distribution system. Emphasis was

on increasing production and distribution. Marketing was not given dueattention.

Sustainable agriculture: The imbalanced fertilizer application and otherinputs, such as water, pesticides led to degradation of natural resources,which adversely affected the productive capability of land. To offset thisundesirable trend the concept of sustainable production was given majoremphasis. Integrated approach for nutrient, pest, water and land

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management involving manual, chemical, and biotechnologies wasadvocated. The objective was to increase productivity by conservingnatural resources and effectively integrating various technologies forproduction.

Market led agriculture: In the early nineties (1990s) the economicpolicies in India were changed in order to globalize the market access andliberalize the business activities giving more scope for private sectorparticipation, especially large firms. As a result the opportunities forexport of agricultural commodities increased. The World TradeOrganization also introduced new norms for international trade, withspecifications for quality, food safety and sanitation. In order to capitalizethe export opportunities the firms had to produce conforming to thestandards prescribed by the market. Understanding the market needs wasadvised as the basis for production operations. Though such practiceswere advocated for the business sector quite long ago, this approach was

given greater emphasis to the farming community. The farmer has tounderstand the market needs not only in terms of quantity to produce butalso the quality aspects such as size, colour, residual toxicity, variety etc.the entry of organized retail sector in agriculture produce marketingduring late nineties also made it imperative for farmers to understand themarket needs and produce accordingly. The growth in marketinfrastructure through private sector participation and governmentassistance, establishment of commodity exchanges and better access tomarket information due the technological developments in communicationsystems have enabled the farmers to orient themselves to market ledagriculture.

Farm to Fork (Supply chain management): Supply chainmanagement in agriculture is gaining attention. It is a step forward andcomplimentary to market led agriculture. In this approach efforts aretaken to integrate various elements in the agriculture produce supplychain to improve the effectiveness and efficiency of the operations anddynamic market orientation, thus enabling a farm to fork integratedsystem. The elements in the supply chain for agricultural produces are notintegrated and there is a dearth of information flow on consumerspreference, demand, arrivals and prices in various markets. Hence privatefirms, especially processors, organized retail chains and the government is

taking efforts to establish integrated supply chains that would also takeinto account the interests of the farmers.

Agribusiness sector in developed and under developednations

Agriculture has undergone a transition in India in terms oftechnology adoption, shift in cropping pattern, export orientation, etc but

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there has been unequal growth with the rainfed areas greatly laggingbehind. A comparison of the agribusiness sector in India (developingcountry) and developed country (USA) is presented for betterunderstanding.

Comparison of Agribusiness Sector in developing and developedcountryProduction sub system

Feature India (Developingcountry)

USA (Developedcountry)

Average farm size 0.50 ha - small,scattered andfragmented

1249 ha very largefarms

Number of farmholdings (millions)

116 too manyindependent farmers,with individual decision

making

2.1 Small number ofvery large farms

Share of agriculture inNational GrossDomestic Product(%)

14 has been decliningover the years indeveloping countries theshare of agriculture ishigh

1 developed countrieshave only 1 2 %contribution fromagriculture

Agriculture growthrate (%) 2007

2.2 low growth rateand fluctuating due tovariations in climate mainly rainfall andtemperature

1.9 2.0 low but yield ofmost crops greater thanthose in developingcountries

Share of workersemployed inagriculture (%)

58 very high in spite ofthe growth in industryand service sectors

2 Labour engaged inagriculture is very low indeveloped nations.Greater share comesfrom service andmanufacturing sector

Per capita AgGDPof Ag population(US $)

201 very low due tofragmented holdings,low marketable surplusand too many peopledepend on agriculture

27651 Due large farmsize and only one percent of labour populationengaged in agriculture

Share of GCA toTGA (%)

54 Large area undercultivation, since India isa tropical country

20 less area,temperate country,severe winter, snow fall

Share of areaunder irrigation(%)

35 Tropical country,benefits from twomonsoons

13 Temperate country,high industrialization

Input sub system

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Feature India (Developingcountry)

USA (Developedcountry)

Share of water usefor agriculture (%)

86 Very high, lowdemands due to lessindustrialization

41 Highindustrialization anddomestic use

Share of production of fertilizer in theworld (%)

9.77 Production cost ishigh due to obsoletetechnology and rawmaterial and energycosts

12.24 Production costless

Fertilizer use Kg.per ha.

90 Low and imbalancedusage

110 Need basedapplication

Herbicide use Less presently growingdue to labour shortagesfor weeding

High- high labour costsand farming ismechanized

Area under Bt

crops (million ha)

3.8 Only cotton is grown 54.6 many crops,

maize, soybean,cotton, mustard

Number of tractorsper 1000 ha

16 Small farms, lessresources

27.4 - farming ismechanized

Number of harvesters /threshers per 1000ha

Negligible 3.8 - farming ismechanized

Output sub systemFeature India (Developing

country)

USA (Developed

country)Post harvest loss Very high low

awareness and adoptionof post harvestmanagement practices,and inadequate marketinfrastructure

Low post harvestmanagement begins atthe farm

Extent of processing (% ofproduction)

3 4 Low, mostlycottage and tinyindustries, technologyadoption is less,growing market,

High share, modernprocessing units, farmlevel integratedprocessing

Value of exports(Million US $)

7058 The value of exports is less, cost andquality constraints

63893 export of processed food

Value of imports(Million US $)

5108 restricted bygovernment, exportoriented imports

59874 Import of freshfruits and vegetablesfrom the tropics

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Services subsystemFeature India (Developing

country)USA (Developedcountry)

Marketinfrastructure Inadequate, most of thesale at farm gate,transactions increasingin commodity exchanges

Well established, pricedisseminationadvanced, commodityexchanges vibrant

Grading Voluntary, AgMark.Export - compulsory

Farm level grading

Storage Inadequate at farm leveland at assemblingpoints, mostlygovernment owned Central warehousing,

State Warehousing andrural godowns. Coldstorages inadequate butincreasing

Adequate storage atfarm level andsufficient cold storages

Transport / Coldchains

Inadequate More organized andgreater availability

Organized retailing Growing market,opposition in somestates UP, Kerala bytraders

Well established andintegrated with farms

Eco-tourism /

alternative healthsystems Ayurveda, Siddha

Growing market Growing market

Technologytransfer

Larger government role Greater private sectorparticipation

Source Farm holdings USAhttp://www.epa.gov/oecaagct/ag101/demographics.htmlAgrl growth rate: Economic growth: Lessons from two centuries of Americanagriculture

Special Features of Agribusiness Sector in India

The production subsystem (farm) is central to the agribusiness sector andthe rest of the subsystems revolve around this subsystem. The specialfeatures of agribusiness are discussed subsystem wise.Production subsystemFeature ImplicationsEntire systemdependent onagriculture

Fluctuations in farm production, production risk,affects sustainable production

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climate naturalresourcesFragmented and

scattered farm holdings

Small marketed surplus, assembling difficult, no economies of

scale, variations in quality, less capital, mechanization is difficult

Rainfed area 60 % Technology adoption less, low production, more risk

Technology andyield

Technology adoption is less, high yield gapPost harvest management low adoption

Marketing Mostly at farm, low share in consumer rupee, lowvalue addition

Input subsystemFeature ImplicationsFertilizers mostlypublic sector units

Old Technology, Low production, SubsidizedGovernment regulated prevent shortages

Fertigation andmicronutrients

Growing market

Biofertilizers andbiocontrol agents /biopesticides

Less growth, fragmented and small units, nocertification

Pesticides mostly private sector units, new molecules, highprice, Indian companies mostly formulators, Spuriouschemicals

Farmmechanization

Growing market, few large private companies tractors and power tillers

Seeds Few large companies Multi National Companies(MNCs) and national firms, many regional players.Research and development initiative in privatesector is less

Output subsystemFeature ImplicationsMarketintermediaries

Scattered and small size, absorb greater margin,largely passing on risk to farmers,

Organized retailing Growing segment, resistance in some States andtraditional market intermediaries,

Exports Increasing, meeting quality standards is a hurdle,cost advantage in few crops, stiff competition from

other countriesImports Fruits, onion, garlic etc., due to low production andcost advantage, export oriented imports sugar,cashew

Processing Less quantity processed, consumer preference andavailability of raw fruits and vegetables for greaterperiod of the year, growing market, technology atlow level, mostly cottage industries,

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Services subsystemFeature ImplicationsMarketinfrastructure

Inadequate, most of the sale at farm gate,transactions increasing in commodity exchanges

Grading Voluntary, AgMark. Export - compulsoryStorage Inadequate at farm level and at assembling points,

mostly government owned Central warehousing,State Warehousing and rural godowns. Cold storagesinadequate but increasing

Transport / Coldchains

Inadequate

Organized retailing Growing market, opposition in some states UP,Kerala by traders

Technologydevelopment and

transfer

Larger government role

Credit Largely met by nationalized banks 18 % lending topriority sector, influenced by government policy onagriculture

Scope for agribusiness in IndiaGrowing population and economy create greater demand for agriculturalproduce for consumption and industrial use. Technological developments,changes in business environment and government policy in the domesticand international market create opportunities for agricultural production.Thus the scope for agribusiness could be examined with respect to thedemand side changes and supply side changes.

DemandIncreasing population, declining poverty ratio (19 per cent by 2007) andchanges in income structure are likely to affect the nature of demand foragricultural produce in future. During 2005 2007 the GDP of the countryhas grown at about 9 per cent and during 2008 it has come down to 7 percent due to global financial crisis. McKinsey Global Institute 2007 reportindicates that income levels will almost triple and India will climb from itsposition as the 12th largest consumer market today to become the world'sfifth-largest consumer market by 2025. Over 291 million people will movefrom desperate poverty to a more sustainable life, and India's middle classwill swell by over ten times from its current size of 50 million to 583 millionpeople. By 2025 over 23 million Indians more than the population ofAustralia today will number among the country's wealthiest citizens.

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The population of the country is estimated to be 1.33 billion by 2020.Under the assumption of 3.5% growth in per capita GDP (low incomegrowth scenario), demand for foodgrains (including feed, seed, wastageand export) is projected in the year 2020 at the level of 256 mt comprising112 mt of rice, 82 mt of wheat, 39 mt of coarse grains and 22 mt of

pulses. The demand for sugar, fruits, vegetables, and milk is estimated togrow to a level 33 mt, 77mt, 13 6mt and 116 mt respectively. The demandfor meat is projected at 9 mt, fish 11 mt and eggs 77.5 billion.Increase in literacy and exposure to mass media could bring aboutchanges in the preferences of the consumers and their consumptionpattern. As more and more women get employed and the nuclear familiesincrease, the demand for processed and fast foods is likely to increase.Motorized transport, computerization, better communication systemswould change the lifestyle of people. Growth in export market also offersopportunities for agribusinesses. Some of the promising areas ofagribusiness opportunities are given below;

Opportunities for Agribusiness due to Demand side changesFood

Processed food, fast food

Nutritive food nutraceuticals /functional foods

Organic food, no pesticideresidues

Demand for fruits and vegetables

Medicinal plants ayurveda,siddha

Products - Mushroom, fish, honey

Organized retailing

Wine

Frozen and dehydrated produce

Non - food

Art and handicrafts banana fibre,coir

Demand for flowers, ornamentals,interior decoration, landscaping

Organic cotton

Natural dyes

Eco-tourism

Cosmetics plant based

SupplyConstraints in availability of natural resources, development of newvarieties, hybrids and technologies, changes in government polices,climate changes, labour shortages, credit flow, market access etc.,

stimulate agricultural production which in turn would create opportunitiesfor input, output and services subsystem. Some of the likely changes insupply side and the opportunities for agribusiness are given below;

Opportunities for Agribusiness due to Supply side changesFactor OpportunitiesClimate changeOrganic farming

Choice of crops, technology, renewableenergy

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Reduction insubsidiesResource

conservationInput use need

based applicationLabour shortageQuality

Bio-inputscompost, vermiculture, enriched FYM, Bio-fertilizerMicro irrigationsoil testing, agri-clinics,

mechanization, herbicidesmicronutrients

Factor OpportunitiesMarket informationMarket accessExcess productionMore capitalNeed for new

technologyTechnology transferRisk protection

media, journalscommodity exchangesCold storage / cold chains, warehousesfinancial servicesR & D services

e platform, consultancy, firms, privateextensionCrop insurance

Technology driven projectsNew technology

Biotechnology &nanotechnology

Irradiation

Micro-encapsulationCryogenic grindingRetort pouchesMembrane TechnologyBio-fuelSuper CriticalExtraction

precision farming, protected cultivation poly house, green house, shade net

Bt crops cotton, brinjal, enzymes,foods, inputsIncrease shelf life, prevent quality loss -

Onions, Potatoes, Fruits, Marine, Meat,SpicesPowder of fruits, Vegetables, Spices,Spices, Herbs.Packaging prepared curries, pulses etc.micro filtration of juices, milk, etcJatropha, PungamOleoresins of Spices, herbs, etc.

Agriculture allied enterprisesSericulture

Silkworm Rearing Technology Silk Yarn Production, value addition & export Handloom and Textile / Garment Designing

Livestock

Milk and meat chilling and processing

Broiler and Egg Production and marketing

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Livestock Feed, vaccine / drug production diagnosis / clinics

Rearing quails, turkey, white pigs

Fish Integrated and Intensive Fish Farming, shrimp farming

Fish Hatchery and feed Ornamental Fish Frozen and canned products

Government programmes that promote agribusinessesSince mid sixties (1965s) the government has played an active role inaccelerating agricultural production. Initially, the emphasis was to increaseproduction to ensure food security for the growing population, which led tothe Green Revolution.

Production subsystemGreen Revolution, launched in mid sixties became a landmark in thetransition of agriculture in India. The introduction of high yielding varietiesin wheat and rice with improved responsiveness to fertilizers and irrigationwas collectively referred to as "Green Revolution". Adoption of improvedtechnology was encouraged through a favourable policy environment,which envisaged; (i) increase in domestic production and supply offertilizers at subsidized prices, (ii) increase in supply of quality seeds, (iii)expansion of irrigation facilities and enabling groundwater usage throughsubsidized / free electricity, (iv) transfer of technology on a continuous

basis, (v) appropriate price policies to motivate risk averse farmers toadopt technologies and ensure fair returns to farmers and (vi) distributionof food grains throughout the country, for providing food to the needy andalso stabilize the markets by creation of buffer stock and supply throughpublic distribution system. Stimulating growth in the farm productionsystems also generates growth in the other sub systems namely, input,output and services sub systems. Presently following schemes areimplemented to stimulate agricultural production at farm level.

a. National Agricultural Development Programme (NADP) The Government of India have introduced a new Additional Central

Assistance scheme to encourage States to draw up plans for theiragriculture sector more comprehensively, considering the agro climaticconditions, natural resource issues and technology into account, andintegrating livestock, poultry and fisheries. The National AgricultureDevelopment Programme (RKVY) aims at achieving 4% annual growth inagriculture sector during XI Plan period by ensuring holistic developmentof agriculture and allied sectors.

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This programme provides greater flexibility and autonomy to the states todevelop and pursue on the basis of their priorities through State andDistrict agricultural plan. The objective of the scheme is to increase publicinvestment in agriculture, reducing yield gap in key crops through focusedinterventions, maximize returns to the farmers and bringing quantifiable

changes in the production and productivity of agriculture and alliedsectors. The pattern of funding is 100% grant by Government of India. Theprojects relating to Agriculture, Animal Husbandry, Dairy, Fisheries andalso minor irrigation are focused under this programme.

b. Support to State Extension Programme for Extension Reformsthrough ATMA In order to involve farmers groups in planning andimplementation and empowering them to achieve best results in transferof technology, a centrally sponsored scheme to support State ExtensionReforms has been implemented in Tamil Nadu on Pilot basis in 9 districtscovering 133 blocks through Agricultural Technology Management

Agency (ATMA) with funding pattern of 90:10 between Government ofIndia and State Government. In addition, the Government of India hasaccorded permission to extend the ATMA scheme to the remaining 19districts covering remaining 248 blocks except Nilgiris and Chennaidistricts. TAWDEVA (Tamil Nadu Watershed Development Agency) hasbeen nominated as State Nodal Agency for all 28 ATMA districts. TamilNadu Agricultural University, Coimbatore has been nominated as StateAgricultural Management Extension Training Institute (SAMETI) The pilotscheme of ATMA in 9 districts has been implemented from September2006 after creation of administrative structure at Block level exclusivelyfor ATMA represented by officials of all the departments, farmer

representatives, women and NGO representatives. Farmer representativesrepresenting Agriculture and 9 line departments formulating block actionplans to fulfill their local needs and farmer representatives at block levelrepresenting Farmer Advisory Committee is monitoring theimplementation of Block Level ATMA activities ATMA is fulfilling the needsof training, demonstrations, Farmer interest Group formation, CapacityBuilding and Revolving funds, Interstate and Inter-district exposure visits.The best performing farmers and the district ATMAs are felicitated withawards at Block, District and State Levels.

c. Irrigated Agriculture Modernization and Water Bodies

Restoration and Management (IAMWARM) Project in Tamil Nadu isbeing implemented with the assistance of World Bank over a period of sixyears (2007-08 to 2012-13) through Water Resources Organization (WRO)and Agricultural, Horticulture, Agricultural Engineering, Animal Husbandryand Fisheries along with Tamil Nadu Agricultural University. The IAMWARMProject aims to improve the service delivery, productivity in irrigatedagriculture with effective integrated water resource management inselected 63 sub basins in Tamil Nadu. Activities like agricultural

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Intensification and diversification, enhancing market access andagribusiness opportunities, strengthening institutions and instrumentsdealing with water resource management thereby improving theconveyance efficiency are being practiced in the project areas. Some ofthe activities of the project are;

Demonstration on various crops and organic farming Distribution of critical inputs-like Bio-fertilizers, Micro Nutrient

mixture, Gypsum, Blue Green Algae etc.

Distribution of Farm Implements like Hand operated Sprayers, PowerSprayers, Seed Drills and Green manure tramples and

Information,/Education and Communication activities (IEC) likePublicity and Capacity Building through training, exposure visits tofarmers.

d. National Food Security Mission (NFSM)Introduction: To implement the resolution of National DevelopmentCouncil (NDC) which envisages increasing the production of Rice, Wheatand Pulses to the tune of 10 million tons, 8 million tons and 2 million tonsrespectively, a Centrally Sponsored Scheme, 'National Food SecurityMission' (NFSM) was launched in 2007-08 in 311 districts of 17 States.NFSM has three sub-components viz: NFSM-Rice, NFSM-Wheat and NFSM-Pulses.

Mission Objectives: Increasing production of rice, wheat and pulsesthrough area expansion, and productivity enhancement in a sustainable

manner in the identified districts of the country through: Restoring soil fertility and productivity at the individual farm level;

Creation of employment opportunities; and

Enhancing farm level economy to restore confidence among thefarmers.

Implementation Strategy: The approach adopted includes activeinvolvement of all stakeholders in planning, execution and monitoring ofthe programme, promotion and extension of improved technologies (seed,nutrients, plant protection, soil amendments, resource conservation, farm

machines and tools), integration of interventions with district plan, regularmonitoring and concurrent evaluation for impact assessment.

e. National Horticulture Mission The National Horticulture Mission has been launched as a CentrallySponsored Scheme to promote holistic growth of the horticulture sectorthrough an area based regionally differentiated strategies. The scheme

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will be fully funded by the Government and different componentsproposed for implementation financially supported on the scales laiddown.To achieve the above objectives, the mission would adopt the followingstrategies:

1. Ensure an end-to-end holistic approach covering production, postharvest management, processing and marketing to assureappropriate returns to growers/producers.

2. Promote R&D technologies for production, post-harvestmanagement and processing.

3. Enhance acreage, coverage, and productivity through;a. Diversification, from traditional crops to plantations,

orchards, vineyards, flower and vegetable gardens.

b. Extension of appropriate technology to the farmers forhigh-tech horticulture cultivation and precision farming

4. Assist setting up post harvest facilities such as pack house, ripening

chamber, cold storages, Controlled Atmosphere (CA) storages etc,processing units for value addition and marketing infrastructure.

5. Adopt a coordinated approach and promotion of partnership,convergence and synergy among R&D, processing and marketingagencies in public as well as private sectors, at the National,Regional, State and sub-State levels.

6. Where appropriate and feasible, promote National DairyDevelopment Board (NDDB) model of cooperatives to ensure supportand adequate returns to farmers.

7. Promote capacity-building and Human Resource Development at alllevels.

f. Wasteland Development: This scheme is implemented by the TamilNadu Government. Two acres of wasteland is given to landless labourersand fruits trees suitable for the region are planted with assistance fromthe government. The new owners have to manage the farm and benefitfrom the harvest. Thus, unutilized wasteland is brought under cultivation,supply of fruits increases and labourers become owners of land and theyget stable employment.

National Horticulture Board (NHB)National Horticulture Board (NHB) was set up by the Government of India

in 1984 as an autonomous society under the Societies Registration Act1860 with a mandate to promote integrated development in horticulture,to help in coordinating , stimulating and sustaining the production andprocessing of fruits and vegetables and to establish a sound infrastructurein the field of production, processing and marketing with a focus on postharvest management to reduce losses. Schemes are; Development of commercial Horticulture through Production and Post-Harvest Management.

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Capital Investment Subsidy for Construction / Modernization Expansion of Cold Storage andStorage's for Horticulture Produce

Technology Development and Transfer for Promotion of Horticulture

Market Information Services for Horticulture Crops

Horticulture Promotion Services (including terms of reference for Techno-economic Feasibility

Study)...

SeedsCentral Government schemes for providing quality seeds are;

Central Sector Scheme on Transport Subsidy for the movement ofSeeds to the North-Eastern States, Sikkim, Himachal Pradesh,Jammu & Kashmir, Uttaranchal and Hill Areas of West Bengal.

Quality Control Arrangement on Seeds Seed Ba

abm 101 pre mt notes

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