1998, Volume 1, Paper 11
ISSN: 2209-6612
Agribusiness: Disciplines and Dimensions
Associate Professor Bill Malcolm – Department of Food Science and Agribusiness, University of Melbourne
Dr. Brian Davidson – Department of Food Science and Agribusiness, University of Melbourne
What Is the Agribusiness Sector?
The outstanding characteristic of the most successful managers of businesses is their mastery of information; thus the educational requirements of people working in the agribusiness sector of the economy can be considered usefully in the broad framework of helping to equip these people to ‘master information’. More specifically, the main requirement of contemporary agribusiness education is for students and practitioners to learn to bringing rigorous ways of processing information from a range of disciplines to bear in solving business problems of a multi-disciplinary and multi-dimensional nature, in managing businesses in a risky environment where much is unknown and much is unknowable. In this paper, agribusiness activity, and the scope of agribusiness study, is defined in terms of the disciplines and dimensions involved, and implications for agribusiness education are canvassed.
Changes in the business environments in which Australian agribusiness have to operate, particularly deregulation of commodity and capital markets, has meant that generally such businesses are exposed to more competition and to the vagaries of markets in inputs and outputs than has been the case. Even though the move towards free trade and greater competition will continue to be slow, with a good deal of backsliding as well, more than ever the race will go to the ‘fittest’ businesses. Australian agribusinesses will need to be fit. Arguably, much of Australian agribusiness has always been fit because one way or another they managed right from the start to export most of the agricultural products Australian farmers and processors produced.
Several major themes underlie any discussion about the future educational requirements of agribusiness practitioners. These themes go beyond the obvious effects of competition on those who experience it. One theme is the critical role of information in successful business management and marketing in a dynamic world. Another theme concerns the nature of agriculture in Australia, and the particular usefulness of understanding technical, economic and human aspects of the operations of businesses related to agriculture in order to manage them successfully.
An initial question is ‘What is the agribusiness sector in the sector?’ The agribusiness sector can be visualized as a vertical ‘slice’ of an economy comprising many parts. The agribusiness ‘slice’ is where consumers and producers of goods and services related to agriculture operate (Figure 1).
Next, ‘What is agribusiness activity?’ Conventionally agribusiness activity is represented in a two dimensional manner, as a continuum from producer to consumer (Figure 2). This approach, in the economist Paul Samuelson’s phrase, is not even wrong – it is boring, irrelevant, uninformative, misleading. A more useful approach is to suggest areas of economic activity and markets (Figure 3). More useful still is to represent agribusiness as a three dimensional sphere of business activity in which firms interact with each other in markets, not in some continuum from ‘paddock to plate’, but more like a moveable feast, with inputs flowing into production at various levels of the marketing chain from throughout the economy and intermediate and final outputs flowing out of various levels of marketing chains (Figure 4).
This approach makes clear the vast array of sources of inputs involved in agribusiness activity, and provides a feel for the dimensions, or scope, of the term agribusiness. It also shows how ill-informed was the debate of the 1980s about whether agribusiness started before or after the farm gate! That question arose directly from the two dimensional continuum view of the world, which implied that somehow farmers produce things without any help from the rest of the economy.
The proximity and strength of agricultural connections to business activities distinguishes ‘agribusiness’ activity from ‘business’ activity in general. The closer and stronger the ties an activity has with the ‘agricultural action’ the more confidently the activity is able to be described as being involved in agribusiness, and the further from the ‘agricultural action’ the more confidently the activity can be termed simply ‘business’. More specifically, agribusiness management and marketing activities can be seen as being of a different nature to business management and marketing in general, because of the nature of agriculture. The nature of agriculture – the biology, the seasonality, the nature of the products, the nature of the markets, and particularly the risks involved- characterizes and distinguishes agribusiness activity and means that people in agribusiness have some distinct and distinguishable needs for knowledge and skills. Thus some of the information that people working in the agribusiness sector have to master is information related to the human technical, economic, financial, institutional and risk aspects of agricultural business activities.
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