From Traditional Firm and Producer Company
to Sustainable Community Enterprise
IAJBS 15th World Forum
XLRI, Jamshedpur
June 8, 2009
Amar KJR Nayak, Ph.D.
Associate Professor, Strategic Management
Xavier Institute of Management, Bhubaneswar, India
amar@ximb.ac.in
1
FIRM?
2
Profit
Growth
The theory of Growth of Firm
Resource Base
Technology driven D.C.
3
Basis of Firm Growth
Economies of Scale
Capital Intensive
Technology Intensive
Ownership
Management Control
Firm Efficiency
“Competitive Advantage”/Strategy”
4
Inclusive Capitalism
Welfare
State
Mechanism
Market
Mechanism
Government
Firm
Firm
Marginal Producer
Marginal Producer
5
Inclusive Capitalism & Firm Strategy
Strategic CSR
Private Micro Financing
Contract Farming
Fortune at the bottom of the pyramid
Producer Company
Agri-Business Model
6
Structure of Intervention from a Traditional Firm Perspective
Firm / Market Based Approach
Intervention
Examples
Rural Sector
FIRM
(Driven by Profit & Growth)
SHG
Knowledge/
Awareness
Govt/NGO/
Radio Programme
Production
Capacity
Agricultural Inputs
Agri Technology
(Dept of Agriculture)
Value Addition
Processing/ Cold storage
(Dept. of Horticulture)
Marketing
TRIFED/Market info
(Swami Nathan Foundation)/
E-Coupal
Finance
F. Efficiency
Economies
Of scale
Capital
Intensity
CIG
PC,
(Fab India,
CCD)
Fortune at
Bottom of
the Pyramid
MFI
Contract
Farming
Development
Sector
RRBs-NABARD
Micro Finance Agencies
Technology
Intensity
Mgmt.
Control
Ownership
7
How sustainable is the Structure?
Internal Contradictions b/w
Traditional Firm & Marginal Farmer
Asymmetries b/w the two
8
Asymmetries
Firm
Parameters
Marginal Producer
Large
Scale
Small
Monocrop
Scope
Season based
Multiple cropping
Large
Capital
Small
High
Technology
Low
High
Asset Ownership
Low
High
Control Mechanism
Low
Profit & Growth
Purpose
Sustainable
Livelihood
Basis of Sustainability?
Firm or Family
9
Is there an alternative that is practical
and workable?
PC is a Sustainable Approach
ICBEED – Poor/Marginal Producers
PC developed around agri-business is exploitative to the weak and
hence unsustainable
Huge Asymmetries in structural design & purpose b/w the traditional
Firm & Marginal Farmers logically leads to exploitation
PC as a agri-business model is no different from the Outsourcing
practices of Nike, Bata, Toyota, GM, Ford, and Global IT companies
Before we create another exploitative structure, we need to revisit the
PC to make it work for the weak, the marginal producers
11
Present Structure of Intervention from a Community Perspective
Community Based Approach
(DPIP-MP, MADP-FAO,
Communes-BAIF)
‘Producer
Company’
Knowledge/Awareness
Production
Marketing
Value Addition
Planning & Execution
Managed by Professionals
Marketing- National / Global
Household
Village
SHG / CIG
Block
District
Efficiency?
Economies
of scale?
Capital
Intensity?
Technology Management
Intensity?
Control
Ownership
Control
12
Questions for Research
What are the appropriate
Scale
Scope
Technology
Capital
Management
Ownership
For sustainability of stakeholders in Agriculture & allied industries?
What are the implications to Management Education & Management
Models for such sectors?
Illustrations of Action Research
For demonstrating a Sustainable
Community Enterprise
Nuagada, Orissa
(Personal-XIMB-Govt. of Orissa, Nabard)
Five Sites in India & Bhutan
(FAO & IFAD)
Structure of Intervention from a Sustainable & Stable Community Perspective
Knowledge/ Awareness
Production
Marketing
Value Addition
Planning & Execution
Foundation
Economies
Of scope
Optimal
Scale
Appropriate
Technology
Managed by Professionals employed
by the Producers
Local / Urban Markets
Community Enterprise
Community/ Capacity Based Approach
Individual
Family
Village
Community (GP)
Ecology
of CBPOPME
Minimal Private
Financing
Community
Efficiency
Producer owned & managed
through professional
15
Nature of Intervention
Action Research
Working Capital
Basic Infrastructure
Professional Managers
Social Communication & Organization
16
Different Scenarios of Monthly Income for Producer-Members and
Turnover of PC at Farm Gate Price
Number of Members
in the PC
Monthly income of PC
Member as contribution
of produce (in Rupees)*
Monthly Turnover –
PC (in Rupees)**
1000
500
5,00,000
60,00,000
1000
1000
10,00,000
120,00,000
2000
500
10,00,000
120,00,000
2000
1000
20,00,000
240,00,000
2500
1000
25,00,000
300,00,000
2500
2000
50,00,000
600,00,000
Annual Turnover PC (in Rupees)***
* In addition to getting the value of his/her produce, the Producer-Member would have additional quarterly
income from the profits made by the PC.
** The Government should make a provision of this amount towards the working capital of the Producer
Company
*** Managerial & Administrative expenses can be easily covered with increase in Annual Turnover of the17
PC
Context & Problem of Rural Communities
•
•
•
•
Food Shortage
Livelihood of people living in the margins
Problems of Migration
Sustainability of the economy & community
• Efforts towards Development and Outcomes
• Institutional Issues in Development Approach
• Basic issues - participation, ownership & sustenance of
programs
• Implications of Rural Communities changing to Free
Markets with out the conditions of free market in place
Expenditure of a few Ministries, Government of India
Amount in Rupees crores
Year
Agriculture &
Allied
Rural Development
Panchayati Raj
1987-88
2955
317
1995-96
10867
5645
1999-00
18865
5139
2000-01
22255
4305
2001-02
28294
6189
2002-03
31101
11737
2003-04
32911
12174
2004-05
36366
9478
8.45
2005-06
37622
15660
48.70
2006-07
48376
32642
1999.48
2007-08
45014
37682
3688.16
Source: Report of the CAG on Union Government Accounts 2006-07 & Annual Report, 2007-08, Ministry of Panchayati
Raj, Government of India.
19
Govt. Schemes for a Gram Panchayat (G.P.), Orissa, India
NREGA
Training &
Capacity Building
Infrastructure
Development
SGSY
SGRY
Gram
Panchayat
Rural Business
Hub
Action Research
& Studies
IAY
NFFWP
Backward Region Grant
Fund
Source: Annual Report, 2005 -06 Panchayati Raj Department, Govt. of Orissa and Annual Report, 2007–08,
20
Ministry of Panchayati Raj, Government of India.
Questions for Research
What are the appropriate
Scale
Scope
Technology
Capital
Management
Ownership
For sustainability of stakeholders in Agriculture & allied industries?
What are the implications to Management Education & Management
Models for such sectors?