Transcript Presentation - HÉTFA Research Institute

DEVELOPMENT OF AGRICULTURAL ENTERPRISES
IN THE KNOWLEDGE-BASED ECONOMY
CHALLENGES OF AGRICULTURAL ENTERPRISES
IN THE CZECH REPUBLIC
Hana Urbancová
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Introduction
• Agriculture is the traditional sector of the
national economy.
• The competitiveness of agriculture is given by
both technical and technological levels of the
processing industry.
• Agriculture is influenced by internal and
external factors.
Internal and external factors
Internal
External
• Factors determining a
technical and economic level
of agriculture
• Level and development of
national economy
• Market structure of the
agricultural and food sector
– Human resources issues
– Risk management issues
• Technical side of the
production quality
• Adaptability to market
conditions
– Competitiveness
– Increasing sales potential/sales
strategy
• Formation of the economic
environment of agriculture by
instruments of agricultural
policy
– Partnerships and cooperation
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Theoretical background
• Agricultural enterprises in the Czech Republic:
– are increasingly determined by the environment;
– are highly dependent on natural conditions;
– there is time discrepancy between production and the
running of a working process, long production cycle and
demands for big stocks of own production;
– there is seasonal work;
– prices of agricultural producers are characterized by
high fluctuation rates.
→ key factor in the economic backwardness of the Czech
Republic is low productivity.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Theoretical background
• Agriculture in the Czech Republic is characterized
by:
– over 48,000 subjects;
– enterprises of natural persons account for 91.7% and manage
30.4% acreage of utilized agricultural land;
– enterprises of legal entities are represented by 8.3% business
entities which manage 69.6% utilized agricultural land;
– in 2013, the agricultural sector recorded a slight increase in the
value of the total agricultural production (2.3%) and the growth
was mainly influenced by a higher value of livestock products.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Profitability
• Main factors influencing profitability:
– gross value added (GVA) is a primary indicator of an
economic result which expresses the value of total
agricultural production after the deduction of production
consumption and taxes;
– in 2012 the gross value added grew to 17,993 CZK per ha,
i.e. by 5.7%;
– EVA growth was recorded for both legal entities businesses
(2.7%) and physical entities businesses (12.5%).
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Profitability
• Planning and forecasting profitability:
– Baun (2009) points at the fact that the situation of Czech
farmers is often worse due to administrative measures of
the government which are more strict and demanding
than EU requirements;
– according to Tomšík (2010), another problem of the Czech
agriculture after the CZ accession to EU is the lack of
capital;
– based on the FADN results it can be said that in 2001-2011
agricultural businesses of legal entities exhibited positive
economic results with the help of subsidies.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
New reform of the Common Agricultural Policy for the
period 2014 - 2020
1. Transfer of CAP measures towards a growing
productivity and competitiveness of agricultural
sector through:
– Verification of an advisory system function and creating the
network of farmers, advisors, researchers, food producers,
customers for creating knowledge and favourable approaches to
secure the financing of rural development - Human resource
issues.
– Encouragement of joint events for economic competition
among farmers to support an efficient use of resources, product
development and marketing - Competitiveness.
– Providing stimuli for the use of risk management tools and
active prevention strategies - Risk management.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
New reform of the Common Agricultural Policy for the
period 2014 - 2020
2. Improvement of CAP impact on climate change and
environment through:
– Increase in a number of agricultural areas where performed
farming brings benefits for environment and climate and
encouragement of an interest in advanced environmental
measures - Partnerships and cooperation.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
New reform of the Common Agricultural Policy for the
period 2014 - 2020
3. Improvement of the efficiency and effectiveness of
the policy through:
– Support of compensation in the form of direct payments in
order to reflect income support and performance in
relation to the environment - Increasing sales
potential/sales strategy.
– Decrease in disparity in direct payments between
member-states and farmers - Increasing sales
potential/sales strategy.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Current situation
• Agriculture in the Czech Republic is characterized by:
– the total number of employees in agriculture in the
period 2000 - 2013 decreased by nearly 30%;
– the number of workers over 55 years of age increased
nearly by 50%, while the supply of new labour forces in
agriculture is declining in the long run;
– the educational structure of sector workers has been
improving;
→ the above-mentioned reasons have a consequent impact on
the process of building the brand of an employer, attracting new
school graduates, keeping present employees and managers in
corporations etc.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Aim of the study
• to identify managerial problems of
agricultural enterprises in the Czech Republic;
• to assess the managerial challenges in the
future;
• to recommend the ways of development of
agricultural enterprises in the knowledgebased economy.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Methodology of the study
• Economic size of agricultural
enterprises:
• Small businesses have
production up to 632 thousand
CZK per year
• Medium businesses have
production 632 thousand CZK –
12, 647 thousand CZK per year
• Large businesses have
production 12, 647 thousand
CZK per year and more
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Methodology of the study
• Number of employees:
• Small businesses: up to 20
employees
• Medium businesses: 21 249 employees
• Large businesses: 250 and
more employees
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Methodology of the study
• theoretical part on the basis of the analysis of secondary
sources;
• primary data from qualitative survey in the Czech Republic,
• the sample group of 9 managers from agricultural enterprises:
– Based on the number of employees: 4 small businesses, 5 medium
businesses, 0 large businesses were involved.
– Based on the economic size: 5 small businesses, 3 medium businesses,
and 1 large business were involved.
– According to focus: 5 businesses dealing in plant and animal
production, 1 business dealing in animal production only and 2
businesses dealing in plant production only, 1 business dealing in
forestry and farming were involved.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Results of the study
• Increasing sales potential/sales strategy
– with the changing market people have begun to take
more interest in what they consume;
– the price is still significantly important for them;
– farmers perceive these changes as rather negative;
– there is a strong local competition in prices only,
which are sometimes forced to drop almost in a
nonsensical way;
– a more specific field is forestry where market
conditions are more balanced and stable as opposed
to farm and plant production.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Results of the study
• Increasing sales potential/sales strategy
– small businesses usually do not have a defined
sales strategy, while large enterprises do, however
it is based on a clear goal which is a profit (to sell
at the highest price).
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Results of the study
• Competitiveness
– small enterprises to a large extent do not use
consultancy because of high costs;
– they rather use official information from available
resources while large enterprises prefer
consultancy in preparation for grant applications.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Results of the study
• Partnerships and cooperation
– local/regional partnerships and cooperation between farm
businesses influence one another;
– the addressed regard regional relations as crucial because
the added value remains in the region;
– what is more, the business can build a strong regional
position and later can expand outside the region;
– according to farmers, farming in European conditions
could not exist without subsidies;
– the addressed farmers receive subsidies from the state
fund regularly and try to apply for EU funds; however, their
applications are not always successful.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Results of the study
• Human resource issues
– the most important requirements in agriculture are
responsibility, diligence, willingness to work at weekends,
punctuality and compliance with rules;
– as regards knowledge, it is the common knowledge of
agriculture (knowledge of a production function in agriculture,
non-production function and environmental function which the
employees should gain at secondary school, or college or school
of higher education) which is important; everything else can be
taught and learned through knowledge sharing among
generations of employees, colleagues and so on;
– independent thinking is also important – workers on lower
positions must report their decisions, while workers on higher
positions are expected to make decisions independently.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Results of the study
• Human resource issues
– references are the most important for managerial
positions in agricultural businesses;
– the best is to select candidates for managerial positions
among people who have already demonstrated their
quality on comparable work posts;
– for a managerial position it is necessary to have education
not only in agriculture (common knowledge in agriculture
functions) but also of an economic character;
– agricultural specialisations at Czech schools therefore also
develop knowledge and skills in business economy,
accounting and business management.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Results of the study
• Risk management
– the most frequent risks which farmers face are unexpected
events (diseases and disorders) weather, EU financing, the
market and purchase prices; these factors can be classified into
2 key areas as follows:
• Natural calamity situations.
• Large price fluctuations of key products, poor payment discipline of
customers.
– natural risks can be insured, although the weather unfortunately
cannot be influenced;
– with respect to high price fluctuations of key products, poor
payment discipline of consumers can be prepared for by a
proactive risk management, which is both time and financially
demanding, or by a systematic proactive approach.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Main managerial challenges
• Modernization of equipment, efficient process
adjustment.
• Building a good brand of the company and
employer.
• Personal development of staff (teaching
managers to decide independently and be
responsible for the consequences resulting
from their decisions).
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Recommendations:
• Competitiveness
– Support applications for state and European subsidies.
– Despite unsuccessful application, learn from negative
experience and keep applying.
– Cooperate in applying with universities and official
institutions so that the application is competitive among
other applicants in the Czech Republic or European Union.
– Partnerships and cooperation
– Cooperation with schools, see the recommendation above.
– Cooperation and creation of joint ventures (fusions,
acquisitions), which would help determine stronger
monitory policies, support brands and increase sales.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Recommendations:
• Human Resource issue
• Cooperation with schools, see the recommendation above, and
specialising in the development of identified key competencies.
• Put emphasis on the development of professional knowledge in
agriculture, creating accredited fields of study with respect to
practical requirements.
• Risk management
• Identify risks in every enterprise and realize the level of risk in the
given enterprise and thus implement reactive or proactive
approach.
• Decide on a systematic approach to eliminate them (e.g. obtaining
ISO standards etc.).
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Recommendations:
• Increasing sales potential/sales strategy
• Consumers start to take interest in what they consume, but the
price is still very important. => Not to reduce quality for the sake of
the price of products, build good brands of products, promote
products, and increase the use of the Internet and connection with
other agricultural enterprises. The higher the demand for the
quality of agricultural products, the lower the price can be reduced,
which is acceptable for both the farmers (in a given sold amount)
and end customers.
• Determine particular and simple sales strategy at the management
level. => Not even a family-run business can survive without a
strategy. In small businesses which face existence problems even
simple promotion (the Internet, local regional newspapers,
cooperation in regional events etc.) can help.
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
Thank you for your attention.
Contacts:
Ing. Hana Urbancova, Ph.D.
Czech University of Life Sciences Prague
Faculty of Economics and Management
Department of Management
Kamycka 129, 165 21 Prague 6 – Suchdol
Czech Republic
E-mail: [email protected]
STAFF NUMBER REDUCTION IN THE CZECH AND SLOVAK REPUBLIC
References
• CZECH STATISTICAL OFFICE [2014]: Statistical Yearbook of the Czech
Republic 2014, Czech Statistical Office, posted 26 November 2014,
download: https://www.czso.cz/csu/czso/statisticka-rocenka-ceskerepubliky-2014-n-zi0tqklk5k (Downloaded: 02 May 2015)
• MĚRTLOVÁ, L. [2007]: Některé aspekty konkurenceschopnosti
českých zemědělských podniků (Several aspects of competitiveness
of Czech farms). Download:
https://is.muni.cz/th/81438/esf_d/Text_disertacni_prace.pdf
• ZEMĚDĚLSKÝ SVAZ ČESKÉ REPUBLIKY [2014]: Struktura
zaměstnanců zemědělských firem. (Structure of the farm
employees) Download: http://www.zscr.cz/download/files/NEG011_BI-DI_ZEMED_Manual-Struktura-zam.pdf (Downloaded: 05
January 2015)
• ……..