i
Table of
ContentsPreface3Abstract3Summary3Introduction3Agriculture - what it
means for India3Decreasing contribution of Agriculture in GDP4The
implications the dark side of India4The proposed solution5The
Framework5Literature Review5Agriculture as stimulant of
growth5Emphasis on capital and technology5Shrinking size of farm
decreasing marginal productivity6The converse theory7Analytical
Review - Agriculture Reform in China7Collectivisation in China8The
problems in collectivism9The solution/ the tradeoff9HRS model a
good fit with some gaps11Proposed agri-business model Lifes
Fresh11Coalition with farmers the hypothesis behind percentage
based commission11The Functional Model12The lowest level of
collaboration M&A Centers12The hub Regional Agriculture
Distribution Unit14The bigger picture The business
verticals14Agricultural Development
Division14Operations15Marketing15Business model16Core
Strategy16Strategic Resources17Customer Interfaces17Partnerships
(Value Networks)18Industry analysis18Porters 5 Forces
Model18Summary20Implenation20Background20The Grass Root
Level21recommendations24Epilogue the beginning25PrefaceAbstractIn
the last decade India has emerged with a strong economic growth,
coupled with an ever increasing population and strengthening food
demand, the countrys dependence on its largest economic sector,
agriculture, has now become more prominent than ever. In-spite of
being the major contributor of GDP (around 17%) and major employer
of Indian workforce (nearly 60%) there has been a steady decline in
its GDP contribution. Investment in Indian agriculture and
agri-business has remained sluggish, and growth in farm output has
slowed, since the early 1990s.
Now with policy environment becoming more investor friendly
(since the late 1990s) and demand for domestic agri-products on the
rise the environment seems to be right to reform the countrys
agricultural model. SummaryAlthough rising incomes are contributing
to expanding and diversifying food demand, investment in Indian
agriculture has remained low relative to other sectors and grown
slowly since the early 1990s. Even though India has one of the
worlds largest agricultural economies, Indian agribusiness is
characterized by a multitude of small-scale, nonintegrated
processing and marketing firms that use mostly outdated technology
and are uncompetitive in global markets[footnoteRef:1]. In order to
resolve these issues, this paper analyzes and proposes land
consolidation and reformation. Agriculture, traditionally part of
subsistence based economy would be transformed into agri-business
model; a market based economy[footnoteRef:2] where a consolidated
administrative ownership of public land is combined with private
ownership of capital. [1: Landes, Maurice The environment for
agricultural and agribusiness investment in India.(Economic
information bulletin ; no. 37) ] [2: Ling Zhu, Rural reform and
peasant income in China (institute of Economics, Beijing
China)]
IntroductionAgriculture - what it means for India
Agriculture has been a key sector in most developing countries,
however for India it has traditionally been a source of self
reliance, social stature and economic independence. In todays
world, though India is a prominent member in the list of
industrialized countries, India is still by far and by large still
an agriculture industry. Agriculture accounts for about 21 percent
of economic output (2003/04-2005/06 average; Reserve Bank of India,
2007) and is the primary source of employment and income for about
58 percent the population (Government of India, Ministry of
Statistics and Program Implementation, 2005)1, including a large
share of Indians living below the poverty line.
Decreasing contribution of Agriculture in GDP
With a population of about 1.14 Billion people and a growth rate
of 1.578% India adds every year over 18 million mouths to be fed
and bodies to be clothed from Indian agriculture industry; an
industry whose investment as percentage of total investment in the
rest of economy had lagged since 1980s and output growth has slowed
since 1990s and implementation of reforms have proven
difficult[footnoteRef:3]. While the contribution of both the
services and industries sector in Indias GDP is steadily increasing
(Figure 1) there has been steady decline in the growth rate of
agricultural sector in India and in the percentage contribution by
agricultural industry in the Total GDP. Agricultural industry
contributed around 26.3% in 1999-00 which went down to 22.5 in
2002-03 and plummeted further to 18.3 and 17.4% in 2005-06 and in
2006-07. [3: Growth rates between 3-year averages centered on years
indicated. Sources: Government of India, Ministry of Program
Planning and Implementation, Central Statistical Organization;
Government of India, Ministry of Finance, Economic Survey]
The implications the dark side of India
While conclusively, there has been a lack of growth of
agri-sector of India the country is simultaneously adding more
demands and more work hands due to its constantly ramping
population. The relationship dynamics between the demand and supply
coupled with inability to tap on available resources like manpower
and advanced agricultural related technology has constantly widened
the gap between the potential of agriculture industry and its
actual contribution.
The decreased agricultural productivity coupled with the
increase in demand (due to increase in population) has also set the
vicious chain of rising inflation which further decreases the
affordability of food products by Indias poor class. This dark fact
has now places India as the country with highest rate of
malnutrition among children under the age of three (46% in year
2007) than any other country in the world.[footnoteRef:4] [4:
"Inclusive Growth and Service delivery: Building on Indias
Success"" Development Policy Review.World Bank. 2006. ]
The presence of stark poverty is borne out by the fact that 1/4
of the nation's population earns less than the government-specified
poverty threshold of $0.40/day. Official figures estimate that
27.5%[footnoteRef:5] of Indians lived below the national poverty
line in 2004-2005. The poverty and lack of employment has led to
the social-economic downfall of the society which inadvertently
shakes the foundation of socio-cultural framework in which a
society must operate. This in turn is largely due to the political,
administrative and bureaucratic dishonesty and corruption which is
so prevalent in Indian society that it is no longer considered as
an evil but a norm. [5: Planning commission of India. Poverty
estimates for 2004-2005]
The proposed solution
Hence, in order to resolve these socio-economic issues there is
a need to develop a sophisticated operational model on the backdrop
of current socio-cultural challenges which would not only
contribute towards overall productivity of agriculture but would go
beyond in improving lives of rural India while increasing
affordability of yields, feeding more Indians and generating more
profits.
The Framework
With the given constraints and challenges related to the current
agri-business environment of India, I would first try to devise a
theoretical foundation of the socio-economic growth model of
agricultural industry. The model would be driven by selected
determinants of growth, determined by doing comparative analytical
review of different agri-business models adopted in history. The
proposed model would be defined so as to optimally leverage current
resources through land reformation while aiding it with the
technological and infrastructure support. An attempt would also be
made to back up the theoretical model by an behavioral model
focusing on its structural and operational
characteristics.Literature ReviewAgriculture as stimulant of growth
The current parallelism drawn between the rapidly evolving foreign
exports of IT and the agricultural sector of India as to which is
more important in long term, can actually find its root in early
theoretical literature dated as far back as eighteenth century in
the writings of the Physiocrats of France. At the time when foreign
trade and commerce was/were considered to be the key ingredients of
economic growth, the theory proposed that only agriculture produced
an economic surplus or net product over costs of production, other
non agricultural sectors (which in todays age would comprise of
various service and other non agricultural related industries in
India). These non agricultural sectors were considered sterile in
the sense they did not produce any economic surplus. This also
points that the growth of non-agricultural sectors was limited by
the growth of agriculture sector, which in it turn flourished most
in a system of free competition.[footnoteRef:6] [6: Mercantilist
and Physiocratic Growth Theory By Joseph J. Spengler and Theories
of Economic Growth,by Bert F. Hoselitz 1960]
Emphasis on capital and technology
Francois Quesney who was the leader and key figure in
Physiocratic school made an important remark by stating that the
size of economic surplus was determined primarily by the technique
of farming or the capital industry of agriculture. Further in his
two encyclopedia articles entitled Fermiers (1756) and Grains
(1757), Quesney distinguished between three techniques of
production: the cultivation of land with manual labor only, the
cultivation with ox drawn ploughs (la petite culture) and the
cultivation with horse-drawn ploughs (la grande culture).
The three techniques of productions dont necessarily map to the
actual means of agriculture production but can be considered as
level of sophistication in agriculture industry with horse-drawn
ploughs to be highly capital intensive and technologically advanced
and manual labor intensive industry to be most rudimentary.
The underline emphasis was on the importance of agriculture
technique of production. With no agricultural capital, grain (high
profit yielding crops) farming became difficult and the poor farmer
who only relies on his labor on the small piece of land produce
yields of little value such as potatoes, buckwheat and primarily
became a subsistence based farmer. In this context it is remarkable
to know that the majority of farmers in India fall in this
category. While the number of farms in India increased from 48
million in 1960 to 105 million in 1990, the average farm size
shrank from 2.7 hectares to less than 1.6 hectares, a reduction of
some 42 percent. The continuously shrinking size of farms and
capital deprived farming if continued is expected to lead to
shrinking returns on marginal addition of manual labor. It is
assumed that by 2020, the land will pass to another generation and
another round of fragmentation will occur, shrinking farm size even
more.
As can be seen from Table 1, though the number of landless
households remained constant at about 14 million in last five
decades, the share of rural households that was landless declined
significantly over time from 23% in mid 1950 to 11% in mid 90s. On
the other hand the number of landed households (owning greater than
0.01 acres) increased dramatically (from 48.8 million in 1953-54 to
103.3 million in 1993-94). Shrinking size of farm decreasing
marginal productivityThis clearly illustrates that number of
households who currently have small amount of land has rapidly
increased and out of the landed households majority owns 5 acres or
less with majority (around 60%) holding less than 1 acre of land.
This decline in the large size of farms indicates that the majority
of growth in number of small farms can be attributed to
sub-division of large farms typically happens when the land is
passed on from one generation to another. This continuous rise in
the size of small farms if left unchecked would only augment the
subsistence based farming with decreasing value of returns.
The shrinking size of the farm would continue to decrease the
marginal benefit derived from per unit area of land, this would
push farmers more into subsistence based farming, shrinking the
capital investment even further and threatening the ability of
those living on the land to earn a livelihood. On the contrary
agriculture production tends to increase rapidly with the
introduction of capital.
Hypothetically assuming that in this subsistence based farming
more capital is induced (transforming it from labor alone
cultivation to ox-drawn plough in Quesneys model) then with little
capital per acre ox-drawn plough technique, agriculture would begin
to yield a surplus; this is measured to be between 30-40 percent
with return on total capital of about 12 percent. Quesney
highlighted that with more induction of capital in the agriculture
eco-system, a switch from the ox drawn plough technique to a more
capital intensive horse drawn plough technique, return on
investment could rise dramatically to 100 percent.
The converse theory
After emphasizing on the need of land consolidation to yield
higher returns I would like to portray an often debatable but well
recognized theory illustrating the inverse relation between Farm
size and productivity. We would review this theory on different
scales of capital inputs. one of the stated reasoning for this
inverse relation is that by using family labor small farms face
lower transaction costs then larger farms[footnoteRef:7].
Consequently, if total labor and land acts as variable to derive
the yield per hectare (as shown in Eq 1) then [7: Raghbendra et
al., 2000, Berry and Cline 1979 , Bhalla 1979]
[Total Labor/ Total Land] Higher yield per hectare, for the
small farm sizes.
It is important to know that the relationship diminishes or is
even reversed as agriculture becomes more capital intensive. One
clear example of this is the green revolution in India (between
1967-1978) when the large scale expansion of farming area was
coupled with information (in term of double cropping of existing
land) and scientific resources (seeds with improved genetics).
Here, both information and scientific resources can be considered
as a direct by-product of capital investment. The green revolution
established India as one of the world's biggest agricultural
producers and yield per unit of farmland improved by more than 30
per cent between 1947[footnoteRef:8] (when India gained political
independence) and 1979 when the Green Revolution was considered to
have delivered its goods. [8: "Library of Congress Country
Studies".U.S. Library of Congres]
This proves that high areas land cultivation approach when
adequately aided by capital and technology can yield significantly
higher returns. Analytical Review - Agriculture Reform in China
In order to better understand the framework co-relating total
area of farm size with productivity and to see the practical
implications of such reforms we will take a deeper dive in the
agricultural reforms in China which started in 1949. This would be
an attempt to devise an optimized model with highest probability of
success in an environment quite close to India.
China quite like India had a large population coupled with large
amount of land area. After communists came to power in 1949, the
war tom agrarian economy was again re-instated on the path of
growth, as significant higher production was recorded during the
period of rehabilitation (1949-1952). The policies introduced
during this time included land reform and stabilization of domestic
prices.
Heavy industries was sought as the ultimate realm by Chinese
government during this time and was considered as the mechanism of
rapidly transforming economy into developed economy. In order to
provide a contusive environment to the industrialization by
implementing and stabilizing agricultural prices the government
introduced the first large scale Unified agricultural Purchasing
and Marketing system (UPMS). In this model the government nearly
abolished the free markets and monopolized the purchase and
marketing of agricultural products.
But, since household were the basic units of agricultural
production, their objective was to maximize total income not to
fulfill state plans. Theoretically, in absence of free markets the
farmer could also choose to consume more leisure specially if the
prices were too low. The strategy definitely posed the challenge of
sincere efficiency and performance evaluation. The government
however went ahead with collectivisation.
Collectivisation in China
Collectivisation in China went through four stages mutual aid
team, elementary and advanced production co-operatives and
communes. The most popular form mutual-aid team comprised of four
or five neighboring households pooling their labor, farm tools and
draught animals on a temporary or a permanent basis. This overcame
the disadvantages of the small scale farming and provided
significant labor productivity gains. It was reported that per
capita income in terms of grain was 10-30 percent higher for
members of mutual aid teams.[footnoteRef:9] It was aided with Rural
Supply and Marketing Co-operatives (RSMCs) and Rural Credit
Co-operatives(RCCs). [9: Forty years of Chinas countryside, Guo,
Shutian, Beijin: Central China Farmers press]
The rapid growth of these mutual aid team in 1953-54 transformed
into elementary co-operatives by 1955. In these, while retaining
private ownership, peasants pooled their land for common use and
management. Animals and large farm implements remained under
private ownership but were used jointly by co-operative members.
Income from the co-operative was then distributed according to work
and investment in form of land, animals and farm implements. In
1956-57 advanced co-operative began to predominate as a form of
collectivization. In an advanced co-operative land, animals and
farm implements became publicly owned and compensation was paid to
farmers. By 1958 these agricultural co-operative became
communes.
Communes the consolidationA commune was organized with three
levels: commune, brigade and production team. The production team
consisted of about thirty households and served as the smallest
level of entity in terms of production and management. Land and
other production means were pooled and all production activities
were determined by the team leader and carried out by collective
labor[footnoteRef:10] on daily basis. In terms of compensation some
necessities such as grain and crop residues, were allocated on a
per capita basis regardless of working effort throughout the year.
The rest of income was distributed according to an individuals
accumulation of working points and the value for each working
point. Working points were calculated on the basis of skill and
effort. It is important to underline that the objective of such
collectivization was to modernize backward, small scale individual
agricultural units. Development and management of plans became much
easier when farm households were organized into production teams
and communes. [10: Agricultural reform in China- getting
institutions right. Yiping Huang; Cambridge University Press
1998]
The problems in collectivismInspite of the strong fundamental
objective and strategy the model lacked the self perpetuating
competitive evolution and faced serious problems (Chinn 1980;
Perkins and Yusuf 1984; Putterman 1987,1990; Lin 1988). A major
problem with the commune system, according to Lin (1988) and others
(Such as Putterman 1987), lay in the tradeoff between the benefit
of scale economies and the costs of monitoring. The benefits from
collectivization in other sectors such as industry are usually
large because monitoring can be carried out relatively easily and
cheaply. Each members income can be measured accurately and a fair
distribution of income is possible[footnoteRef:11]10. [11: ]
Another problem faced by agriculture industries is that its
sites are often scattered and the results of efforts by individuals
cannot be made accurately which leads to a difficult and
inefficient compensation system. Such a system acts as destructive
reasoning leading to universal laziness [the word was coined by
Chinn (1980)] in absence of cost intensive heavy monitoring.
The solution/ the tradeoff
Clearly collectivization in its most natural form, as adopted by
China, poses its own set of challenges which can adversely impact
the overall productivity in term of decreased motivation. But, at
the same time unique benefits offered by collectivization in terms
of capital and technological aid at an affordable cost are hard to
ignore.
In order to strike a perfect balance between collectivization
and individualistic approach towards agriculture a hybrid theory
seems to be the best fit. Under this new system, Household
Responsibility System (HRS), the responsibility for production
systems was delegated back to farmers in an attempt to resolve
various managerial problems including monitoring individuals work
and awarding fair compensation. Under this new system called
Contracting of production down to the household the cooperative
divides its total land area into plots and assigned the plots to
households. Though the farm work was still carried out by
collective labor the household would monitor the quality of work
done. The household would also work on the plot and the output of
the plot was directly related to the responsible households income
at the end of the year.
This originated the concept of output responsibility
system[footnoteRef:12] which put responsibility of monitoring
quality on household basis. With this system everybody on the team
rather then just the team leader had responsibility for monitoring
quality of work and achieving yield improvement. At a macro level
the two modes of collectivization (Commnune system and HRS) can be
depicted as below:: [12: Agricultural reform in China- getting
institutions right. Yiping Huang; Cambridge University Press 1998
Chapter 3: Getting farmers back to work]
The core difference between the two models relate to incentives.
On the one hand Commune system faces low incentives because of
egalitarian component of production system, ensuring team member
are awarded certain necessities even if they dont work. The HRS
system enforces deep commitment from individual households because
the total income at the end of year was directly tied to the
individual output of the respective farm. This made the HRS system
inherently more sincere where the large scale complex monitoring of
work (as seen in commune system) is promptly replaced by more
diligent self initiated monitoring by respective households.
HRS model a good fit with some gaps
Considering the socio-economic environment of India the HRS
model now seemingly evolves as a close match to theoretical
platform of agricultural reformation in India. Juxtaposing this
model in India along with capital inducement would enable farmers
to leverage economies of scale. The model while helping small
farmers (around 60% of farmers own less than 1 acre of land) get
additional work, from owners of bigger farm lands, would also help
them use technology and information previously not affordable to
them.
However, due to socio neo-classical differences originating from
the caste system and absence of strict diligent governing body some
of the distribution variables including land distribution and
collective labor would have to be modified before they can be
applied in India context. In the next section we would dive deep
into the proposed model in the context of India while illustrating
the changes at theoretical and structural level of the
operations.Proposed agri-business model Lifes FreshThough HRS model
offers advantages like mutually dependent relation between
household and workers which results in increase throughput and
lower monitoring costs the model can not be applied as-is in India
context. Firstly, since the Indian government is a Democratic
government theortically to create and distribute a pool of land
would be impossible. Secondly, due to various layers of financial
and cultural segregations (in terms of caste, community and
religion) the pool of collective labor even if crated wouldnt be
utilized optimally. The elite caste people would be apprehensive in
working for people from different financial, societal background or
vice versa. Therefore, the land instead of being a collective
resource would remain as independently (household) owned asset.
However, these land owners would have a choice of creating a
coalition partnership with LF where LF would provide various
strategic resources (Explained below) to these owners in return of
the percentage commission of the total aggregate sales from that
unit area.
Coalition with farmers the hypothesis behind percentage based
commissionIn order to convince farmers that the coalition is
beneficial to farmers the commission calculation process would be a
three tiered process. Each Tier would be mapped to the percentage
of the on-average yield from that area of land (negotiated between
LF and the land owner).
For eg. considering for farmer F A = Total area of land owned by
F
R = Total revenue/ Year where, R C [Rmin., Rmax] Here Rmin. and
Rmax corresponds to the minimum and maximum Revenue generated as a
result of most unfavorable and most favorable conditions. This
revenue could have been generated through any combination of crops
and seasons but the baseline denomination of Tiered contract would
remain the Total Revenue R.
This range of R would be mapped to Potential Revenue(P)
calculated by LF strategic and operational analysts considering the
current state of farmer and the contribution which can be made by
LF by offering its distinctive competitive advantage as strategic
resources to F. Once the margin of improvement [Pavg.-Ravg.] has
been identified the distribution of commission would be established
For eg. if L is the revenue generated from the same unit of land of
Farmer F after coalition with LF, then (figures below are just a
sample and in practice would be derived as a f( P-R) a.) If L <
R, all the sales would go to farmer and LF would give R-L amount
back to farmer to ensure the coalition would in any case be not a
loss yielding move for farmer. b.) If L = R, all the sales would go
to farmer. c.) If L > R, theni. For L>R and L 1.2 R and L 1.5
R and L< 1.8R, farmer would get 20% as commission and the
remaining 80% would go to LF.iv. For anything above L> 1.8 R,
farmer would get 5% as commission and the remaining 95% would go to
LF.
The revenue distribution function is designed to award LF in
progressively increasing manner as L increase more and more. This
is logical because
DIFFERENCE(L-R) Contribution of LF To illustrate for a farmer
who was able to produce R(=100), if after going into coalition if
he is able to produce 110 then the probability of the cause of this
increase as higher contribution by farmer or as added value offered
by LF can be 50-50. However, as the revenue after coalition keeps
increasing more and more, the marginal contribution of the farmer
would keep decreasing while the marginal contribution of LF
strategic resources would increase more and more and hence the
distribution of commission is as indicated above.The Functional
Model
The lowest level of collaboration M&A Centers
In order to penetrate deep in the rural pockets and to work
closely with farmers in an optimized manner LF would establish an
onsite M&A (Management and Assistance) center. These M&A
centers would be the lowest level at which LF would integrate and
collaborate with farmers. M&A centers would be responsible to
provide services including,1. Agricultural knowledge: This would
include advice and knowledge regarding type of seeds to use in the
specific environment; The fertilizers to use specific to the type
of crop and soil. 2. Equipments: Efficient and optimized allocation
of heavy machineries on a temporary basis for farming,
irrigation.3. Supervision and assistance on best agriculture
practices.4. These M&A would also act as the intermediaries in
LF supply chain model.
Figure 1: LF Organization design and Functional overview
The hub Regional Agriculture Distribution Unit
In order to provide scale and scope flexibility to LF(s)
operating model from the production and distribution stand-point,
every geographical zone would be distributed amongst Regional
Agriculture Distribution (RADs) Unit. One RAD would be tied to many
M&A. Mapping between RAD and M&A (1:n) would be driven by
the physical conditions associated with specific M&A(s) for eg.
n number of M&A within a geographical unit offering similar
agriculture environments (soil, weather, water table etc) would be
mapped to one RAD. However, different M&A(s), may be within
close geographical proximity, if differ significantly in term of
climate, soil etc. would be mapped to different RAD(s). Hence, an
RAD would be symbolic to geographical and environmental uniqueness
amongst many M&A(s).
Every RAD would have its team of agricultural engineers expert
in analyzing and formulating strategies to yield maximum throughput
for the given environment. Every RAD would have its team of
statistical engineers who would work with agricultural engineers
and operational analysts to devise Progressive Distribution based
Commission System (PDCS). Depending on the PDCS formulated for
every region the coalition terms and conditions would be negotiated
with farmers. Every RAD would have a team of marketing associates
responsible to outreach to farmers and to encourage them to
establish a coalition with LF.
It is remarkable to know that in the preliminary stages when
only few farmers are part of coalition network, RAD would work
directly with farmers to optimize costs. However, as more and more
farmers joins the coalition network RAD would establish on-site
M&A centers. Also, RAD(s) would have certain degree of autonomy
and would be responsible for creating its long terms plans and
implementation strategies to maximize its yield and return on
Investment. RAD(s) would also be involved in creating
collaborations with other government and nongovernmental
stakeholders and NGO(s) to establish value partnerships and create
goodwill relations on political and societal front. This is
remarkably important in a country like India where it is very
important to establish grass-root level goodwill relations by
reflecting genuine commitment towards society as a whole.
The bigger picture The business verticalsAgricultural
Development Division
In bigger picture these RAD(s) are a part of Business Unit
vertical called Agricultural Development. The units primary
responsibility is to spear head the coalition efforts of LF and
farmers. The unit would also facilitate the Research &
Developments for the latest advancements in the field of
agriculture. Being central to LF operational model this R&D
would act as the core competency of LF acting as strategic asset
and providing competitive advantage over its counter parts. The
R&D would work directly with vendors of Heavy industries, to
collaborate and develop machineries and equipments specific to the
respective environment. The specific customizations which earlier
was unaffordable for farmers and un feasible for vendors would now
be made available to farmers through LF coalitions.
The other division of this unit would be Equipments units which
would be responsible for buying, procurement and allocation of
equipments including but not limited to the fields of sowing,
cultivation, harvesting and irrigation. While the two units R&D
and Equipments would work at the central HQ(s) the RAD(s) would be
established for each Regional Unit. The collaboration of these
RAD(s) deeply with M&A units and farmers would be the key to
develop successful partnerships which eventually would be the key
to Prod2Sale lifecycle.
Operations
A key component in achieving cost efficiency is attributed to
efficient Supply Chain model. Specially in the area of agriculture
produce it is estimated that more then 25% of produce is lost on an
average due to slippage on account of unavailable markets/
distribution channels. The problem is aggravated during favorable
weather conditions when the excess produce is either sold at a
minimal price because of limited demand and excess supply or is
lost forever due to the limited local outreach of these .
The problem around logistics remains more pertinent in
Developing countries like India where absence of good roads and
connectivity still creates a big gap between urban and rural
communities. In order to circumvent the issue and LF would
establish its own partnership network in areas where current
logistics can be leveraged by stream-lining the process. In areas
where minimal infrastructure logistical exist LF would strive to
establish its own supply chain system (if financially viable) in
terms of its regional distribution centers.
The supply chain system would be highly advanced and would be
designed to project the supply demand forecast and would
accordingly distribute resources to efficiently meet the
demands.
Marketing
Marketing would act as the third vertical of LF. It has been
estimated that by facilitating the exposure of right markets the
agriculture yield can generate revenues in excess of 150%. This is
primarily on account of traditionally observed sudden spike of
demand (due to less than expected yield accounted by severe weather
conditions) or sudden spike of supply (due to extremely conducive
weather conditions) either of these conditions create a mismatch
between demand and supply and hence creates an opportunity to be
exploited by distributing yields across regions to bridge the gap
between excessive supply and excessive demand.
Since the agri-trade depends on host of external and internal
variables including Political (subsidies, tax regulations etc),
social, legal, economical(Forex rates) in order to identify
potential buyers and to forecast demand marketing team would
comprise of a team of economical and political analysts from
various fields who would be responsible for selling the yield in a
world market in most optimal manner, aimed to maximize revenue on
the current yield.Business modelIn order to theoretically reinforce
the operational model of LF explainer above, the following section
would illustrate the Business model of LF. The business model would
be explained in terms of i.) Core Strategy ii.) Strategic
Resources, iii.) Customer Interfaces and iv.) Value Networks.
Figure: Business ModelCore StrategyVision: To be a leading
global producer and supplier of agricultural products by
establishing mutually value added relationships with our partners
with farmers, distributors and retailers.
Mission: To provide key values to our partners to farmers by
helping them maximize production at minimum cost, to customers by
delivering highest quality product - by leveraging technology,
capital and knowledge together.
Scope : For Farmers - Focused narrow approach, primarily
targeted towards small farmers (sub-marginal farmers owning