From Traditional Firm and Producer Company to Sustainable Community Enterprise

1. From Traditional Firm and Producer Company to Sustainable Community Enterprise IAJBS 15th World ForumXLRI, Jamshedpur June 8, 2009 Amar KJR Nayak, Ph.D. Associate Professor, Strategic Management Xavier Institute of Management, Bhubaneswar, India amar@ximb.ac.in

2. FIRM?

3. Profit Growth The theory of Growth of Firm Resource Base Technology driven D.C.

4. Basis of Firm Growth Economies of Scale Capital Intensive Technology Intensive Ownership Management Control Firm Efficiency “Competitive Advantage”/Strategy”

5. Inclusive Capitalism Welfare State Mechanism Firm Marginal Producer Government Market Mechanism Firm Marginal Producer 5

6. Inclusive Capitalism & Firm Strategy Strategic CSR Private Micro Financing Contract Farming Fortune at the bottom of the pyramid Producer Company Agri-Business Model 6

7. Structure of Intervention from a Traditional Firm Perspective Firm / Market Based Approach Rural Sector Fortune at Bottom of the Pyramid Development Sector Intervention Examples FIRM (Driven by Profit & Growth) SHG CIG Knowledge/ Awareness Govt/NGO/ Radio Programme Production Capacity Agricultural Inputs Agri Technology (Dept of Agriculture) PC, (Fab India, CCD) Value Addition Processing/ Cold storage (Dept. of Horticulture) Marketing TRIFED/Market info (Swami Nathan Foundation)/ E-Coupal MFI Contract Farming Finance RRBs-NABARD Micro Finance Agencies F. Efficiency Economies Of scale Capital Intensity Technology Intensity Mgmt. Control Ownership

8. How sustainable is the Structure? Internal Contradictions b/w Traditional Firm & Marginal Farmer Asymmetries b/w the two

9. 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

10. Is there an alternative that is practical and workable?

11. 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

12. Present Structure of Intervention from a Community Perspective Community Based Approach Household Village SHG / CIG Block District Knowledge/Awareness Managed by Professionals ‘Producer Company’ (DPIP-MP, MADP-FAO, Communes-BAIF) Production Marketing- National / Global Marketing Value Addition Planning & Execution Efficiency? Economies of scale? Capital Intensity? Technology Intensity? Management Control Ownership Control 12

13. 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?

14. 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)

15. Structure of Intervention from a Sustainable & Stable Community Perspective Community/ Capacity Based Approach Individual Family Village Community (GP) Ecology Knowledge/ Awareness Managed by Professionals employed by the Producers Production Community Enterprise Local / Urban Markets Marketing Value Addition Planning & Execution Foundation of CBPOPME Economies Of scope Optimal Scale Appropriate Technology Minimal Private Financing Community Efficiency Producer owned & managed through professional 15

16. Nature of Intervention Action Research Working Capital Basic Infrastructure Professional Managers Social Communication & Organization

17. Different Scenarios of Monthly Income for Producer-Members and Turnover of PC at Farm Gate Price * 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 the PC

18. 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

19. Expenditure of a few Ministries, Government of India Amount in Rupees crores Source: Report of the CAG on Union Government Accounts 2006-07 & Annual Report, 2007-08, Ministry of Panchayati Raj, Government of India. 19

20. Govt. Schemes for a Gram Panchayat (G.P.), Orissa, India NREGA Training & Capacity Building Infrastructure Development Gram Panchayat SGSY SGRY 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, Ministry of Panchayati Raj, Government of India. 20

21. 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?