MARKETING MANAGEMENT IN POLISH AGRICULTURAL ENTERPRISES

Witold Wielicki
Department of Economic and Food Sector, University of Agriculture in Poznan, Poland

ABSTRACT

Effective management of the agricultural enterprise is connected with acceptance of the paradigm, that change is a prominent feature of reality. Marketing management of enterprise is indispensable in conditions of conforming to and broadening rules of a market economy. In this study, determinants of marketing management in agriculture were set. Next, these determinants were analysed in 15 agricultural enterprises. It was concluded from the research that known techniques of management which can increase competition of enterprises are not fully applied. Nevertheless, few analyzed enterprises experience the need for a marketing orientation and thus they made real progress in this matter.

Key words: agriculture, food industry, enterprise, marketing management.

INTRODUCTION

Marketing management and management of marketing functions do not have the same meaning. Marketing management is often understood as management with market orientation, client orientation, or pro-market orientation. It applies to the whole company, occurs in each department and in the mentality and behaviour of each staff member. Management of marketing has come down to managing the separate parts of the enterprise concerning promotion, distribution, market research, new product creation, and prices.

This issue – marketing management and management marketing – is considered as a very important thing which influences the success of industrial, trade, and service enterprises. The issue is not appreciated in agriculture [1, 10].

The purpose of this paper is to attempt to estimate the use of marketing management in companies with special attention given to economics and the food sector. Scientific studies of this concept are carried out in various scientific centres in our country and abroad [3], but are applied mainly to enterprises out of economics and the food sector. It is the first circumstance to take this subject approach, and apply it to the governing agriculture body. The second aspect is that, if certain managing operations bring good results apart from agriculture, it follows that they may be successfully implanted into the economics of the food sector. Finally, differences in economic occurrences in agriculture would be documented or rejected in the field of management [9].

Putting forward a hypothesis, the author states that agriculture like other sections of the national economy should adapt to market economy rules. We say agriculture, industry, trade, services, etc., but in fact we mean not only a matter but above all adjusting people who adopt in consequences other fields of company: a matter, organizational structure, law, finance, etc.

KNOWLEDGE AND ACCEPTANCE OF MARKET ECONOMY RULES

After 15 years since the rules of market economy have been enforced in Poland, arise some reflections about achieved results in economics and the food sector. Market economy brings many, even revolutionary, changes into some fields of business. Although, the extent of property privatisation in agriculture, except housing, was the highest of the whole post-war period, because it reached 75%, the rules of market economy preferring private ownership were hardly adopted. Rural population accepts the freedom of economic activity and free market when prices are higher than production costs. But, when the situation gets worse they claim the state should intervene. The freedom of business choice, right to profit, right to accumulation are very well accepted, but that every man runs a business on his own with constant competition and threat is unacceptable. This form of ownership doesn’t guarantee the skill to run a business under market economy conditions. It seems that, in spite of 15 years of market system, many members of rural communities do not realize what free-competition is. They do not know what the free market means, how to obtain the right price, that product quality is an important indicator of sale price, and how to follow deliveries, etc. Even today many agribusiness` members are not aware that the source of their frustration is supply surplus with all of its consequences, of falling price and limited sales. They basically don’t understand the different situation with greater importance on the consumer than like previously on the producer [5]. It is hard to negate changes which take place in rural population awareness, especially of young people. For fifty years city and country persons have been at odds and now the second one is interested in a wealthy city population because it has been recognised that demand for produce depends on the wealthiness of the town. As the years go by, the percentage of people who glorify the previous system and who want its return is decreasing. Nowadays most rural communities accept the approach to setting prices according to current market competition rather than on the basis of average cost plus margin like it was before 1989. The surplus of supply in the food market is connected to decreasing prices. Keeping the minimal level of prices requires state intervention and the use of public financial resources. However, the market demands better quality products and lower production costs as the basis for lower price.

CHANGE IN AGRARIAN STRUCTURES OF FARMS

Some farmers who have enough knowledge of technique, technology, and production economics stated that decreasing of production costs is related to the scale of production. The expansion of production scale is connected with changes in farm size (area), buildings size, and technical equipment adoption. Consequently, we notice modifications in the agrarian structure of farms. Between the years 1996 and 2002, farm area structure polarization in that the number of the smallest (1-5 ha) and the largest farms (>15 ha) increased, but the number of middle-area farms decreased. At the same time the percentage of agricultural land in large-area farms rose to 51.5%; 5.7% higher than in 1996. This index (area) in farms with over 100 ha AL equalled 21.52% in 2002. It was the highest (9.6% of total number of farms) in the group in farms with 200-500 ha. The index amounted to 1.72% in the largest farms (>1000 ha).

Considering that the rural family produces and consumes self-produced products, literally and in practice, the scale of production depends on the range of connections with the market. The study of the last agrarian register follows that production participation of non-commercial farms amounted to 40.90% and commercial farms to 32.20%. Therefore, it follows that 27.10% of farms produced for self-supply. This situation results in a postulate for changing the way that government influences agriculture. Non-commercial farms should be covered by social policy and commercial farms should be included in agrarian policy [12].

The second postulate concerns product quality in agriculture, which is not appreciated and ignored by producers. This issue is very important relating to our presence in the European Union, where quality features have high rank because they are connected not only with price but through influence on processed products and consumers’ health. The food industry tightens quality criterion for raw materials. It seemed that meeting the standards is out of reach of Polish farmers, but practice is more optimistic. Producers who didn’t meet the requirements desisted from production or limited production to their own needs. This is hardly acceptable from the social point of view.

Quality is very significant in the food market, because it belongs to markets with great sensitivity. Minor importance of quality in communities with low incomes and greater concerns with product price leads to non-confirmation in relation to medical, educational, or safety market standards.

Quality requirements relating to export are generally accepted and obeyed, but consumers in the domestic market weren’t appreciated, for example one couldn’t buy meat of young rams but only of old animals. Therefore, opinion about the virtues of this meat is negative. Recently, producers have changed their perception of the domestic market. The European Commission has prolonged meeting the sanitary regulations until the year 2007. It turned out that companies which don’t meet these requirements lose their markets and they are forced into an advanced process of adjustment. This results in lower quality products in default positions on domestic and foreign markets.

Connection between a sale, a price, and a quality still isn’t appreciated at the agrarian production level, hundreds of thousands of small producers produce goods with undefined quality based on their common norms of production. However, large farms which wish to strengthen their market position must pay attention to desired product quality today.

In agricultural like in industrial enterprises, compared to trade-service ones we can observe the domination of activities connected with production and investments over others. Agricultural enterprises pay greater attention to material analyse of production than to financial indexes and activities related to marketing. Dominate in these enterprises are specialists with technical knowledge (e.g. of agronomy, agrarian technique). Few persons have economical background, but they struggle with the need for marketing professionals. Analysing organizational structure of agricultural enterprises, we can conclude that the production department fills the whole structure and it dominates over the other departments, including financial.

Marketing management which is a part of strategic management has to include decisions connected with marketing of human resources. It relates to decisions with long-term influences, because they consider quantity and structure of employment, level of qualifications, salary and bonus systems, and promotion and selection systems.

MARKETING MANAGEMENT RULES

From this research it can be concluded that the extent of a farm’s connection with a market varies from one farm to another. The scale of one family farm is marginal, but every producer has to know the answers to the following questions:

• what and how to produce?
• who will consume the product?
• where, when and for how much to sell products?

The answers to these questions are simple when they refer to self-supply farms. We are interested mainly in producers who have considerable connections with markets (commercial farms that produce 32.2% of all production). Various market analyses techniques, which should enable the highest benefits, are addressed to this group of farms. Further, these farms would be called enterprises. They should apply management instruments, especially marketing management, like it is in industry companies.

Marketing managed firms are organizations with rules of marketing orientation <3>. Taking the above definition into consideration we can try to define conditions that an enterprise should meet so we can say that marketing rules are followed in its management. Marketing management isn’t a bilateral feature, but the intensity of this characteristic varies, so that we can identify enterprises with different degrees of marketing orientation.

Many known specialists have expressed the importance of management. They state that the thinking and actions of managers need to be professional in conditions of intense competition and extensive globalization. Decisions should be based on scientific and practical processes.

A comparison of different approaches to marketing management by pro-marketing managed enterprise attributes is presented in Table 1. Particular authors emphasize different features of marketing management. Based on table 1 and the author’s research features of modern marketing managed enterprises were identified as follows:

1. mission and vision as the long-term programme of action,

2. marketing research as the basis for making decisions,

3. market segmentation and attempts to identify niches as the direction for market action of the enterprise,

4. possession and making use of unique resources as an important element in gaining an advantage over competitors,

5. adopt a paradigm of change as the result of enterprise` adjustment to surroundings,

6. the control system of marketing management as attaching importance to modern managing techniques, and

7. social responsibility of management that takes into account a broad spectrum of enterprise tasks.

MARKETING MANAGEMENT ASSESSMENT

Many scientific centres in Poland deal with the important issue of distinguishing between marketing management and management marketing. Research on domestic enterprises carried out by Mšczyńka [6, 7], Fršckiewicz and Rudawska [3] show that the Polish economy still does not meet the conditional of a developed market economy. A basic condition in applying the principles of marketing orientation is competition and free consumer choice [3]. In Poland there is excessive state interference, thus there are monopoly markets. This situation results because of requests from enterprises for interference in pricing, purchases, and the quota system.

The marketing management issue was often the subject of research in economic scientific centres of universities as can be distinguished from the literature review. Research included different groups of enterprises, but they were not connected with agriculture. Even though our studies are based on limited samples, we consider the presentation of our findings as justifiable because agricultural enterprises were the subject of little past research [11].

Insight into marketing managed modern enterprises can be done through review of the management rules in APA companies (APA – Agricultural Property Agency) dealing with breeding, animal husbandry and agricultural production. In this way we could identify to what extent theoretical or practical rules of functioning industrial, trade, and service enterprises are known and applied in agricultural enterprises.

It is not so easy to create the organizational structure of a company that has conformed to marketing management. The difficulty occurs because the practices of management are not always the same as the theoretical conceptions of the marketing management discipline. They include many elements of management following from one method to the next. But only few of them are tools consciously applied in management practice.

On the basis of this author’s research with 15 agricultural enterprises which were strongly connected with the market and which knew the issues of management marketing and marketing management were separate parts of the enterprise, we provide some generalizations. Empirical observations showed that among the 15 agricultural enterprises, eight had defined their mission properly with clear indicators, however three of the others hardly stressed the problem, and the remaining four enterprises gave no information about missions. The issue of vision was omitted in all fifteen cases. Therefore, it was concluded that the enterprises misunderstand the essence of this concept. The studied enterprises are APA companies; therefore the board of directors receives inconsistent information about owner intentions because they change them due to trends indicated by politics. Owners’ priorities switch from the strategic character of enterprises and the necessity of state control on biological and technique progresses to privatization as policies change. Therefore, the board of directors finds it difficult to clearly define the enterprise’s future position on production, investment, and the course of development (see Table 2).

The next element distinguishing marketing managed enterprises is applying market research.

Most enterprises do no research or commission market studies. Agricultural communities are convinced that land and capital assets determine the framework of production activity. Other indicators include tradition and managing personnel skills. Considerable increases in knowledge about technology and production techniques and improvement of technical equipment were observed, but deliberations about applying the marketing approach to management were not evident. Questions and the answers:

• which products (services) do we offer and to whom?
• which other products or services we can offer?
• how attractive are markets?
• are we competitive on these markets?

are rare in practice of enterprise’ management in agriculture. This is shown in annual business plans which supervisors present to the board of directors for acceptance. It follows that the sale of good-quality agricultural products, especially those included in the quota system, were not a concern of the board of directors. Management was based on former directives characterized by the lack of thinking about sales possibilities from new products and new markets, etc. Three of fifteen enterprises stated that they had increased the number of recipients in order to lower the risk of insolvency. Positions relating to marketing were created in all of them.

In defence of enterprise’s research and commissioning analyses it’s difficult to say much market segmentation and attempts of market niche identification. However, some substitutes exist for them. One of the enterprises dealing with breeding and seed production conducts recipients’ analyses relating to their location, size and frequency of purchases, variety preferences, way of payment etc. The situation after Poland’s integration with the EU was analyzed; there was a change of competition after trade barriers disappeared. An important part of the findings was a change of financial situation which occurred because price levels on agricultural inputs, especially breeding material, declined; therefore, a rise in income was observed that was connected with an increase in competitiveness. All the enterprises have, more or less, trade connections with foreign markets, so they know the competitive power of foreign products. This could be a chance for them to take advantage of a favourable circumstance.

Possession and using unique resources in order to gain the advantage over competitors is an esteemed attribute of marketing management. The boards of directors in agricultural companies pay great attention to staff qualifications and their domestic and foreign trainings. A great role of owner – Treasury should be emphasised as an originator, a coordinator, and a propagator of increasing knowledge standards through systematic training presented by domestic and foreign known authorities. Additional means of obtaining education include the support consulting and advisory personnel, and through travel and training abroad. A favourable influence of an enterprise to its surroundings should be noticed. High knowledge standards of technology and production techniques were emphasized in many of the analysed companies. This tells us to treat them as centres of history and agriculture heritage because they are propagators of technical and organizational development and not just local suppliers of seeds and breeding stock. In this context, enterprises researched were aware of their resource endowments and utilized skill in allocating them.

Farmers often ask why they should make changes in the enterprise that works well. The answer is only one – the enterprise has to adapt itself to a constantly changing environment. Referring to an agricultural enterprise, we notice a lot of changes, especially since 1989 and now when Polish agriculture adjusts to EU procedures. Changes are connected with production technology: changes that result from scientific progress, experiences with a practical functioning economy, appearance of new varieties of plants, improving genetic material of animals, applying new technical and organizational solutions, changing infrastructure connected with agriculture, higher requirements for quality of products and raw materials, and for environmental protection. In this situation, someone who does not change production methods becomes anachronistic, falls behind development, and cannot comprehend the events and activities surrounding him. Mutual aversion and frustration follows.

Marketing management in its assumption is prognostic marketing, because a number of operations have to be ahead of the new product development process – idea, market recognition, profitability analyse of undertaking, creating a product, preliminary testing, marketing tests, and commercialisation. In each management system, regardless of applying sophisticated techniques of management or just simple tools, control is the key issue. Lack of control deprives decision makers of important information about effectiveness of previous decisions, hinders current correction of tasks, and does not motivate employees. Electronic communication systems provide a chance for control to be more efficient and to increase work efficiency.

Analyse of managing personnel’s behaviour in the enterprises lead to the conclusion that systematic control is a rarity. Control is more penetrating when an enterprise is threatened, but when it prospers, control is occasional. This finding shows that the current norm of behaviour is to not adopt strategic management priorities. This leads to a lack of vision for future economic development of the business.

The concept of social marketing is a modern adaptation of the classical marketing orientation. The first one differs from the second one because it takes into account broadly-comprehended public issues like establishing new workplaces, docent remunerations and environmental protection.

An inherent element of marketing management is a marketing plan, which is designed to make operations more effective and efficient. Researchers have shown that agricultural enterprises lack previous market experience which leads to problems with running marketing activity. Enterprises which adopt a marketing orientation secure a better position in the market. This concerns companies producing goods like: seed material, breeding animals, nursery material, fresh fruits and vegetables, edible potatoes, etc. Farms adopting the marketing orientation direct their activities to the client and his needs, because only this attitude guarantees the possibility of the sale of total production at a satisfying price [4].

Analysis of table 2 reveals that the scale of realization of features identifying marketing management is very low. Only in 22 out of a possible 105 cases could total realization of marketing management features be affirmed. Features like marketing research, control system or public responsibility were not totally realized in any enterprise. More optimistic results occur when we consider partial realization of particular marketing management features. In this case we can claim that general awareness of the marketing management philosophy exists due to the occurrence of some of the features in each of the enterprises, but the range of this type of management is limited. Very few businesses use market research, control systems, market segmentation, and public responsibility marketing management techniques.

Presented view of awareness and practice of marketing management is sceptical taking the analyzed subjects of this study were leading enterprises dealing with biological and technological development. They are called centres of history and agriculture heritage, so they are obligated to manage in a distinguished manner. These results lead to much scepticism concerning the awareness and adoption of marketing management by the agricultural sector of the Polish economy.

Integration with the European Union and submitting to common agricultural policy (CAP) requires more commitment and knowledge of farmers in the sphere of business management in a free-market economy. The issue of people’s enterprise has never been more important than now, because without it access to the EU’s financial resources will be limited.

CONCLUSIONS

Summarizing, the current use of marketing management techniques in agriculture is not extensive. We get a good view of marketing management when we analyse conduct in industrial, trade, or service enterprises. Fršckiewcz’s and Rudawska’s research indicates that, marketing management is often applied in these enterprises [3]. The literature reviewed presents us with many techniques of marketing management which lead to higher effectiveness of material and nonmaterial resource allocation and use.

On the basis of these theoretical considerations and the practical research conducted for this study, we can draw the following conclusions:

1. marketing management and management marketing belong to basic domains of marketing in every enterprise,

2. industrial, trade, or service enterprises practicing techniques of marketing management obtain significant economic results,

3. on the basis of research and economic practice we can identify basic features of marketing management,

4. agricultural enterprises have little knowledge of and seldom apply modern marketing management techniques,

5. the board of directors of APA companies adopted the marketing management system, an important element in the process of increasing competition in food markets.

Referring to the research hypothesis formulated in the introduction it should be stressed that it is up to date and important for agricultural enterprises. The results of this research analysis indicate that these agricultural enterprises apply certain marketing management techniques, although in limited scale. Some reflections indicate that many enterprises and especially agricultural enterprises have pre-1989 management structures. Application of current and past methods for solving future problems has been perpetuating these old structures

Changing circumstances require new management and it involves initiating a new worker selection system other than the current workers’ theoretical and practical preparation criterion. Changes of this nature will lead to greater adoption of marketing management techniques by agricultural businesses.

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