Analysis of Business Practices of Selected Agricultural Supply Stores in San Leonardo, Nueva Ecija
Date
6-2022
Degree
Bachelor of Science in Agribusiness Management
College
College of Economics and Management (CEM)
Adviser/Committee Chair
Mar B. Cruz
Committee Member
Maria Noriza Q. Herrera, Nohreen Ethel P. Manipol
Abstract
In the agricultural sector, more emphasis is always given to the production and marketing of agricultural outputs leaving the upstream supply chain behind with less support and control of the market. It is important to recognize agricultural supply stores as vital business in the agricultural sector as these businesses provide inputs to the farmers in crop and animal production. Their business operations are differentiated based on the types of agricultural inputs offered, line of business operations, and ownership type. Alongside the goals and objectives of the business and the owners, these influence the business practices of the agricultural supply stores, therefore, affecting business efficiency and profitability.
This study presented the profile of agricultural supply stores and looked into their business operations. The objectives of the study were to (a) present the external environment of the agricultural supply stores; (b) determine the profile of agricultural supply stores; (c) discuss the business practices and operations of the agricultural supply stores; (d) analyze the issues and challenges facing the agricultural supply stores; and (e) formulate strategies for the agricultural supply stores to improve the business operations in terms of productivity and profitability.
The data gathering process for this study lasted for a month starting with the updated list of registered agricultural supply businesses that was requested from the Municipal Treasurers' Office (MTO) of San Leonardo which served as the primary reference for the businesses to be interviewed. Business owners and managers who agreed to participate in this study were interviewed personally in their respective stores through a pre-made questionnaire as a guide during the interview. Due to the differences in business operations, the researcher made adjustments to the guide questions as necessary. Results of the interviews were analyzed using inductive reasoning and by classifying them according to business type and ownership type.
The results of this study are solely based on the interviews with nine registered agricultural supply business currently operating in San Leonardo, Nueva Ecija. These supply stores offer a wide array of agricultural products including seeds, fertilizers, agrochemicals, animal feeds, and machinery and equipment, which have been operating since 1997 for the longest, and 2020 for the most recent. In this study, we considered five different classifications based on the ownership type and line of business: Sole Proprietor-Retailer, Sole Proprietor-Dealer, Cooperative-Retailer, Cooperative-Distributor, and Corporation-Wholesaler, all of which are different in terms of the four business functions.
The four (4) sole proprietor-retailers in this study have been operating for at most 25 years in the municipality and are engaged in selling multiple agricultural inputs for crops and livestock. Less formal practices were observed in their recruitment and staffing, training and development, business documentation, and even storage and inventory practices. The ultimate goal of the respondents was to be able to cover their daily personal and operational expenses using their income from the agricultural supply business. The most important aspect of their business operations was convenience whether to the pricing of suppliers, payment terms, delivery, and inventory practices so they do not have exclusivity arrangements and they can also switch to other suppliers whenever they like. Sole proprietor-retailers almost transact with their suppliers daily. Most of the time, they are efficient, especially during the off-season, but the lack of a separate storage area for two of the business and difficulty in paying cash upon delivery are the constraints of increasing their bulk orders even during planting season. They also place great value on communication and establishing a goof relationship with their customers and they do not see the need for additional marketing strategies such as using posters and social media. Moreover, they provide embedded services such as free delivery and flexible payment terms. Sometimes, they also give free items to their customers which are also from their suppliers. Their are no pressing issues and challenges that disrupt the overall operations of sole proprietors-retailers. However, there are many inefficiencies in the operations and lack of importance to other aspects of management and marketing aside from selling inputs at a low price. There are also opportunities and prospects that the business owners should be aware of such as engaging in exclusivity arrangements and branding of self-formulated agrochemicals. To address some problems and improve the productivity and profitability of the business, it is recommended to limit their credit policies for employees, segment their suppliers, maximize storage capacity, and improve the documentation of business operations. It is also recommended for their suppliers to expand on online marketing to effectively communicate with retailers in different locations to improve efficiency in delivery systems and for the government institutions to improve the accessibility of their programs to input providers.
Second, there is only one sole proprietor-dealer in this study who focused on selling animal feeds particularly hog feeds, broiler feeds, and duck layer pellets (DLP). Among all the sole proprietors, only the said business has an exclusivity arrangement with one of its suppliers which provides the business has an exclusivity arrangement with one of its suppliers which provides the business with almost 8,000 bags of animal feed per month. Another benefit of the business arrangement was the monthly reimbursement on their technician salaries. The business mainly supplies large duck farms in the province and although their geographical scope for exclusivity is with Nueva Ecija only, the business has customers in the neighboring provinces as well. Unlike other businesses, the dealers charges delivery fees to its customers because of the large volume of products and the costs of trucking services. Thus, he gives pick-up discounts to customers who personally bring their trucks to pick up the supplies. One supplier, however, directly delivers its products to its customers, making it more convenient for both customers and the dealer. It is to be noted that the business temporarily stopped its operations due to the restrictions brought upon by the pandemic. Nevertheless, the business owner still plans on continuing the agricultural supply business which is why he was still registered with the MTO. It will be challenge for the owner to get back to business and attract previous customers. Recommendations and prospects for the business include conducting an investment analysis for trucking services and additional technical services for their customers.
One of the cooperatives in this study is a retailer which has been operating for 2 years. Its business model focuses on selling directly to customers including cooperative members. Currently, it has 4 employees which are all members of the cooperative and no special arrangements were found in all 3 suppliers which are all located in Gapan City. In general, the business pruchases at most three times a month from each of its suppliers. However, only one supplier gives a 5% discount and allows at most 30 days in payment terms. Because of their limited space and space-sharing with their other business, the cooperative does not have a separate storage area for their products but they conduct a monthly inventory to check their remaining supplies. Aside from slow deliverables, issues and challenges of the business include financial problems brought upon by customers who were not able to repay their debts on time.
The cooperative-distributor in this study is an aggregator of the New Rural Bank of San Leonardo (NRB-SL) and was formed because of the Bangko Sentral ng Pilipinas (BSP) Circular No. 908 s. 2016, also known as the Agricultural Value Chain Financing Framework. the cooperative does not have daily business operations so its employees are only limited to the general manager and the bookkeeper. Moreover, they have volunteers who also help them in the procurement process. The cooperative uses an aggregator business model wherein customers apply for a loan first and submit their farm plan to the bank. Instead of giving cash to the customers, the bank forwards the farm plan to the cooperative for them to procure the inputs needed by the clients. The cooperative, however, does not have fixed suppliers and chooses the suppliers per planting season based on the prices. Because of this, the cooperative does not also stock agricultural inputs hence, there is no need for a storage area and to conduct inventory. They also do not provide embedded services to customers aside from buying their agricultural outputs, mainly palay, after the planting season. Issues and challenges facing the business are focused on the comparison of prices by their customers thus, they have to explain the pricing of inputs to them. It is then recommended that the cooperative create strategic partnerships with input suppliers to lessen the costs of agricultural inputs, provide more quality products to customers, and be able to offer more technical services to the clients.
Lastly, the corporation-wholesalers in this study are engaged in selling particular types and brands of agricultural inputs - agricultural machinery and equipment for ADAMCO and fertilizers for Ferez Agrochem Development Inc. Both of the companies have long been operating in the province but relocated to the municipality of San Leonardo because of the convenience of location and safety during typhoons. Both businesses employ formal recruitment and training processes for their employees which extend after their hiring period. Because the business has both permanent and contractual employees, both companies have the highest expenses on salaries and wages paid to employees. In terms of business operations, ADAMCO has nationwide exclusivity on YANMAR's products wherein the products coming into the San Leonardo branch where not directly imported, but from their warehouse in Marilao, Bulacan. Then, the machinery is directly sold to customers. On the other hand, Ferex directly imports from Japan, Korea, Canada, Taiwan, and Belarus, depending on the fertilizer grade to be imported. The products from the ports of Manila and Subic were directly delivered to the San Leonardo warehouse and were distributed accordingly to their distributors in Central Luzon. Marketing strategies employed by the companies include traditional print media, field demonstrations, and farmer's meetings. The most pressing issue was fertilizer supply and price which spiked because of the Russia-Ukraine War while prospects for the said businesses include participating in government public bidding for ADAMCO and demand generation in premium fertilizers for Ferex in areas outside Luzon.
Language
English
LC Subject
Farm supply industries, Business enterprises
Location
UPLB College of Economics and Management (CEM)
Call Number
LG 993 2022 M17 D45
Recommended Citation
Dela Cruz, Hannah Grace P., "Analysis of Business Practices of Selected Agricultural Supply Stores in San Leonardo, Nueva Ecija" (2022). Undergraduate Theses. 11723.
https://www.ukdr.uplb.edu.ph/etd-undergrad/11723
Document Type
Thesis
Notes
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