Challenges Faced by Agricultural Enterprises in the Czech Republic
The development of agricultural enterprises in the Czech Republic faces challenges such as staff number reductions, internal and external factors influencing market structures, human resource issues, risk management, and competitiveness. Agricultural enterprises are highly dependent on natural conditions and face fluctuations in prices, impacting productivity and economic growth.
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DEVELOPMENT OF AGRICULTURAL ENTERPRISES IN THE KNOWLEDGE-BASED ECONOMY CHALLENGES OF AGRICULTURAL ENTERPRISES IN THE CZECH REPUBLIC Hana Urbancov
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 Level and development of national economy Market structure of the agricultural and food sector Increasing sales potential/sales strategy Formation of the economic environment of agriculture by instruments of agricultural policy Partnerships and cooperation Factors determining a technical and economic level of agriculture Human resources issues Risk management issues Technical side of the production quality Adaptability to market conditions Competitiveness
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 Tom k (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 knowledge- based 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: urbancova@pef.czu.cz
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-ceske- republiky-2014-n-zi0tqklk5k (Downloaded: 02 May 2015) M RTLOV , L. [2007]: N kter aspekty konkurenceschopnosti esk ch zem d lsk ch podnik (Several aspects of competitiveness of Czech farms). Download: https://is.muni.cz/th/81438/esf_d/Text_disertacni_prace.pdf ZEM D LSK SVAZ ESK REPUBLIKY [2014]: Struktura zam stnanc zem d lsk ch firem. (Structure of the farm employees) Download: http://www.zscr.cz/download/files/NEG- 011_BI-DI_ZEMED_Manual-Struktura-zam.pdf (Downloaded: 05 January 2015) ..
