Essay Example on For agribusiness Internet systems Become Valuable

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The Web as a new media growing dramatically does not only act as communication vehicle but also as a distribution channel Nowadays traditional agricultural suppliers and manufacturers want to transform the way business is conducted in agriculture because the Internet has become the pivotal point for new agriculture investments Rural communities and small scale agricultural producers figure out how agricultural business can be improved from the Internet Recognizing the value of the Internet they understand that everyone is affected by global economic environmental and political forces Information about interest rates tariffs changing trade patterns new transportation systems can be tailored to local regional and national needs and realities Winer 2011 For agribusiness Internet systems become valuable strategic planning and decision making tool with its ability to communicate quickly with potential buyers and brokers flexibility to change crop choices develop products for niche markets The move to the Internet is brought about by many reasons Increased importance of gathering exchange and use of information the quick communication flow among businesses and customers lead to expectations of substantial cost savings and great responsiveness to customers Cross 2000 It is evident the Internet gave access to a larger customer base that is geographically diverse to generate not only convenient transactions more efficiently but also build relationships as cited in Henderson Dooley Akridge and Carerre 2005 p 44

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There are five supply chain processes transactions information negotiation logistics and promotion are used to guide an analysis into Internet adoption for e commerce among agribusiness firms Henderson et al 2005 p 58 For example many Internet sites are set up to sell farmers the necessary inputs for crop and livestock production and farmers can get the following benefits the exchange of information about products pesticides seeds fertilizer their characteristics price transparency through auctions negotiations reduction or elimination of transaction costs procurement delivery warranty custom application increase in online cooperatives Moreover the new media vehicle can provide farmers and processors the ability to advertise the current cash prices to locate the best places for selling the output While introducing a new product farmers face two obstacles the geographical spread of producers and climatological interactions climate land necessary for the production process

The Internet can overcome it by finding products appropriate to the climate and processing Without a doubt customer behavior is the most significant reason for having pressure on traditional distribution channels due to the Internet s ability to lower the cost of transacting business while matching buyers and sellers There are several forces pressuring traditional distribution channels in the agricultural input markets First of all the customer base is very fragmented that forced input suppliers to provide tailored value bundles individualized sets of products services and information to fit the needs of producers Escalating customer expectations have increased performance standards that input suppliers have to meet as cited in Akridge 2003 The increase in expectations depends on the size of farming operations the larger farming operations the higher demand levels of performance The demand for convenience in the supplier producer relationship is an example of increasing performance standards as cited in Akridge 2003 Certain services such as prepurchase post purchase service storage and delivery troubleshooting inventory management complaint handling and information services available to communities of producers are examples of the manufacturer s demands that only e retailer can provide these functions more efficiently than the traditional distribution channel The next factor is the intense competitive rivalry that exists in these markets as cited in Akridge 2003 Intense profit pressure for producers in the marketplace market share battle in slow growing markets for retailers competition with other firms for the volume larger producers product proliferation shorter product life cycles pressure for acceptable rates of return from investors have prompted most agricultural suppliers to look for ways more efficient and effective

Finally the development and introduction of new technologies expand the capabilities and efficiencies of distribution systems that change management practices to bring products services and most importantly information directly to producers U S Department of Agriculture is one of the examples of a new way to acquire readily available information Logistics management technology GPS bar coding the Internet Intranets bandwidth expansion e business information systems technology such as SAP Oracle and other new ways of communicating with suppliers and other producers offer the potential to change existing market relationships and create new ones The e commerce has caused agribusiness companies to rethink their distribution channel They have realized that it helps reach new customers and old customers in new ways tap new and old suppliers through new and innovative channels gain efficiency and substantial cost savings through improvements in transaction information and negotiation functions of the supply chain Agriculture becomes more efficient at providing consumers with higher food quality improved food safety and better food taste As customers and their demands continue to grow direct sales are likely to follow

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