კონფერენცია

∘ Giuli Keshelashvili ∘
ROLE OF AGRICULTURAL COOPERATIVES IN THE VALUE CHAIN MANAGEMENT

Summary

Work offers discussion of the issues of value chain management and development in agribusiness. In particular, based on the study of business entities in Georgia it analyzes and assesses the process of value chain formation and role of the involved stakeholders that increase the product value for the consumers through organized cooperation.

Value chain connects the raw material producers, middlemen, processing enterprises, sales markets, service providers and different parties, whose activities promote competitiveness of one another at marketplace and its maintenance through introduction of innovations in the processes of value chain. Value chain management is the instrument of strategic business analysis and planning that is used for coordination of the value chain components and resources. Effective management of value chain directly affects profitability of the involved stakeholders and satisfaction of consumers.

The work demonstrates the main challenges hindering development and effectiveness of agribusiness management in Georgia, including land fragmentation, low availability of advanced technologies, lack of business management awareness and skills, poor organization of logistics and supply process, low opportunities of negotiating and performing agrarian marketing etc.

In Georgia, most small producers of agrarian goods face such problems as gaining desirable share of profit distributed over the entire value chain; production of high quality goods with available seeds, fertilizers and chemicals; low access to the financial resources for performing agricultural works in due time and seasonality of cash flows characteristic for their activities; problems of transportation of the produced goods that are frequently dealt with through sale of the products to the middlemen at very low prices.

Regarding the value chain management is organized union of the producers, merchants, processors and raw materials / service suppliers for improvement of productivity, the value chain participants should make attempts to improve and maintain competitiveness based on innovations. Participation of the commercial partners in the value chain should contribute to costs reduction and effective performance of business. Availability of the advanced technologies, information, capital, would help them in use of the innovative production techniques and effective marketing management, as a result, they will be able to supply high quality goods to the consumers.

Summarization of the research results and analysis of the international experience showed that while individually working small farmers are unable to gain profits from sale of their products, the farmers working collectively, who have established powerful organizational links in similar production in a form of cooperatives, are better able to take advantage of market opportunities and mitigate negative outcomes of the crisis situations.

Naturally, the farmers can establish the cooperative enterprises. In addition, the primary production cooperatives can establish the new entities in a form of the second-level cooperatives allowing tightening of the value chain, costs reduction and improvement of profits.

Within the scopes of the research various cases of the agricultural cooperatives involved in the sector were studied and business cycles of priority sectors of Georgian agriculture were surveyed. Work was prepared on the basis of in-depth interviews with the industry experts, agribusiness managers and parties involved in the value chain. Secondary data (desk research) were collected through studying of the publications related to the issue and value chain reports.

Seasonality of raw materials production and their insufficiency was found to be one of the main causes of instability of value chain and supply chain in agriculture sector. Participants of value chain do not perceive one another as partners and do not care properly about the quality stability thus reducing competitiveness of their businesses.

In the process of research the emphasis was made on the problems of value chain management. In agribusiness, necessity of formation and setup of the full production chain allowing significant reduction of production costs was identified as one of the significant directions for production growth and development.

Recommendations offered by the work would contribute to improvement of value chain management in agribusiness, in Georgia.

Annotation. Work offers discussion of the issues of value chain management and development in agribusiness. In particular, based on the study of business entities in Georgia it analyzes and assesses the process of value chain formation and role of the involved stakeholders that increase the product value for the consumers through organized cooperation. Within the scopes of the research various cases of the agricultural cooperatives involved in the sector were studied and business cycles of priority sectors of Georgian agriculture were surveyed. Recommendations offered by the work would contribute to improvement of value chain management in agribusiness, in Georgia.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ Giuli Keshelashvili ∘ ROLE OF AGRICULTURAL COOPERATIVES IN THE VALUE CHAIN MANAGEMENT Summary Work offers discussion of the issues of value chain management and development in agribusiness. In particular, based on the study of business entities in Georgia it analyzes and assesses the process of value chain formation and role of the involved stakeholders that increase the product value for the consumers through organized cooperation. Value chain connects the raw material producers, middlemen, processing enterprises, sales markets, service providers and different parties, whose activities promote competitiveness of one another at marketplace and its maintenance through introduction of innovations in the processes of value chain. Value chain management is the instrument of strategic business analysis and planning that is used for coordination of the value chain components and resources. Effective management of value chain directly affects profitability of the involved stakeholders and satisfaction of consumers. The work demonstrates the main challenges hindering development and effectiveness of agribusiness management in Georgia, including land fragmentation, low availability of advanced technologies, lack of business management awareness and skills, poor organization of logistics and supply process, low opportunities of negotiating and performing agrarian marketing etc. In Georgia, most small producers of agrarian goods face such problems as gaining desirable share of profit distributed over the entire value chain; production of high quality goods with available seeds, fertilizers and chemicals; low access to the financial resources for performing agricultural works in due time and seasonality of cash flows characteristic for their activities; problems of transportation of the produced goods that are frequently dealt with through sale of the products to the middlemen at very low prices. Regarding the value chain management is organized union of the producers, merchants, processors and raw materials / service suppliers for improvement of productivity, the value chain participants should make attempts to improve and maintain competitiveness based on innovations. Participation of the commercial partners in the value chain should contribute to costs reduction and effective performance of business. Availability of the advanced technologies, information, capital, would help them in use of the innovative production techniques and effective marketing management, as a result, they will be able to supply high quality goods to the consumers. Summarization of the research results and analysis of the international experience showed that while individually working small farmers are unable to gain profits from sale of their products, the farmers working collectively, who have established powerful organizational links in similar production in a form of cooperatives, are better able to take advantage of market opportunities and mitigate negative outcomes of the crisis situations. Naturally, the farmers can establish the cooperative enterprises. In addition, the primary production cooperatives can establish the new entities in a form of the second-level cooperatives allowing tightening of the value chain, costs reduction and improvement of profits. Within the scopes of the research various cases of the agricultural cooperatives involved in the sector were studied and business cycles of priority sectors of Georgian agriculture were surveyed. Work was prepared on the basis of in-depth interviews with the industry experts, agribusiness managers and parties involved in the value chain. Secondary data (desk research) were collected through studying of the publications related to the issue and value chain reports. Seasonality of raw materials production and their insufficiency was found to be one of the main causes of instability of value chain and supply chain in agriculture sector. Participants of value chain do not perceive one another as partners and do not care properly about the quality stability thus reducing competitiveness of their businesses. In the process of research the emphasis was made on the problems of value chain management. In agribusiness, necessity of formation and setup of the full production chain allowing significant reduction of production costs was identified as one of the significant directions for production growth and development. Recommendations offered by the work would contribute to improvement of value chain management in agribusiness, in Georgia. Annotation. Work offers discussion of the issues of value chain management and development in agribusiness. In particular, based on the study of business entities in Georgia it analyzes and assesses the process of value chain formation and role of the involved stakeholders that increase the product value for the consumers through organized cooperation. Within the scopes of the research various cases of the agricultural cooperatives involved in the sector were studied and business cycles of priority sectors of Georgian agriculture were surveyed. Recommendations offered by the work would contribute to improvement of value chain management in agribusiness, in Georgia.