Paper Example on Farm Management and Finance

Introduction

In the farm and financial management, the main goal is to increase the productivity of agricultural activities, to reduce losses and increases the profit margins among other roles. In most of the farms, the concerns are mainly on the health of the live assets like the animals and how to achieve the long-term goals. In the new enterprise to be introduced into the farm, the main focus will be to increase the management skills and monitor the profitability of the farm. It will also aim at showing the financial position of the farm and predict the future performance of the farm. For example, the comparison between the financial ratios of the company in the past and the current performance will help the owners and managers of the farm to predict the possible performance in future and to create awareness of how to achieve the goals. In some of the companies, such analysis is done to enlighten the stakeholders on how the management has performed in the past financial periods.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Analysis of the New Venture

The intended enterprise is to introduce new products like fruits that will be grown in greenhouses and sold as export products. The fruits business will be done in conjunction with other horticultural products like flowers and vegetables. The enterprise will employ new employees and buy new machinery that will be used to improve the efficiency and effectiveness of farming activity. The venture will be allocated resources by the management in bits. For instance, the first phase that involves planting the new crops and setting up structures for processing the new products will be allocated adequate resources and later the second phase of maintenances and taking care of the new venture will be funded. The last phase, harvesting, and processing will be allocated resources last. The reason for this is to prevent misuse of the resources.

Challenges Expected and their Solutions

The challenges expected in the new enterprise include inadequate resources, poor market conditions, poor storage conditions, high pest infestations, low motivation of the employees, resistance from employees, unfavorable weather and misuse of funds and other resources. The solution to the inadequate resources is to solicit for funds from external investors who can later earn money from the venture once it succeeds. The investors can buy shares of the new venture and then make profits proportional to these shares. The other way is to request more money from the top management. According to Too and Weaver (2014), the support of the top management determines the success of the new projects. The new enterprise will rely on the support of the top management to get the required resources. The other challenge is poor market conditions and this includes the fluctuating prices and unfair market practices. The new enterprise may attract many other players and eventually copy the idea. The imitation may reduce the market share of the company and this may affect the profits as they are planned. The solution is to invest more resources in the Research and Development department to analyze the market and advise the company on how to achieve its market goals. The other solution is to look for the market before the products expire.

Most of the horticultural products expire easily and they have to be preserved in the most effective ways. The challenge of storage and preservation will be minimized by purchasing more equipment that can be used to store the farm produce. The other solution will be to ensure that all products are only harvested when they are ready for the market and when the market is ready. The new enterprise will require good management skills to prevent losses and reduce the misuse of funds and other resources. As noted by Kerzner (2018), project management is vital to the success of the project. Failure to plan and manage the resources and time of the project are some of the main reason why most of the project fail (Larson and Gray, 2015). The enterprise will hire management experts who can handle it effectively and prevent mistakes. The high pest infestation may reduce the quality of the products and increase the operational costs. The solution will be to use preventive measures and ensure all inputs are of high quality. Some of the products will also be grown in the greenhouses where conditions are controlled and pests do not get express access to the crops.

The other challenge is unfavorable weather conditions and this could be heavy rainfall, winds and hurricanes, storms, and drought. The solution will be to plant the intended products in a timely way, such that they can survive the harsh weather. The low motivation and resistance in employees are common in many sectors. Poor motivation affects the quality of work that people do in their workplaces (Hertzberg, 2017). The challenge can be reduced by introducing incentives to motivate the employees. Such incentives can be financial or non-financial. The politics of resistance are common in the organization and they are mainly as a result of employees who do not want changes and who feel the changes may affect their comfort or it threatens their work (Pullen and Rhodes, 2014). In the new enterprise, it will be reduced through rewards and punishments. The employees will also be included in the decision making processes to make them part of the management process.

Marketing Techniques

As noted above, the new enterprise will require stiff marketing to ensure there is a ready market for the products. This is the process by which the business will be able to promote its products and services in the existing market. For a business to grow into high level and expand to other areas, then its marketing plan must be of high quality since it will determine the future of the business. To enable the success of this enterprise, several factors must be considered when coming up with marketing strategies such as potential customers, the market share and competitors. Since this enterprise is new into the market, various promotion techniques will be adapted to establish the business into the market as well as to the target consumers. The main techniques used will be highlighted below;

Posters

This will be the basic source of promotion for the business since its materials are available and affordable. The posters will include all details of the business plus the products and services offered inclusive of prices per commodity. These posters will be pinned in strategic locations within the city and its environment and their main aim will be to offer information to the residents of the new business penetrating into the market. The posters will be used to create awareness in the market in the initial stages of the enterprise.

Signboards

Signboards will be another major technique that will be impressed by the enterprise to promote its products and services. The signboards will be placed at major roads especially the junctions and will indicate the direction of the business location. The aim of this marketing technique will be to create more awareness about the new products. The billboards will include images of the new products.

Internet

Due to the ever-growing technology, the internet will be a great method of promoting business into the market. Many individuals are able to access the internet from various sources daily and hence the enterprise is optimistic that creating a business profile and uploading it to the internet will yield positive results in regards to promoting the business. Many people will be able to access the business profile and view the products and services offered and if interested communicate to place their orders. The social media sites like Facebook and Twitter will be used to advertise to the many users.

Radio, Television Station and Billboards

This is the future plan that the business will use after it has penetrated the market and created a large network in the country. Some of the stations to be targeted are the international ones. The farm aims to sell its products to the potential consumers in other countries. Some of the horticultural products will be exported to other countries.

Budgeting Techniques

Money and time are scarce resources to all individuals as well as organizations and are therefore required to be utilized both efficiently and effectively. Since planning alone is not sufficient to enable smooth operations of the enterprise, control is a necessary tool for every organization. A budget, therefore, comes in handy as it is a tool that managers will use to plan and control the use of scarce resources. A budget is simply a plan that shows the objectives of the company and how management intends to acquire and use scarce resources to attain those objectives. Budgeting process entails planning for future profitability because earning a sufficient return on resources is always the main objective of any company. There various capital budgeting techniques adopted by different organizations to achieve their objectives. This enterprise will use several budgeting techniques categorized as non-discount methods such as payback period and accounting rate of return method as well as the discounted cash flow method which includes the NPV method, profitability index method and IRR.

Payback Period Method

Payback period method emphasizes the period in which the enterprise will generate cash to recover the initial investment made. It strongly focuses on the cash flows, the economic life of the project and the investment made in the project. In this method, there is no consideration of the time value of money. It uses the formula below;

Payback Period= Cash Outlay (investment)/ Annual Cash Inflow

Accounting Rate of Return Method (ARR)

The new enterprise is intended to make profits and this can be measured using the returns received. The ARR method aids to overcome the shortcomings of the payback period method. It is presented as a percentage of the earnings of the investment in a particular project putting emphasis on the criteria that any project having ARR higher than the minimum rate established by the management will be considered while those below the predetermined rate are rejected. The advantage of this method is that it takes into consideration the entire economic life of a project, therefore, providing a better means of comparison. However, the method is not consistent with the objective of the enterprise of maximizing the market value of shares.

ARR= Average Income/Average Investment

Discounted Cash Flow Method

This technique calculates the cash inflow and outflow of an asset which is then discounted through a discounting factor and then a comparison is made between the discounted cash inflows and outflows. The main advantage of this method is that it considers the interest factor as well as the return after the payback period.

Net Present Value (NPV) Method

This is one of the most practiced methods for evaluating capital investment proposals. In this particular method, the cash inflow which is expected at different periods of time is discounted at a particular rate. The present values of the cash inflow are then compared to the initial investment. The project is accepted if the difference between them is positive and rejected if otherwise. This technique also considers the time value of money and consistent with the main objective of the owners which is profit maximization. Understanding the concept of capital cost is however not an easy task.

NPV= PVB-PVC

Where,

PVB= Present value of benefits

PVC= Present value of costs

Internal Rate of Return (IRR)

This method solely depends on the outlay and proceeds which are associated with the project and not any determined by the outside environment. It is defined as the rate in which the net present value of the investment is zero, where the discounted cash inflow is equ...