Dear Beneberu,

It is very difficult finding a binary logic between the 3 variables taken two by two: efficiency/competitivness; efficiency /market performance; competitivness/market performance. It shoud be taken into account the direction of the effects and their feedback.

To maximize efficiency, tha farm has to minimize unit costs, but it has constraints (technologic level; land and capital resources; manpower capabilities etc.)

To maximize competitiveness is a challenge. The farm in the great commodity markets is a price-taker and not a price-maker.

In the niche markets farms may operate in conditions of monopolistic competition, but the size of the market is limited. There are contextually the problems of maintaining the quality and that of product diversification.

Maximizing the market performance is a black-box the scientists have not yet been able to highlighten.

To your question even the managers of the largest multinational companies have turned their attention as well as those of the single firms or farms. But indipendently from the size of the company the problem remain insoluble at the present state of economic science art.

Merry Christmas

Though there is inter-connectivity as Agricultural business linkages; efficiency, competitiveness and market performance are unique modules of existence.

• Efficiency - Resource Utilization & Scheduled dispatches
• Competitiveness - Cutting edge of product features, performance, pricing, promotion etc.,
• Market Performance - Logistics, Supply chain, Sales coordination, shelving nimbleness etc.,

I am not an economist, so I will answer this as a biologist. For me, these three are logically connected, but not in the order given. Efficiency leads to market performance, which leads to competitiveness.

1. Efficiency of resource use refers to the ratio of product outputs to resource inputs, such as production per unit area of land, per kg of fertilizer, per litre of oil, per seed sown, and so on. Of course, it also relates to the balance sheet: ratio of profit output to capital input. This can be measured per business unit (e.g. farm) or per business sector (e.g. dairy, beef, vegetables, oranges, and so on). It also relates to efficiency of labour, such as output per hours worked.

2. Market performance may relate to the producing unit (e.g. farm, cooperative, corporation) or the product (e.g. oranges, wine, goat cheese). It is measured by standard financial accounting. It is strongly affected by marketing, which is a local art and not easily quantified (for example, it may depend in part on the personality of the business owner, or the weather, or simply luck). 

3. Competitiveness of the producing unit (or unit group) can be measured by survival and growth, either of the individual or sector. In biology we measure this by survival and reproduction (fitness). Theoretically, a more efficient business should be a more competitve business because efficiency is reflected in product price. Due to the many efficiency variables, a farm could be very efficient in materials use but very inefficient in labour (or vice-versa), and so predicting competitveness is difficult, particularly given that market performance is affected by marketing, which is largely qualitative.

Regarding references, I expect this goes back to Adam Smith, David Ricardo, James Mill and others who thought about these things in the late 1700s.

Dear discussants,

I greatly appreciated all your contributions.

@ Beneberu: the question can not refer to all firms. One should establish the purpose of the analysis. The farms that produce large commodities are different from the others.

Then we need to identify the form of the market in which the company operates. Free competition, monopoly, oligopoly, monopolistic competition etc.

As well known the market form called free and pure competition is very rare. Francois Perroux (an important French economist) says that it is a pathological extreme case of economic science. Were that the case, welfare economics (Pigou) argues that free competition leads to the most efficient use of resources, and vice versa: the optimization of efficiency is combined with the free and pure competition. In this case, the economy is in a condition of Pareto optimality. But the Nobel Laureate Amartya Sen has challenged this approach because Pareto optimality can lead to a situation of efficiency without equity if no poor man can improve his position without worsening the situation of the rich.

The case of the free and pure competition is however only theoretical due to the presence of aspects that lead to market failure, including the asymmetry of information, the presence of scale economies and externalities etc.

This is just a beginning of the approach to the problems which you treated.

Cost efficiency refers to least costs of the processes and structures to achieve given objectives but effectiveness means the matching of results with objectives.

Attached please find an article from my ResearchGate.

I have done extensive research for improving the efficiency, competitiveness and market performance in connection with manufacturing and product development industries. Many of such aspects may apply to Agricultural production.

Take a look, if you find it useful for your application.

Article Towards Balancing Multiple Competitiveness Measures for impr...

Article Hybrid re-engineering strategies for process improvement

To Teferra:

Gordon and Davidora (1999) study about superiority of one organisational type, namely family farms, over corporate structures (production co-operatives and various types of farming companies) and the nature of the relationship between size and farm efficiency.

Highly recommended papers:

• Arifin, B. (2013). On the Competitiveness and Sustainability of the Indonesian Agricultural Export Commodities, ASEAN Journal of Economics, Management and Accounting 1 (1), 81-10
• Gómez, E. G (2006). Productivity and efficiency analysis of horticultural co-operatives, Spanish Journal of Agricultural Research, 4(3), 191-201

To Prasad:

I am fully agree about Hybrid re-engineering strategies for process improvement with policies, practices, procedures and productivity

@ Hengky

I agree the Farm efficiency (productivity and resource utilization) provide the cutting edge in market pricing for farm produces.