The word "diversification" is increasingly present in the agricultural scene. What can you understand by this and which branches of business are behind it?
Diversification as a business approach
In principle, diversification stands for "difference". This applies to agricultural management systems and production methods as well as a large number of different species in flora and fauna. From the point of view of animal husbandry, this is the diversity of animal species, races and genetic makeup, from the point of view of crop production, the coexistence of cultivated and wild species ("biodiversity"), from the point of view of business management it is the combination of different (and new) branches of business. This last-mentioned business approach as part of a corporate strategy will be discussed in more detail here.
There are different types of diversification as well as different goals and reasons for businesses to enter this area of agriculture. It covered a colorful spectrum and is an important future topic for Bavarian agriculture.
Development strategies are important for a successful future
In order to run farms successfully in the long term, it is important to always keep an eye on strategic decisions about further operational development.
Development strategies of agricultural holdings can be very different or can be combined depending on the individual farms' resources and external framework conditions.
- Growth (often combined with specialization): expansion of existing branches of agricultural production (e.g. animal husbandry, areas used for agriculture or forestry)
- Improvement of production technology or increase in production output: (specialization or intensification in the existing branches and in the existing operational framework)
- Diversification: Creation of additional fields of employment or expansion of the company to include new marketing channels or additional entrepreneurial activities
Definition of diversification
Diversification, or income combination, is an important and diverse area in agricultural practice. For farm manager families, it means the expansion or supplementation of agricultural employment with additional, company-related entrepreneurial activities.
In the first stage, this can be the expansion of the crop rotation and thus the sale of additional crops and goes up to the establishment of completely new branches on the farm. In this case, the operating income is not only generated from traditional agriculture, but with the help of additional pillars. These branches of operations use the resources of the agricultural operation (land, capital, labor) to varying degrees. Without using the word for it, many farmers have been practicing this for years, despite the great trend towards specialization.
Historically, forestry has always been a practice of diversification for many companies, as has the construction of guest accommodation or the installation of a photovoltaic system on stables and farm buildings in recent years.
The primary economic goal is to stabilize or increase income - especially wages - and at the same time to increase resistance to crises in individual markets, also known as crisis resilience.
Diversification strategies of farms are diverse, but equally require entrepreneurial creativity, a clear concept and courage in implementation.
Types of diversification
There are three different types of diversification:
The horizontal diversification
Horizontal diversification includes new products on the same value chain. An example of this can be the expansion of the operational crop rotation to include other crops such as B. Herbs.
The vertical diversification
Vertical diversification is used for new branches of business within the value chain (e.g. processing of agricultural products or direct marketing).
The lateral diversification
Lateral diversification describes new branches of business or services that have little or no relation to previous production or branches of business. Examples of this can be holidays on the farm, winter road clearance, or energy generation through photovoltaics.
Arguments for Diversification in Agriculture
Strategies for income-generating diversification make a sustainable contribution to securing and maintaining the existence of farms in the long term, contribute to higher value creation and spread the entrepreneurial risk over several pillars.
The establishment of new business fields or services serves an optimal use of resources (land, capital, manpower), creates new jobs in agricultural enterprises and last but not least strengthens the rural area.
Agricultural diversification encompasses a wide range of gainful activities
Classic fields of diversification are, for example, holidays on the farm, direct marketing, boarding horses or energy generation. However, the range of employment opportunities has expanded significantly in recent years and is now very diverse. Examples of this are farm catering (e.g. courtyard cafés), farmers' markets, subscription boxes, adventure-oriented offers, country adventure trips, domestic, communal or forestry services, social services Agriculture (e.g. senior citizens on the farm), farm kindergarten, ...
The list of possibilities is extensive and shows that the most diverse topics have found their way into agriculture and that the range and the large number of branches of business have increased.
Entry into the acquisition combination
The question of whether and which mainstay is suitable for a successful, competitive development strategy cannot be answered across the board for a farm. The offers and services are diverse and the requirements of the various income alternatives vary greatly, as do the requirements of the companies.
However, it is important to note that not every combination of income is suitable for every company. Before starting the acquisition combination, it is important to check to what extent you, the environment, the company and the location are suitable for the intended offer. For a good success, the whole family should stand behind the planned project; everyone must pull together. In addition, there must be enough free work capacity for the additional pillar. The basic requirement is a critical inventory of factors such as free work capacity, financial reserves for investments, company structure (compatibility with existing branches of business), existing building fabric, specialist knowledge, legal / tax requirements, but also the assessment of the location including a market analysis and, last but not least, the funding opportunities are important.
Contact person and qualification
I) First point of contact for questions about diversification:
Advisory departments of the offices for food, agriculture and forestry in the respective regions.
II) Training and advanced training offers in diversification:
The Diversification Academy bundles the diverse range of qualification measures. Newcomers will find orientation and decision-making aids as well as basic knowledge and have the opportunity to attend seminars on branch development. Those who want to further expand an existing income combination can hold advanced seminars, information events and much more. visit. The qualification measures are carried out by the departments for food, agriculture and forestry and funded by the Free State of Bavaria.
III) Information and advice on diversification:
The diversification work area of the LfL Institute for Business Administration and Agricultural Structure continues to develop bit by bit in Ruhstorf with the clear objective of positioning itself even more strongly than before as an information and consulting service provider in the area of diversification with its many facets.
Diversification - a future issue at the new LfL location in Ruhstorf
Head picture, photo: Warmuth / StMELF