Problem

Inadequate management skills in rural communities

Other Names:
Limited village management
Fragmented forms of commercial management in rural areas
Nature:

Business people in small communities are often dependent upon the international market for both supplies and customers. Such a market requires skillful participation in order to benefit from the services it affords, which presents difficulties in an economy of small business units. Small farmers may increase their production by using hybrid seed, equipment and tools produced elsewhere, but their small scale purchases, like those of other local businesses, must be made through expensive middlemen from outside the village. Similarly, sale of their produce through individual marketing methods requires costly transport and wholesale services. In a subsistence economy where external commercial structures are undeveloped, the subsistence style of operation itself blocks the perception of business possibilities. Producers who have never encountered their customer's lifestyle lack skills in perceiving their changing tastes and product needs. Because of this inexperience they find themselves limited to local markets or put at the mercy of sporadic market demand and expensive middleman services. They lack the skills to develop the capital to build the flexibility needed to market goods for maximum income. The resulting erratic income patterns discourage any effective financial planning and cause a cycle of loan defaults, effectively terminating credit services. Diminishing returns may lead to such capital shortage that children must be withdrawn from school to provide labour for the family to survive. In fact, such business people find themselves no longer able even to imagine success. As long as these ineffective business management methods persist there can be no significant participation in expanding the local economy.

Incidence:

[Developing countries] Small farming communities in the developing world are faced with issues such as availability of markets, diversification or crops, initiation of small industry, compliance with government regulations and agricultural quotas, and observance of strict loan regulations, all of which require management training and experience inaccessible to most of the local people, if indeed they are aware of its necessity. Simple management skills such as bookkeeping, purchasing, credit, interest terms and saving methods are extremely limited. Home industries may be unprofitable because markets have not been secured outside the village and the local demand for goods is limited. Small local shops offer overlapping stocks and are unable to expand to a profitable size. Profits from activities such as fishing may be diminishing, since middleman costs in marketing are high, encompassing both cold storage and transport. Farming done on small plots also produces little income. Essentially, all goods for the community are purchased by shop owners in a larger city. The continuation of inadequate or misinformed management approaches makes real growth in the local economy unlikely.

Claim:

Rural village vendors have a long history of trading through barter, buying and selling, but today their traditional style is being challenged as the market is undergoing a great transition. The market for local products like pots, rope, bamboo walls, hats and baskets is becoming increasingly competitive. Vendors experience themselves as having to accept smaller and smaller profits. Sales promotion and expansion include techniques just becoming familiar to the local merchant. In competitive instances he often finds himself the loser. The brokers who are middlemen between the craftsmen and the market take increasing advantage of rising inflation and the inexperience of the craftsmen. Total productivity has no doubt increased over the last 100 years, and has required more complex operations and therefore more highly technical managerial skills. Production techniques are often underdeveloped compared with modern methods. Unless advance techniques in sales, management and production are acquired soon, the rural areas will find themselves continually unable to benefit from their own potential in the commercial world.

Problem Type:
F: Fuzzy exceptional problems
Date of last update
07.11.2017 – 16:54 CET