MANAGEMENT MODEL OF THE REGIONAL FOOD MARKET DEVELOPMENT

Research article
DOI:
https://doi.org/10.23670/IRJ.2022.126.7
Issue: № 12 (126), 2022
Suggested:
03.09.2022
Accepted:
08.11.2022
Published:
16.12.2022
1230
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Abstract

A structural and logical model of managing the development of the regional food market based on the regulation of processes using strategic management tools is presented. According to the article the model includes the purpose, objectives, principles, methods, functions, justification of the direction of development of the RFM (regional food market) from the point of view of strategic, resource, reproductive and social approaches taking into account the potential, risks, strategies and development programs including the FOODNET market products, technological policy, sales of products; development of exports and reduction of imports of food products; development of measures to stabilize prices, develop competition, infrastructure, digitalization and information support of RFM, risk minimization. It is stressed in the article that one of the key elements of the implementation of the RFM development management model is the developed roadmap, which defines target indicators in the following areas: stimulation of producers and consumers, consumer demand and supply; improvement of regulatory and personnel support for food production.

1. Introduction

According to the article, the modern regional food market (RFM) operates in conditions determined by the state of the infrastructure required for the production, storage, transportation, sale of food products; the activities of economic entities producing and processing food products; the structure and volume of monetary incomes of the population; consumer preferences of the population; the level of demand, supply, prices, contest in the food market; technologies used (product, innovation, information, management); risks, etc. It is stated in the article that successful functioning and development of the RFM is ensured by its effective management aimed at achieving food self-sufficiency and security, meeting the needs of the population. At the federal level, the management system of the unified food policy is based on the development and implementation of targeted programs and national projects for the development of branches of the food sector of the economy; monitoring; regulation and control of the implementation of tasks for the food supply of the population. At the regional level, the tasks of the unified food policy for the development of the territory's market aimed at achieving the provision of food products to the population are being solved. It is stressed that the development of the food market depends on the characteristics of the region determined by natural and climatic, industrial, labor, social, biological and other factors and conditions, as well as on the organization of the management of the RFM associated with the elimination of structural imbalances and economic support of the market entities to attain maximum socio-economic effect, the formation of a favorable climate for the economic activities of all market participants. The food market has an important feature that qualitatively distinguishes it from other markets: it sells essential goods. In this regard, the food market is a sphere of economic, social and political interests.

2. Research methods and principles

In the course of investigation, the following methods were used: general scientific methods of system and functional analysis, process and spatial approaches, methods of comparison, systematization and generalization. Research information base is presented by statistical data of the Federal State Statistics Service and the authors' own scientific developments.

3. Main results

It is emphasized in the article that the structural and logical management model of the RFM development is based on the regulation of processes using the tools of strategizing, forecasting and programming. The model includes the purpose, objectives, principles, methods, functions, justification of the direction of development from the point of view of strategic, resource, reproductive and social approaches, taking into account the potential, risks, strategies and development programs including the FOODNET market. Figure 1 shows the general structure of the management model of the RFM development in the region. We are to consider in detail the structural elements of the management model of the RFM development.

The first stage is the justification of the need for the development of the RFM in a particular region. This element is based on the analysis of the current state of the RFM, identifying problems of its functioning and determining the directions of development. The current state of the RFM and the problems of functioning are presented in the works devoted to the development of the RFM [1], [2], [3]. The results of the analysis prove the feasibility of developing the model of the RFM development.

The second stage of the development of the management model of the RFM development is the description of the general provisions of the RFM development model. It includes setting goals and objectives for the development of the RFM. The purpose of the development of the food market of the region is the rational provision of the population of the region with quality products in accordance with consumption standards; the formation of an effective food market based on the interaction of its participants and the balanced development of its components ensuring sustainable profitability of all market participants. The RFM functions in accordance with the market mechanism. The market mechanism of the RFM in its most general form includes such elements as demand, supply, competition and price. It connects producers and consumers, sellers and buyers, forces them to interact and creates the necessary conditions for this, and, ultimately, determines the results and the level of consumer satisfaction in food products.

Structural and logical management model of the RFM development

Figure 1 - Structural and logical management model of the RFM development

The main objectives of the development of the RFM are presented by the elements of the RFM. They include:

1) Offer:

- formation of the legislative framework for the development of the RFM;

- optimization of the structure of food production (sunflower, sugar beet, grain, honey);

- diversification of the structure of food production (transition from the production of raw materials to the production of final products);

- stimulation of the innovative development of the RFM based on the introduction of digital economy technologies in order to increase the competitiveness of regional food products, the development of import substitution, export;

- improvement of the quality of regional food products;

- development of interregional relations in order to expand potential sales markets;

- formation of mechanisms to support regional producers;

- elimination of existing market barriers;

- achieving the necessary level of indicators of self-sufficiency of the population with food products;

- ensuring the food security of the region.

2) Demand:

- development of programs in the field of support of monetary incomes of the population;

- promotion of goods of regional producers.

3) Price:

- regulation of prices of producers of food products;

- regulation of market prices (inflation rate, national currency rate).

4) Infrastructure:

- development of the RFM infrastructure (logistics, transportation, storage, etc.).

5) Competition:

- improvement of the regulatory framework;

- improvement of the incentive system.

Also, this stage contains a description of methods, principles and tools for the development of the RFM.

The third stage of the management model of the RFM development is associated with the definition of the structural elements of the RFM system (Figure 2).

Structural components of the RFM system

Figure 2 - Structural components of the RFM system

The resource component of the system includes all types of resources: labor, land; material; innovative; investment; technical; energy; water; forest and others. The labor resources of the food sector require special attention from the point of view of training specialists who ensure the production and sale of food products. Currently, the system of training specialists in this field including the management staff has significantly weakened in the regions. It is necessary to recommend Ministries of Education and Science of the regions to resume training specialists to ensure the food sector of the economy. Unfavorable demographic processes (especially population migration), low wages in a number of regions have a significant impact on the workforce.

During the years of the crisis, a significant part of the intellectual and human potential that provides the food sector of a number of regions of Russia, traditions of applying research results, the introduction of innovative achievements of experimental stations, scientific and production testing facilities, research institutes in practice were lost.

Land resources: it is advisable to ensure reliable protection of agricultural land from negative factors, organize comprehensive land management on agricultural lands, organize a monitoring system for their condition and use.

An optimal combination and placement of the subjects of the food market infrastructure is required, determined by the volumes of products produced by agricultural producers, food and processing industry enterprises, wholesale intermediary links, retail trade network, catering, etc.

The production structural component includes the development of the management logistics chain, starting from production and processing to consumption. In addition, the functions of developing and stimulating the sales system, standardization of manufactured products, pricing issues, etc. should be carried out.

The magnitude of demand, its dynamics and structure depend on a large number of factors which include: the level of food supply; nutrition balance; consumer incomes; consumer demand level; consumer preferences; the number and composition of the population by age groups; the level of monetary income of the population, differentiation; the level of prices for products, etc. The demand and needs of the population are the basis of economic activity.

The offer is formed because of the influence of the following factors: price; export volume; import volume; own production; production of agricultural enterprises, etc.

Supply and demand are interdependent categories of the food market. Their ratio reflects the level of development of the region's economy. For a steadily developing economy supply is equal to demand.

With unsatisfied demand supply is less than demand which is typical for a commodity-deficient economy. The way out of this situation is an increase in the price level which, however, negatively affects the standard of living of the population or an increase in the volume of imports, that is, an increase in the attachment of the food market to external producers.

Limited demand for agricultural products causes a marketing problem for the relevant sector. In this case, it is advisable to stimulate the effective demand of the population on the basis of expanding the sales market for food products of social importance. Measures to expand the capacity of the market for food products provide support for low-income segments of the population, providing provision for people in need. This type of assistance can be organized in the form of issuing coupons for the purchase of the necessary amount of food products at reduced prices or by introducing social assistance to low-income segments of the population for the purchase of products. Certain measures to support the poor are applied in practice.

With the production of surplus products or high imports of goods there is an excess of supply over demand. The way out of the situation is to reduce the prices of goods which will negatively affect producers.

The optimal option is formed when the supply and demand ratios are normalized or the supply exceeds the demand in such a way that there is a saturation of the population's demand for food products, taking into account the necessary increase in inventories.

The ratio of supply and demand in the RFM depends on the price, tariff, tax policy of the region and the state as a whole, the level of production, logistics system.

To determine the levels of the supply and demand ratio it is necessary to forecast the population's demand for food products. To do this, firstly, it is necessary to predict the population of different age groups. Also, it is necessary to include demand forecasts in the development strategy of food production enterprises.

In order to achieve a balance of supply and demand in the region, it is necessary to apply a mixed type of state regulation of the food market based on combining the freedom of economic entities in choosing areas of activity and state measures to create conditions for expanded reproduction of products.

In order to eliminate possible imbalances in the supply and demand of the food market, the following areas of its state regulation should be identified:

1) compliance with the proportions of the market sphere: the ratio between the volumes of commodity production and circulation, supply and demand;

2) compliance with price fairness for producers and consumers; prevention of infringement of the interests of low-income segments of the population;

3) the choice of effective organizational forms of market relations.

It is advisable to apply a system of state impact measures that takes into account market development trends and is based on a combination of various methods: economic (for example, the provision of subsidies or compensations), administrative, organizational (for example, infrastructure optimization). In the system of state measures the following measures can be distinguished:

- to form a legally approved regulatory pricing framework that would eliminate subjectivity in the formation of prices. It is a fairly common practice when the costs of producers of food products are overstated by suppliers of food products significantly exceeding the real costs;

- to ensure the regulation of import receipts of food products using the tools of tariff and/or import quotas;

- to provide guarantees to the producer of the produced food products for their sale, that is, to form an optimal market infrastructure. This is possible with an optimal combination of the system of wholesale food markets, intermediary firms, trade and logistics complexes;

- organize commodity and procurement interventions that contribute to maintaining the balance of the market and the price level which are an important economic regulator applied by the authorities;

- to forecast the conjunctural situation in the food market, to exclude the situation when producers of agricultural products spontaneously produce it without having information about the necessary volumes and prospects for the sale of products.

It is possible to borrow foreign experience in regulating the food market, in particular, the export of food products characterized by a fairly wide range of goal-setting and, accordingly, the use of many different tools such as loan guarantees, rational taxation, insurance, tariff measures, embargoes (a complete ban on exports). In the regions of Russia an increase in agricultural exports is possible only after the saturation of the domestic market. Specialized support for the export of agricultural products must necessarily be synchronized with the production activities of economic entities in this sector of the economy and with the peculiarities of the formation of the conjuncture of world markets.

The fourth stage of the model development is associated with the definition of target indicators for the development of the RFM. To do this, it is proposed to develop a roadmap for managing the development of the RFM. One of the key elements of the implementation of the management model of the RFM development is the developed roadmap which defines target indicators in the following areas: stimulation of producers and consumers, consumer demand and supply; improvement of regulatory and personnel support for food production.

The roadmap is a planning tool that represents a process of managing the development of the RFM agreed between the participants containing specific measures and deadlines for achieving development goals and objectives. The roadmap is developed with the help of the following principles:

1) assessment of the real production capabilities of the regional food market and the level of self-sufficiency in food products;

2) equal conditions of competition between regional food producers, foreign and other regional partners.

The roadmap is based on the following components: resources, technologies, FOODNET, production (quality), distribution, exchange, consumption, infrastructure, export, import, risks. The roadmap presented in Table 1 (fragment) is developed in relation to a specific region (the Republic of Bashkortostan).

Table 1 - Roadmap for managing the development of the regional food market of the Republic of Bashkortostan (fragment)

Name of the event

Starting date of implementation

Finishing date of implementation

Responsible performers

Activities

Result

Assessment criterion

1. Improving measures of supporting of food producers

2022

2023

Ministry of Agriculture of the Republic of Bashkortostan

Ensuring the financial stability of food producers, increasing the level of self-sufficiency of the population of the region

Expansion of preferential lending programs (PAO «Rosselkhozbank», PAO «VTB», PAO «Sberbank»), expansion of the list of credit institutions

The share of concessional lending (dlk), including under the guarantee of the future harvest and the share of quotas of manufactured food products (dkp)

dlk ≥ 70 % of income;

dkp – 40 – 90 %

2. Improving the staff support of food production

2022

2026

Ministry of Agriculture of the Republic of Bashkortostan, Ministry of Education and Science of the Republic of Bashkortostan

Equipping educational institutions with modern technology and equipment, using new teaching methods and practical training.

Organization of targeted personnel training based on the real need for the development of the RFM; training, retraining and advanced training of its employees in institutions of higher education, secondary specialized colleges and vocational educational institutions

Conclusion of tripartite agreements for education: Ministry of Education and Science of the Republic of Bashkortostan – Administrations of the Ministry of Defense – Educational institutions (BSAU, BSPU, USPTU, KFU, OSU etc)

- the level of provision of food producers with labor resources (dtr),

 - labor productivity (Ptr)

 dtr = 100 %,

Ptr = 2 mln. rub. for 1 employee

The main conditions for achieving the target indicators of the roadmap management of the RFM development in the region are [4], [5]:

- completion of the improvement of the legislative and regulatory framework for the development of the RFM;

- creating conditions for an accelerated transition to modern technologies of the digital economy of food production and processing;

- optimization of the territorial location of food production;

- increasing measures of state support for the export, production and processing of food products and ensuring the priority of food exports;

- advanced development of market infrastructure;

- support for domestic consumption.

The regional roadmap makes it possible to synchronize regional and municipal processes in the management of the development of the RFM, to ensure that risks are taken into account, the availability of resources when choosing goals and making managerial decisions, to introduce elements of project management into the activities of regional authorities, to contribute to the development of the region and to prevent problems in the future. The forecast of the values of the indicators of the roadmap for the development of the Republic of Bashkortostan is presented in Table 2 (expert method) [6], [7], [8], [10].

Table 2 - System of indicators for the implementation of the roadmap for managing the development of the regional food market of the Republic of Bashkortostan (forecast)

Criteria

2020

(fact.)

Valid range

Years (forecast)

2022

2023

2024

2025

2026

The value of indicators of food production volumes based on the construction of forecast models for which a decline is predicted

The volume of production of commercial honey, tons

6076

-

6100

6120

6150

6180

6200

The volume of production of livestock and poultry meat, thousand tons

287

 

292

295

298

300

303

Vegetable production volume, thousand tons

288

-

291

293

296

300

304

Sunflower production volume, thousand tons

313

-

317

321

325

327

330

Sugar beet production volume, thousand tons

1290

-

1700

1750

1770

1790

1800

Grain production volume, thousand tons

3839

-

3850

3920

3925

3950

3980

Egg production volume, million pieces

1029

-

1035

1050

1075

1090

1120

The value of the indicators integrated into the methodology of economic diagnostics

Clustering of regions by gross collection of raw materials

1 cluster

1-3

1

1

1

1

1

Determining the rating of regions by an integral indicator

2

Above 1

2

2,1

2,2

2,3

2,4

General characteristics of the RFM's state by its elements

Overall condition is average

Overall condition is above average

Overall condition is average

Overall condition is average

Overall condition is average

Overall condition is average

Overall condition is above average

The degree of development of digitalization and FOODNET directions in the region

2

5

3

3

3

3

4

The value of specialization coefficients

1,92

Above 1

2

2,1

2,2

2,3

2,5

The value of concentration coefficients

80 %

LCM* and MCM**

80%

LCM

80 % LCM and MCM

80 %

LCM and MCM

80 %

LCM and MCM

80 %

LCM and MCM

80%

LCM

The value of the indicator of food self-sufficiency of the region

6

5-10

7

8

8

9

9

The importance of foreign economic food potential

0,61

Above 1

1,5

1,9

2

2,5

3

Assessment of the probability of risks' occurrence of development of RFM

The probability of risks' occurrence affecting the functioning and development of the RFM

The number of risks with a probability of occurrence of 81%-100% is about 18 %

-

No more than 15 %

No more than 15 %

No more than 13 %

No more than 12 %

No more than 10 %

Note: LCM* – low concentrated markets; MCM** - moderately concentrated markets

The conditions for achieving the set priorities should be solved on the basis of the synthesis of the following components: regional resources, financial support, investments in the region, research and innovation, staffing, as well as risk management.

Legislative and informational support for the implementation of the model is associated with the description of the legislative and regulatory framework for the development of the RFM. The management model of the RFM development should not run counter to existing federal and regional legislative acts, developed strategies, programs and development projects. The management model of the RFM development is based on regulatory documents of industry significance, regulatory documents of food sector entities, standards of scientific, technical and engineering societies and other public associations, standards of enterprises and technical conditions.

An important component of the management model is the analysis of the following components:

1) production capabilities;

2) determination of the levels of supply and demand for food products;

3) forecast of the achievability of production indicators;

4) consequences of the implementation of the directions of the model.

4. Conclusion

The implementation of the considered directions of improving the management of the regional food market, in our opinion, will have a positive effect and will be reflected in an increase in the index and production volumes of food products, improving the quality, competitiveness of food products in the region and the development of the food market of the region as a whole.

The introduction of a structural and logical management model and the implementation of the roadmap will ensure a positive trend in the values of the presented indicators characterizing the development of the regional food market. The achievement of the forecast values of the presented indicators is possible on the basis of the synthesis of components: resources of the region; financial support; investments in the economy of the region; scientific research and innovation; digitalization, human resources development; effective risk management.

The Republic of Bashkortostan has all the necessary resources for sustainable growth of volumes of almost all types of food products. The measures presented above will make it possible to effectively implement the policy aimed at the development of the RFM both in the region and in Russia as a whole.

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