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ENTREPRENEURSHIP IN AGRICULTURE AND A FINANCIAL MODELLING ADVISORY TO A NEW OLIVE FARM INVESTMENT IN TURKEY
- Abdullah Burak MENGÜÇ
Ph.D. Güner GÜRSOY
Assist. Prof. Dr. Özlem KUNDAY
CHAPTER 1: INTRODUCTION
This study will focus on entrepreneurship in agriculture and a financial modelling advisory to a new olive farm investment in Turkey. Sectoral research which is about entrepreneurship is mostly paid attention to manufacturing, high technology and service industries, whereas, is slightly given attention to agriculture (Alsos, Carter, Ljunggren & Welter, 2012). Olive has a special portion in agribusiness of Turkey. Olive is formed as 10% of all agricultural enterprises (Olive Research Institue, 2012)2012). In this study, the researcher will investigate the entrepreneurship in agriculture and a financial modelling advisory to a new olive farm investment in Turkey.
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Entrepreneur is someone who establishes and manages a business for the aim of gaining profit and growth. Entrepreneurship is an act of enterprise that is applied by an entrepreneur (Gartner, 1988). Entrepreneurship is an important subject in economics and social sciences. Entrepreneurship can be formed into public and private entrepreneurship. In this study, private entrepreneurship will be studied which is related to the purpose of the study. Private entrepreneurship can be formed into Service, Merchandise, Industrial and Agricultural Entrepreneurship (Gokce, 2010). For this study, agricultural entrepreneurship is considered as a main type of entrepreneurship.
Some researchers define agricultural entrepreneurship as an innovation or investment of farmers in order to improve or expand their farming business for gaining more profit or growth (Kahan, 2012). The definition of agricultural entrepreneurship is considered as a new investment which is for building up a farm from nothing. In this concept, investors will use their own resources, governmental incentives and/or bank loans. The investor may or may not have knowledge about agriculture in order to make an investment to agribusiness. The important thing is to make investment into a new farm in order to raise capacity of investment and their profit in the agricultural sector.
Olive production is restricted with most importantly climate conditions and also several other facts that raises importance of olive production in countries which is in suitable climate zone. Olive production widely occurs in between latitudes of 30 and 45 degrees of northern and southern hemisphere and primarily produces in Mediterranean region, Europe and Arabian Peninsula where supply almost whole of the world olive production. (Öztürk, YalçÄ±n, DÄ±raman, 2009). For that reason, Turkey has important place as an olive producer due to its climate conditions and several other facts.
Turkey has an important place as an olive producer, olive and olive oil exporter in the world. Turkey is the biggest producer in the countries which is not in European and the 4th biggest producer in the world (Secer, 2012). Turkey supplies 8,56% of olive production of the world (FAOSTAT, 2011). Olive investment is rapidly increased in last decade in Turkey because of increased governmental incentives for agriculture, low interest rate bank loans and increased irrigable land. Moreover, due to developments in technology and government investments about irrigation in agriculture, olive tree numbers increased 62.6% and olive production raised 97.2% in last decade in Turkey (TUÄ°K, 2013). After these new investments to the olive and the number of olive trees rapidly increasing, supplied olive production of Turkey will be raised more in near future according to the government investments and the other factors that have affected increasing in last decade.
Olive investments can be accomplished with investors own resources and bank loans in addition to government incentives which investors may or may not have use. The raise in olive investment results in the increase of olive production. Olive production is supported by Turkish Government for many years in Turkey, such as fuel, fertilizer, Soil analyze, Good Agriculture Process and incentives directly to the product. Olive investment is supported with mechanisation, irrigation, certificated olive sapling purchase, organic olive production , land allocation for olive production. Some of these incentives still continue, some of them are restriced with regions and some of them are cancelled. In this study, incentives will be searched with specific bank loans for agricultural and olive investments together or seperated.
The intencives in Turkey that increased recently, developments in agriculture and financial stability increased tendency to the investment of olive. The literature on entrepreneurship in agriculture and a financial modelling advisory to a new olive farm investment is very limited. There is lack of resources for enterprenur who wants to make investment to the olive because of whether the interpretation of the enterpreneurship on agriculture specifically, or deeply unanalyzed investment for olive financially. The olive invesment will not be profitable in short term with current financial conditions and bank interest. The working hypothesis of current study is that the olive invesment can be profitable according to increase in portion of export to the world with branding and increasing in export incentive. The olive invesment must be invesitgated in terms of agricultural enterpreneurship and financial modelling.
Purpose of the Study
The main purpose of the current study is to investigate entrepreneurship in agriculture and a financial modelling advisory to a new olive farm investment in Turkey. The secondary purpose of the study is to help investors who want to make investment to olive by defining financial model. The territory purpose of the study is to make agricultural entrepreneurship understandable to the readers.
CHAPTER 2: LITERATURE REVIEW
This chapter established the theoretical framework of this study. The purpose was to present agricultural entrepreneurship, olive investment and a financial modelling advisory. First, the definition of entrepreneurship and agricultural entrepreneurship has been explored through a rigorous analysis of relevant studies. Second, olive investment has been explained. This section provided the readership with a research-based rationale about agricultural entrepreneurship in Turkey, how does being an entrepreneur in agriculture, opportunities, difficulties and threats. Finally, financial modelling in olive investment was critically analyzed. All this served as a framework to understand entrepreneurship in agriculture and a financial modelling advisory to a new olive farm investment.
1. Entrepreneurship and Agricultural Entrepreneurship
The study of entrepreneurship reached back to the work of Richard Cantillon and Adam Smith in the late 17th and early 18th centuries. It was largely ignored theoretically until the late 19th and early 20th centuries. In these centuries, entrepreneurship was defined by Schumpeter (1934) as “essentially, consists in doing things that are not generally done in the ordinary course of business routine, it is essentially a phenomenon that comes under the wiper aspects of leadership” (p. 254). Soon after that, entrepreneurship was also defined by some other researchers. In addition to Schumpeter, Gartner defined entrepreneurship as an act of enterprise that is applied by an entrepreneur (Gartner, 1988). Entrepreneurship was defined by many researchers starting from the late 17th century.
Entrepreneurship was formed in two folds: (a) public entrepreneurship; and (b) private entrepreneurship. Private entrepreneurship included service, merchandise, industrial and agricultural entrepreneurship (Gokce, 2010). Agricultural entrepreneurship was defined as similar to general entrepreneurship definition. However, an agricultural entrepreneur was defined differently from entrepreneur as who organizes, manages and assumes the risks of and agri-business or agri-enterprise more deeply than entrepreneurs who are in different business (Parcell & Sykuta, 2003). Although general entrepreneurship and agricultural entrepreneurship was defined similarly, the definition of entrepreneur in each entrepreneurship had differences by assuming risks.
2. Position of Olive and Olive Investment in Turkey and in the World
Turkey has been considered the 17th biggest economy in the world (The World Bank, 2013) and 7th biggest agricultural economy in the world (The World Bank, 2013). Agriculture was one of the most important sector in Turkish economy, according to official figures; agriculture sector has 8,8% portion in GDP and 24,1% of employment of Turkey (Official Gazette of Turkish Republic,2013). Olive had an important economic value in the world. According to FAO statistics, total value of olive production was 20210 Million $ in the world and 2783 Million $ of total production was produced in Turkey in the year of 2011(FAOSTAT, 2014). Moreover, total agricultural production value of Turkey was 74483 Million $ in 2011(FAOSTAT, 2014). According to these production values, when calculated, Turkey produced 13,78% of world olive production and olive production value was 3,74% of Turkey total agricultural production value. These values indicated that Turkey was 7th biggest agricultural economy in the world in 2013.
Olive investment increasingly continued in last two decade in Turkey and in the world. Olive harvested area increased 28% and olive production increased 119% in years between 1990 and 2009 in the world. In addition, olive harvested area increased 36% and olive production increased 17% in years between 1990 and 2009 in Turkey (Secer, 2012). Moreover, according to Secer (2012), olive investment mostly increased in east side of Mediterranean region and supply amounts was expected to be rise in near future (p. 96). The resources that had been presented with percentages showed that there was an increase in olive investment in last two decade both in Turkey and the world.
3. Olive Investment and Financial Modeling
Olive investment needed to be researched in agricultural techniques and considered as its economic feasibility (De Genaro, Notarnicola, Roselli, &Tassielli, 2011). According to this article, researchers applied two growing techniques, “High Density” (with over 200 trees/ha) and “Super High Density” (with over 1500 trees/ha) (Tous, Romero, & Hermoso, 2007) to perform an economic feasibility comparison with Life Cycle Assessment (LCA), due to ISO 14040:2006 and 14044:2006 standards (ISO,2006a, b) and Life Cycle Costing (LCC) (White, Savage, & Shapiro, 1996). Thus, researchers reached that LCC and LCA analysis showed that High Density Olives performed better than Super High Density Olives.
Alsos, G.A., Carter, S., Ljunggren, E., & Welter, F. (eds.) (2012).The handbook of research on entrepreneurship in agriculture and rural development. Northhampton: Edward Elgar Publishing.
De Genaro, B., Notarnicola B., Roselli L., &Tassielli G. (2011) Innovative olive- growing models: an environmental and economic assessment. Journal of Cleaner Production, 28, 70-80.
FAOSTAT, (2011). Olive Production,2011
FAOSTAT, (2014). Value of Agricultural Production, Olive Production year of 2011statistics.
Gartner, W. B. (1988). Who Is an Entrepreneur?” Is the Wrong Question. American Journal of Small Business, 12(4), 11–32.
Gokce, O. (2010). Agricultural Entrepreneurship and Its Development. Retrieved from
Kahan, D. (2012). Entrepreneurship in Farming. Rome: Food and Agriculture Organization of the United Nations
Official Gazette of Turkish Republic, (2013). 2014 YÄ±lÄ± programÄ±nÄ±n uygulanmasÄ±, koordinasyonu ve izlenmesine dair bakanlar kurulu kararÄ± eki (25 Ekim 2013 Tarihli ve 28802 SayÄ±lÄ± Resmi Gazetede YayÄ±mlanan 7 Ekim 2013 Tarihli ve 2013/5502 SayÄ±lÄ±).
Olive Research Institue. (2012). Balance Sheet of Table Olive and Olive Oil Sector of Turkey. Retrieved from http://www.zae.gov.tr/index.php/bolumler/ekonomi/bilancolar
Öztürk, F., YalçÄ±n, M., DÄ±raman, H. (2009) “Türkiye ZeytinyaÄŸÄ± Ekonomisine Genel Bir BakÄ±ÅŸ” GÄ±da Teknolojileri Elektronik Dergisi, 12(2) 35-51
Parcell, J. & Sykuta, M. (2003). Undergraduate Perceptions of the Need for an Agricultural Entrepreneurship Curriculum. Selected Paper Prepared for Presentation at the Western Agricultural Economics Association Annual Meeting, Denver, Colorado.
Schumpeter, J. A. (1934). The theory of economic development. Translated by R. Opie. Cambridge: Harvard University Press.
Secer, A., (2012). Olive and olive oil production and marketing in east mediterranean region and the possibilities to improve olive sector in the region
The World Bank, (2013). The World Bank: World Development Indicators Database.Agriculture, value added 2012. Last revised on 1 July 2013
The World Bank, (2013). The World Bank: World Development Indicators Database.Gross Domestic Product 2012.Last revised on 1 July 2013
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TUÄ°K, (2013). Olive Production, 1988-2013
White, A.L., Savage, D., & Shapiro, K. (1996). Life Cycle Costing: Concepts and Applications, in: Curran MA (ed.): Environmental Life Cycle Assessment, McGraw-Hill, New York, p. 7.1-7.19.
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