Dr. Joan Fulton Professor and Associate Department Head Department of Agricultural EconomicsPurdue University

Peter Diamond, Dale Mortensen, Christopher Pissarides

For their analysis of markets with search frictions.

Elinor Ostrom and Oliver WilliamsonFor “her analysis of economic

governance, especially the commons.” and “his analysis of economic governance, especially the boundaries of the firm.”

Paul KrugmanFor his analysis of trade patterns and

location of economic activity

Leonid Hurwicz, Eric Maskin and Rober Myerson

for “having laid the foundations of mechanism design theory.”

Finn E. Kydland, Edward C. Prescott“for their contributions to dynamic

macroeconomics: the time consistency of economic policy and the driving forces behind business cycles.”

2003 Engle III and Granger – “for methods of

analyzing economic time series with time-varying volatility (ARCH)”

2002 Daniel Kahneman and Vernon Smith – “for

having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty.” and “for having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms.”

2002 George Akerloff, A. Michael Spence and

Joseph E. Stiglitz – “for their analyses of markets with asymmetric information.”

2001 James Heckman and Daniel McFadden –

for “development of theory and methods for analyzing selective samples” and for “development of theory and methods for analyzing discrete choice”

Accounting 101

Economics 101

The Dilemma Change Majors or Get a Degree in 4 Years

The Solution Bachelor of Commerce (business)▪ Honors in Economics

This path allowed me to complete my Bachelor’s degree in 4 years while still focusing on economics

So my career has combined business and economics from the start

University of Western Ontario London, Ontario, Canada

MA in EconomicsVery Theoretical

Mathematical models of economics with no application was not sufficient for me at that time

Decided that I needed to experience the business world

Spent 2 years as Strategic Analyst in Corporate Planning Department of the Potash Corporation of Saskatchewan

Pulling It All Together with Economics

5 years teaching intro and intermediate economics at University of Saskatchewan

“You really learn something when you have to teach it.”

Taking Economics to the Next Level After 2 years working in a corporate

environment and 5 years teaching introductory and intermediate economics I was prepared to see the value of theoretical modeling of economic concepts using high level mathematics

Applications of economics to business environment (farm business management, cooperative management, logistical examples) were an integral part of the program

Centralized versus Decentralized Decision Making in Grain Marketing Cooperatives Professors Prescott and Hurwicz were both

on my Ph.D. committee Initial theory suggested we should see more

decision making activity at centralized level – but my empirical results found bulk of activity at decentralized level▪ Revisiting the model to consider the extent of the

uncertainty

Following Ph.D. my research examined Member Commitment to their Cooperatives Situations where cooperative structures CAN

and DO work▪ Where joint ownership and joint responsibility are

recognized by all of the decision makers so people do not “free ride”

Factors affecting success with Joint Venture and Strategic Alliance agreements

Effectiveness of New Generation Cooperatives

Customer Satisfaction with their Cooperatives

Managing multi location facilities for grain marketing cooperatives

Consolidation of agricultural cooperatives over time

Effectiveness of Word of Mouth Marketing

Value Added Businesses can be important – especially in agriculture

Challenge for small business owners can be the lack of business skills (marketing, finance, planning) Often they have the skills for the technical

production aspect of the business Large percentage of small businesses

fail Business planning significantly increases

chance of success

Although building a plan does not guarantee success, it does increase your chances of succeeding in business.

Research has shown that attempting to write a business plan increases your chances of starting a business by 24%.

A plan is like a road map.

23Fighting Poverty

Women Entrepreneurs

Miriam OtooGraduate Student, Dept. of Ag. Econ, Purdue University Germaine IbroEconomist, Institut de Recherche Agronomique du Niger Joan FultonProfessor, Dept. of Ag. Econ, Purdue UniversityJames Lowenberg-DeBoerAssoc. Dean Int. Programs in Ag., Purdue University

24

Women hold a central role in this sector, They use traditional skills and little capital

to prepare food from scratch using local cereals and grains.  

Provide important nutrition for all consumers and especially the urban poor

Important product from cowpeas: Kosaï

25

Essential source of inexpensive ready-to-eat food for workers of every class and occupation.

Kosaï: consumed at anytime of day: for breakfast and as a snack between lunch and dinner. 26

The objective of this work is to identify the factors that affect the success or women entrepreneurs involved in kosaï production and sales in the three largest cities of Niger (Niamey, Maradi and Zinder)

28

Census of Kosai Vendors Niamey Maradi Zinder

One-on-one Interviews with Random Sample of Vendors

29

30

Between 50% and 60% of vendors have no formal education

Primary education: 25% in Niamey, 8% in Zinder and 4% in Maradi

31

Savings:- 80%, 77% and

67% of vendors in Niamey, Zinder and Maradi respectively;

Maradi and Zinder vendors used earnings for immediate expenditures

Two Measures of Success Considered Size

Quantity of cowpea used per day is proxy for size of business operation

OLS regression analysis with size as dependent variable

Growth Self reported perception of the women.

Variable equal to 1if she was experiencing growth, 0 otherwise

Binary Logit analysis32

Success = f(education, experience, business constraints)

R2 values are low Experience (years in business)

- positive and statistically significant for all models- indicates that vendors with more experience are more

successful; Capital Constraint variable:

- negative and statistically significant for two of the models

- vendors identifying capital equipment as an important constraint are less likely to be successful;

Cowpea Constraint variable:- negative and statistically significant for all models- vendors who find purchasing cowpea as an important

constraint are less likely to be successful.34

• Dummy variables for education:• not statistically significant• Indicates that level of education

does not affect the level of success for the Kosaï vendors.

• Dummy variables for city:• statistically significant – but suggest

that may be picking up some other factors

35

Likelihood ratio tests show that all models are statistically significant.

Experience (years in business)- positive and statistically significant for all models. - corroborates the results of the OLS model.

Capital Constraint- Negative and statistically significant

Cowpea Constraint Negative and statistically significant- This supports Esim’s (2001) findings, who cites

non-availability of raw materials as a major constraint faced by women micro-entrepreneurs in developing countries

36

Dummy Variable for Education- Coefficients are negative and significant , not expected;- Vendors with more education have other employment

opportunities;- Vendors with secondary education usually younger and

single and enter into Kosaï production just to save enough money for continuing their education or for their trousseau;

Family Size- variable is positive and statistically significant, implying

Kosaï vendors with larger family size were more likely to experience growth;

- family members provide free or inexpensive labor. Dummy variables for city:

- Similar to OLS results, these variables are statistically significant but are most likely picking up other effects 37

The production and selling of Kosaï by women street vendors in West Africa is an important economic activity Uses a significant amount of cowpea Provides nutritious food for general population Provides important income for the women who spend the

money on their families Experience is an important factor contributing to success Production constraints are also important

Capital Purchasing the cowpea every day Preparing the batter

38

Explore other measures of successExplore the production constraint of

“Preparing the Batter” Joint work with Food Scientists Have identified a potential new line of

business▪ Making a dry cowpea product for quick

mix of kosaï

39

40Fighting Poverty

Women Entrepreneurs

Profit = Revenue – CostsRevenue equals

Selling Price times Number of Units SoldCosts

Fixed Costs▪ Those costs that you incur even if you

produce/sell nothing Variable Costs

THE BUDGETING PROCESS

Marketing Plan Consider each Market Segment ▪ Number of customers who are potential – and

who will BUY▪ Number of units each customer will buy▪ Price customer will pay▪ Price times Quantity = REVENUE from that

segment Add up Revenue Across all Segments

Go through all aspects of the operation and identify the costs

Fixed Costs – you will get a totalVariable Costs – most of these will be

on a per unit of product produced basis

Add up all costs for the amount you project to product to get Total Costs

Profits = Revenue - Costs

Careful evaluation of ALL of your competitors

5 Forces Publication is excellent resource here

There is ALWAYS Competition Sometimes it is “do nothing”

Your entry into the market may cause an unexpected reaction by a competitor – plan for this as much as possible

What is the Core Benefit your product/service provides?

What are the needs that your primary customers have?

How does the Core Benefit of your product fit with the needs of your customers? What are the implications for marketing?

Planning is extremely important because It provides a ROAD MAP Following the plan is the best way for all people

involved in the business to be “on the same page” If things don’t go as expected you can look to the

map to see what the appropriate “detour” will be Research has shown the value of planning -

attempting to write a business plan increases your chances of starting a business by 24%.

Purdue’s On-Line Business Planning Tool:

InVentureFor more information see the

lecture from the first evening

https://www.agecon.purdue.edu/planner/

Purdue’s AICC/New Ventures Publications

We have a set of over 20 publications targeted for small business management.

Check out these! They are all free of charge!

https://www.agecon.purdue.edu/planner/re

sources/

The publication on the 4Ps of Marketing is closely related to the material covered in the 2nd session. Note that the publication is all about Marketing material but is presented a bit differently than the material in the 2nd session in other words don’t expect it to be just the same.http://www.ces.purdue.edu/extmedia/EC/EC-730.pdf

The publication that helps entrepreneurs think about the competitive environment they are operating in may be helpful for many people

http://www.ces.purdue.edu/extmedia/EC/EC-722.pdf

For people who are just starting to think about the new business the following publication can help entrepreneurs sort through the process of taking care of all licenses.

https://www.agecon.purdue.edu/newventures/var/EC733.pdf

Check out this page with all of the list of publications – we just had a

sampling this evening!

https://www.agecon.purdue.edu/planner/resources/

https://www.agecon.purdue.edu/newventures/Grant_Writing/index.html

Here you will find a set of resources that will be useful when you are

preparing to develop and submit a grant proposal. The resources include: a Quick time video with background,A

Quick Time video with a specific example, A publication(with important

worksheets) on Grant Writing.

http://in.marketmaker.uiuc.edu/