Background of the Research Topic

On a broader scale, businesses are always thinking about major industry shifts and new technologies that will affect the way that they operate in the years ahead. With developments in technological innovation, internet-powered tech companies and startups are challenging the biggest incumbent industries like hospitality, transport, and now agriculture. From a management standpoint, technological innovation, in the form of digital transformation, will certainly impact all business sectors. In the agriculture sector, digital transformation will affect aspects of yield, efficiency, and profitability. There is huge potential, and need, to help the agriculture industry find efficiencies, conserve valuable resources, meet global demands for protein, and ensure consumers have access to clean, safe, healthy food. To achieve this, technological innovation is inevitable. To keep the workforce and operations intact, revenues and profitability will certainly decrease.

According to a study from Price Waterhouse Coopers (2016), regarding agriculture enterprises and digital technology, digital technology will impact the industry ―on the farm‖, such as input technologies (encompassing all inputs such as fertilizers, pesticides, soil amendments, genetics, seeds, and feed); precision agriculture (including drones and robotics, big data, smart equipment and sensors, and farm management software); new production and new business models (indoor or controlled environment agriculture, cellular agriculture, input and asset sharing). Nowadays technologies are looking to disrupt the supply chain in the agriculture sector through traceability and packaging, processing technologies, waste-reducing technologies such as biotechnologies producing biomaterials from food and agricultural waste, farm-to-consumer distribution, e-grocers, and food nutrition transparency. These technologies are being applied globally across developed and emerging markets. As a supporting enterprise in the supply chain, agriculture enterprises are also subject to innovation to keep up with the changing trend. Changes in farm ownership are challenging the traditional dynamics between agriculture enterprises and farmer relationships. There is a trend of strategic acquisition of farmland and established farming operations by institutional investors. These stakeholders recognize the value of land scarcity and the investment opportunities that come with it. There is also a trend where younger farmers

are beginning to take over their family‘s farms. The younger generation of farmers are more technological-savvy and they looked from digital experiences in other industries to apply in the agriculture sector. Therefore, the farmers of the next generation may leave the long established traditional relationship for a breakthrough in digital agriculture. In the next decade, there will be retirement of much of the rural workforce in farms. As the older generation leaves the industry, they will depart with years of customer insights and agronomic expertise. The transfer of knowledge and client relationship may be difficult since the younger generation leaves the rural area for high paying jobs in urban areas.

The urbanization that is taking place will have an impact on the loss of human resources in the agriculture sector. However, digitalization might be a driving force to bring young talent back to the agriculture industry. Digitalization will become increasingly important in the future, and since the agriculture business involves largely daily transactions to maintain the food supply chain, then digital payments will become a trend in day-to-day operations.

A study from Centre Technique de Coopération Agricole et Rurale (CTA) in 2018 mentioned that agriculture plays a major role in the economy with numerous cash transactions taking place throughout the value chain. Digitalization should be able to answer the challenge by finding ways that can be economically and environmentally sustainable. Although the study from CTA focuses on the digitalization of agriculture in Africa, the Caribbean, and the Pacific, overall, digitalization could potentially increase productivity and profitability levels. As digital agriculture matures, agriculture retailers will continue their important role of servicing producers through interrelated farm technologies and crop input products. Often structured as enterprises, agriculture retailers serve as the middlemen between manufacturers and growers in the agriculture value chain.

According to Nadeau and Nadeau (2016), agriculture enterprises are owned and democratically controlled by their members. Enterprises are owned by producers, consumers, workers, business, and other organizations, and combinations of the above.

Also, according to the International Cooperative Alliance (ICA), unlike for-profit businesses, in which profitability is the primary measure of success, service to members is the priority of enterprises, but they also must maintain a level of profitability that allows them to operate sustainably over time. From a measurement perspective, the growth or decline of enterprises is problematic, because there is no worldwide, longitudinal data set encompassing the many different kinds of enterprises.

Throughout this research, the term ―agriculture enterprises‖ is used to describe business units engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural related industries, which also encompasses cooperatives. The use of the term ―agriculture enterprises‖ is to give a general idea about the structure of the business unit, as the term ―cooperatives‖ has a different meaning in Indonesia and Hungary, respectively.

The number of agriculture enterprises in the world is approaching 3 million, and the number of agriculture enterprise memberships is about 2 billion. By 2030, there would be more opportunities to create additional agriculture enterprise enterprises (ICA, 2018):

1. Improving the measurement of performance in agriculture enterprises

Without systematically measuring the number of agriculture enterprises and related variables over time, it is not possible to tell whether the agriculture enterprise movement is increasing or decreasing in size and sustainability. This lack of information creates a fundamental problem: how can we increase the role of enterprises in the world, if we do not know how many there are or what are they doing? Good data and analysis are prerequisites to good planning. Research on agriculture enterprises, including a periodic, global census, is necessary for effective planning their long-term growth.

2. Improving the legal and regulatory environment for agriculture enterprises.

The quality of agriculture enterprise laws, regulations and regulatory systems varies dramatically from one country to the next. All countries should have agriculture enterprise laws, regulations, and enforcement practices that are consistent with the seven agriculture enterprise principles.

3. Strengthening community-level, national and international support for enterprises.

4. Improving agriculture enterprise development and financial assistance.

5. Developing targeted strategies for agriculture enterprise sectors, countries, and job-creation opportunities.

The agriculture sector is commonly faced with problems such as production capacity and quality, access to markets, improved trading positions, and higher incomes.

Digitalization is a driving force for agriculture enterprises to keep up with the changing trend. Digital financial services (DFS) hold an enormous opportunity for financial inclusion and expansion of basic services. Financial services can help development through facilitating transactions, investments, and managing accounts. When provided with appropriate DFS products and access to well-designed networks, agriculture

enterprises will benefit from improvements in income, financial management, and economic resilience. DFS will become increasingly important and widespread, since in the future, digitalization will take over some parts of daily operations of businesses, including agriculture.