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13 CAgE INFLUENCING FACTORS TOWARDS STUDENTS ENTREPRENEURIAL ATTITUDE AT UNIVERSITAS SUMATERA UTARA Diana Chalil 1 and Arwina Sufika Universitas Sumatera Utara Medan, Indonesia 1 Corresponding Abstract In , BPS recorded more than 600,000 open unemployment from university graduates. The aim of this study is to analyze influencing factors towards students entrepreneurial attitude. Data was obtained from 121 USU students from various faculties and study programs, by using a structured questionnaire. Of the 121 samples, 21 of them did not completely answer the question, thus were not included in the estimation and were subsequently analyzed. The attitude is measured by 4 factors namely (1) their orientation after graduation, (2) students' perceptions of success determination, (3) the tendency to be action oriented, and (4) the level of innovativeness. Influencing factors consist of 3 groups namely (1) motivation that includes financial need, work challenge and the need to be recognized, (2) competence that includes the ability to identify opportunities, the ability to cope with stress, the ability to cope with problems, the ability to cope with uncertainty and the ability to deal with failure, and (3) personality which consists of self confidence, leadership and the totality in working. The linear estimation result shows that of the 11 independent variables, only 3 significantly influence the independent variable, namely the challenge of work, the ability to deal with failure and the totality of work. All of them have positive signs, with a value of 0.419, and 0.409, respectively. Keywords: entrepreneur, attitude, motivation, competency, students personality Introduction In 2013, five ministries in Indonesia have agreed to develop entrepreneurship to address the unemployment problem. Ministry of Manpower and Transmigration targeted the creation of 10,000 new entrepreneurs annually. One of the targets is educated unemployment in urban areas, including those from the college graduates (Kemenakertrans, 2013). In , BPS (2014) recorded more than 600,000 open unemployment from university graduates. Such a condition does not merely stem from the lack of job opportunities, but is also caused by the high interest of college graduates to find a job rather than to create ones. This indicates that students attitude towards entrepreneurship is still minimum; although a number of entrepreneurship programs have been conducted at various universities, including Universitas Sumatera Utara. For example, as a complement to many entrepreneurial programs that have been there before, since 2009 the Government through the Directorate General of Higher Education, Ministry of Education and Culture has launched the Student Entrepreneurial Program (PMW) to be implemented and developed by universities. The program is implemented in the entire State University (PTN) and in some Colleges (PTS) selected results Coordinator of Private Universities (Kopertis). However, after evaluating the program in Universitas Hasanuddin, Makassar, Indonesia, Yusuf (2012) stated that implementation of the program is not effective. The Indonesian Ministry of Manpower and Transmigration claimed that one of the problems might stem from the university curriculum that does not focus on the creation of strong entrepreneurs (detik.com, 2012). In USU, entrepreneurship education is divided into curricular and extracurricular education. Curricular education is implemented in entrepreneurship courses, while extracurricular is in all activities carried out by a number of supporting units in the Bureau of Student and Alumni. In early 2008, USU sent its staff for a fostering entrepreneurship in students- comparative study to the five universities in Malaysia. The results of the visit was the formation of USU Student Entrepreneurship Center (SEC) USU. Conducting a comparative study in three countries, namely Indonesia, Japan and Norway Indarti and Rostiani (2008) found that education is a major influencing

14 factor of the Indonesian students entrepreneurship intensity. Similarly, Thomson (2004) argues that entrepreneurship education can effectively improve various entrepreneurial characteristics. Kazemi and Manandar (2012) suggested that entrepreneurship has a number of dimensions including creativity, inner control (independency), leadership, dealing with ambiguity and uncertainty, need for achievement, personal control, innovation, self-confidence, attitude toward self-efficacy, inner control, creativity, leadership, intuition attitude toward earning money, competition (rivalry), risk taking, selfeffectiveness, differentiability, and inner independency. Using respondents perception of 4 entrepreneurial attitudes determinants namely leadership, creativity, need for achievement and interior control they find that the level of entrepreneurial level of athlete students in Tehran, Iran is above average. No demographic variables such as gender, having a selfemployed father, employment status of mother, and the type of university have significant impact on the level of entrepreneurial attitude in students. In contrast, using Structural Equation Model, Yang (2013) find that gender and parents entrepreneurial experience have significant impacts on Chinese undergraduates entrepreneurial attitude, subjective norms, perceived behavioral control, and entrepreneurial intention. Yang suggests effective entrepreneurship education could significantly enhance perceived behavioral control and entrepreneurial intention. Similarly, Schwarz et al (2009) and Rasli et al (2013) suggest that educators and practitioners may influence individuals entrepreneurial attitudes by influencing individual desire for achievement, risk taking propensity, internal locus of control, or improving their innovativeness. In Austrian and Malaysian student cases, university courses on entrepreneurship and small business management as well as incubators located on campus appear to be crucial for waking students enthusiasm and interest in business ownership. The aim of this study is to analyze the influencing factors towards students entrepreneurial attitude. Method This research was conducted at USU, which is one of the universities that have continuously implemented entrepreneurship programs for students. Since 2009 USU has a Student Entrepreneurship Center. USU Students also follow and receive entrepreneurial grants from the Directorate General of Higher Education. USU has also established various collaborations with private companies and government institutions in developing entrepreneurship programs. Data was obtained from 121 USU students from various faculties and study programs, by using a structured questionnaire modified from those in the Business Development Bank of Canada (BDC) website QuestionnaireNew Section11En.asp. Sampling was conducted by a convenient sampling method. The population is students who have known entrepreneurship either through lectures or as participants in various entrepreneurship programs and activities in USU. Of the 121 samples, 21 of them did not completely answer the question, thus were not included in the data estimation. The data was then analyzed with multiple regression model with entrepreneurial attitude as the dependent variable and 11 independent variables grouped in motivation, competencies and personality factors The attitude is measured by 4 factors namely (1) their orientation after graduation, (2) students' perceptions of success determination, (3) the tendency to be action oriented, and (4) the level of innovativeness. The information is collected through 8 questions. Each of these factors has a score of 1 to 4, with 1 reflecting the very low, while 4 is very high. By dividing the range of the minimum and maximum total scores in 3 intervals, these 4 factors were classified into the less supportive, moderately supportive and very supportive entrepreneurial attitude. Influencing factors consist of 3 groups namely (1) motivation that includes financial need, work challenge and the need to be recognized, (2) competence that includes the ability to identify opportunities, the ability to cope with stress, the ability to cope with problems, ability to cope with uncertainty and ability to deal with failure, and (3) personality which consists of self confidence, leadership and the totality in

15 working. Dewi et al. (2012) and Sukmana (2008) find that motivation can encourage a person to overcome problems in achieving goals and improving performance. All of the information about these independent variables is collected through32 questions. Similar with the dependent variable, each of these 11 independent variables also has a score of 1 to 4. The total score of each group is also divided into 3 levels. The influencing factors are then estimated Ordinary Least Square (OLS) Method. ( ) ; i=1,1,...,11 in which y is the entrepreneurial attitude, x are the independent variables, β the coefficient regressions of each of the independent variables and ε is the error term. The model specification is determined through the Ramsey Linearity Test. The usage of OLS method is justified through the 3 classical tests namely Park Test, VIF Test and Uji Durbin Watson Test for homoscedasticity, multicollinearity and autocorrelation, respectively. Results and Discussion The data shows that from the total 100 samples included in the estimation, 76% are female students and 24% are male students. Among them, 42% comes from the social faculties and the rest (58%) from science. The description of the dependent and independent variables are as follows. The total score of their answers about the dependent variable, entrepreneurial attitude shows that only 2% of the total samples are classified into the less supportive, while 77% and 21% are moderately supportive and very supportive entrepreneurial attitude, respectively. In particular, only 5% of the total respondents intend to find a job after graduation, while 95% still seek opportunities to start their own business while looking for a job, but none of the respondents solely focus on starting their own business. More than 90% of them tend to be action-oriented and innovative. However, among them more than 50% also believe that luck and destiny influence their success considerably. The total score of their answers concerning the independent variables motivation and personality shows that samples tend to have moderate motivation and entrepreneurial personality; with 7%, 75% and 18% have the low, moderate and high motivation, respectively, and 1%, 80% and 19% have the less supportive, moderately supportive and very supportive personality, respectively. Respondents are more motivated by the entrepreneurial work challenge and the need to be recognized than the encouragement of financial needs. 75% and 96% of respondents prefer to be involved in a new project and activities that are valued by wider community. 93% of the respondents have almost never experienced serious financial problems that make them need to earn extra income. Furthermore, 62% of the total samples still live with their parents. In terms of personality, 82% of respondents have an above average level of confidence and 92% have an above average level of working totality. However, only 53% of the total respondents have fairly good leadership. The total score of their answer concerning the other independent variable, competencies, shows that samples tend to have a high level of competency; none of them belong to the low competence and only 6% were moderate, while the rest 94% was recorded as the high competence. Nearly 80% of the respondents have a fairly good ability to identify opportunities and to cope with problems, and even 89% and 97% have a fairly good ability to cope with uncertainties and to cope with failure. They are only still not good in the ability to cope with stress, in which 55% of them still have low score. The influences of the independent variables to the dependent variables are estimated through the multiple linear regression model. The linear regression equation is used based on the Ramsey-Test of a significance 0.52, indicating that the linear model fits to the estimated data sets. In addition, the three classic assumption namely the homogeneity, multicollinearity and autocorrelation tests are conducted as a requirement in using the Ordinary Least Square Method. Graphically, the residuals regression does not have any particular pattern. The Park Test result also shows that only 1 of the 11 independent variables has a significance value less than 5%. Therefore it can be said that there is no serious problem of heteroscedasticity. The result also shows that all independent variables have VIF values less than 2, indicating that the regression is also free from multicollinear problem. The Durbin-Watson test has a

16 value of 1.86, which still lies in the "doubtful range", but since it is very close to 1.90 (the border of the "no correlation range"), it can be concluded also that there are no serious autocorrelation problem in the regression. The results are as follows. Table 1. Estimation Results of the Multiple Linear Regression Unstandardized Variables Coefficients t Sig. VIF B Std. Error Constant Financial Needs Work Challenge Need to be Recognized Ability to Identify Opportunities Ability to Cope with Stress Ability to Cope with Problems Ability to Cope with Uncertainty Ability to Cope with Failure Self Confidence Leadership Totality in Working F test significance R Adjusted R Table 1 shows that of the 11 independent variables, only 3 significantly influence the independent variable, namely the challenge of work, the ability to deal with failure and the totality of the work. All of them have positive signs, with a value of 0.419, and 0.409, respectively. The significant and positive sign of challenges of work might be related to the age range of the samples, which in between 19 and 23 years. In general, youth are attracted with challenging activities. In this case, 25% of the total samples are not too fond of the work challenge, 65% moderately love challenge, and only 10% who really love it. With a range of 8 scores between each of the low, medium and high level of the entrepreneurial attitude, respondents need an increase minimum 1 score and maximum 8 scores to improve their entrepreneurial attitude from low to moderate or from moderate to high. The "challenges of work" regression coefficient of shows that a unit increase in the score of "challenges of work" will increase the score of the entrepreneurial attitude In other words, a unit and 8 scores unit of the entrepreneurial attitude increase will need 2.39 and score increase in the "challenges of work" score. With a range of "challenges of work" low, medium and high respectively by 4, it can be concluded that the increase of the "challenges of work" from low to moderate or from moderate to high can improve the attitude of the respondents from low to moderate or from moderate to high. The "ability to deal with failure" regression coefficient of shows that a unit increase in the score of "ability to deal with failure" will increase the score of the entrepreneurial attitude by In other words, a unit and 8 scores unit of the entrepreneurial attitude increase will need and score increase in the "ability to deal with failure" score. With a range of "ability to deal with failure" low, medium and high respectively by 2, it can be concluded that although significant, the impact to the entrepreneurial attitude is so small, hence could be seen as no improvement at all. The "totality of the work" regression coefficient of shows that a unit increase in the score of "totality of the work" will increase the score of the entrepreneurial attitude In other words, a unit and 8 scores unit of the entrepreneurial attitude increase will need 2.44 and score increase in the "totality of the work" score. With a range of "totality of the work" low, medium and high respectively by 2, it can be concluded that the increase of the "totality of the work" from low to moderate or from moderate to high can improve the attitude of the respondents from low to moderate or from moderate to high. Except these 3 variables, the estimation result shows that other 8 independent variables namely financial needs, need to be recognized, ability to identify opportunity, ability to cope with stress, ability to cope with problems, ability to cope with uncertainty, self confidence and leadership do not significantly

17 influence the samples entrepreneurial attitude. 4 of these insignificant variables are in the competencies group, which in fact appear to have moderate to high level. Unfortunately, this estimation shows that these competencies does not significantly influence the attitude, thus explaining only 21% of the total samples reach the highly support entrepreneurial attitude. Theoretically, Mitzhelmore and Rowley (2010) suggested that competencies, say the ability to identify niche market, is one of the factors that determine the success of an entrepreneur. Many programs in the universities, including in USU, are designed to improve this ability, and in this case, 77% of the total samples have such an ability. However, Mitzhelmore and Rowley (2010) also find that besides competencies, an entrepreneur also needs the ability to build good human relations. Similarly, based on their empirical study, Kovac et al. (2010) suggest that besides competencies, such as knowledge and skills, entrepreneur also need to maintain good emotions and attitude. Such factors have not been included in this study. These factors might be significantly influence and explain the students entrepreneurial attitude, because the adjusted R 2 in this study is still 0.266, showing that only 26% of the entrepreneurial attitude variations can be explained by the 11 independent variables included in the equation. The rest 74% of the variation will be explained from other independent variables that have not been included yet. Previous studies show that the estimation of entrepreneurial intention or attitude is a complex condition with a wide range of influencing variables. In addition, many variables are not well-defined. Competencies, for examples are interchangeable with the skills, knowledge and expertise, hindering the clarity in practical applications and implementations (Mitzhelmore and Rowley, 2010). Similar problems found in Jaen and Linan (2013) study that uses data from 3223 respondents, and incorporate 11 independent variables. Their estimation results only have of R 2 value. Solesvik (2013) showed that one possible solution could be inserting mediating variables. In his study, including the mediating variables, namely subjective norm and perceived behavioral control, significantly increase the adjusted R 2 value. Conclusion In conclusion, samples of this case have entrepreneurial potential, shown by the 98% who have the moderate and high supportive of entrepreneurial attitude. This is influenced by 3 factors namely the motivation of having challenge of work, the ability to deal with failure and their totality of the work. This potential can be developed by improving the existing curriculum and entrepreneurship training at Universitas Sumatera Utara. This can be done, for example, by integrating the research activities with entrepreneurship, so the results are not only useful for academic purposes but can also be used for business purposes (Rahayu & Fitriati, 2013). Of course, this needs to be supported by all involved parties, including lecturer, facilitator, and the university policy makers. References BPS (2014). Pengangguran Terbuka Menurut Pendidikan, Retrieved October 30, 2012 from =4. detik.com (2012). Cak Imin: Ada 3 Masalah dalam Mengembangkan Wirausaha, Retrieved January 02, 2015 from Dewi, E. et al. (2012). Pelatihan Motivasi dan Kewirausahaan bagi Tim Penggerak PKK Kelurahan Rawasari, Kecamatan Kota Baru Kota Jambi. Jurnal Pengabdian pada Masyarakat 52. Universitas Jambi. Indarti and Rostiani (2008). Intensi Kewirausahaan Mahasiswa: Studi Perbandingan antara Indonesia, Jepang dan Norwegia. Jurnal Ekonomika & Bisnis Indonesia, 23(4). Jaen, I. and Linan, F. (2013). Work Values in A Changing Economic Environment: The Value of Entrepreneurial Capital. International Journal of Manpower, 34 (8),

18 Kazemi, R.M. and Manandar, S. (2012). Identifying the Factors Affecting Entrepreneurial Attitude of Athlete & Non-athlete University Students. Information Management and Business Review, 4 (6), Kemenakertrans (2013). Kemenakertrans Latih Calon Wirausaha Mandiri, Retrieved December 29, 2014 from calon.html Kovac et al. (2010). Entrepreneurial Conative Components of Competencies: The Case of Slovenia. Organizacija, 43 (6). Mitzhelmore, S. and Rowley. J. (2010). Entrepreneurial Competencies: A Literature Review and Development Agenda. International Journal of Entrepreneurial Behavior and Research, 16 (2), Rahayu, A.Y.S. & Fitriati, R. (2013). Change in Student Mindset toward Entrepreneur an Action Research. International Journal of Administrative Science & Organization, 20 (2). Rasli et al. (2013). Factors Affecting Entrepreneurial Intention Among Graduate Students of Universiti Teknologi Malaysia. International Journal of Business and Social Science 4 (2), Sukmana, U.D. (2008). Peran Pendidikan Kewirausahaan dalam Menumbuhkan Motivasi Wirausaha. Equilibrium 4 (8). Schwarz, E.J. et al. (2009). The Effects of Attitudes and Perceived Environment Conditions on Students Entrepreneurial Intent: An Austrian Perspective. Education + Training 51 (4), Solesvik, M.Z. (2013). Entrepreneurial Motivations and Intensions: Investigating the Role of Education Major. Education + Training, 55(3). Thomson, J.L. (2004). The Facets of The Entrepreneur: Identifying Entrepreneurial Potential, Management Decision 42 (2), Yang, J. (2013). The Theory of Planned Behavior and Prediction of Entrepreneurial Intention Among Chinese Undergraduates. Social Behavior and Personality, 41(3), Yusuf, A.T. (2012). Evaluasi Program Mahasiswa Wirausaha di Universitas Hasanuddin, Retrieved January 02, 2015 from E211%2008%20264.pdf?sequence=1

19 CAgE ANALYZING ENTREPRENEURSHIP AMONG ORGANIC PADDY FARMERS IN NORTH SUMATRA Diana Chalil 1 and Riantri Barus Universitas Sumatera Utara Universitas Nusa Bangsa 1 Corresponding Abstract Currently, with the increase in health and environmental awareness, organic rice demand is likely to increase. This could be an opportunity for organic paddy farmers to improve their income. However, this could only be realized if the farmers have the entrepreneurial ability to manage the dynamics of the organic rice agribusiness system. The aim of this study is to analyze the entrepreneurship among organic paddy farmers in North Sumatra. Data were collected from depth interview with 45 organic, semi organic and conventional paddy farmers, and analyzed with Structural Equation Model (SEM). The level of entrepreneurship is formed by 4 possible factors namely networking, the ability to identify and solve problems, reasons to become a paddy farmer and risk taking behavior. The factor loadings indicate that among them only networking and risk taking behavior appear to be important. Four possible variables namely land size, level of education, age and cosmopolitan level are included in the model. The estimation result shows that only cosmopolitan level significantly influences the entrepreneurial level. Keywords: entrepreneurship, organic paddy farmers, networking, risk taking Introduction Rice is the staple food for the majority of Indonesians. With a population of 237 million, Indonesia is known as the world's largest rice consumer. As a strategic commodity, rice market in Indonesia is often interfered by the Government. However, this is not prevailed in the organic rice market. Therefore, organic rice producers could have the opportunity to gain potential profits that are likely to increase with the increase in consumer awareness of health and environment. Reviewing a number of empirical previous studies Siregar (2014) found that the majority of consumers are willing to pay premium prices for organic products. In the city of Morogoro, Tanzania, 78% of respondents are willing to pay premium prices because of the environmental and health benefits they receive by consuming organic products. In Kathmandu, 58% of the respondents are willing to pay 6%-20% more expensive for organic products, while in Indonesia consumers are willing to pay 65% more expensive than the actual organic products market price. However, this potential extra benefit could only be realized if organic rice producers have the ability to manage the dynamics in the organic rice agribusiness system. In general, having the time lag between cultivation and maturation, and being perishable, agricultural commodity price fluctuations are relatively high. Moreover, the high dependency on uncontrollable factors such as climate and land suitability requires farmers to continuously make decisions not only based on the existing condition but also on the expectation and prediction of the future conditions Meridith et al. (1982 in Husin et al. (2012) state that entrepreneurs are characterized by their ability to predict the opportunities in the future. The organic rice market in Indonesia is still slowly developing. In North Sumatera, only 3 villages are recorded as organic paddy farming area. They are Desa Lubuk Bayas, Kabupaten Serdang Bedagai, Desa Namu Landor, Kabupaten Deli Serdang and Desa Laguboti, Kabupaten Toba Samosir, with an area of 21 ha, 2.5 ha and 20 ha, respectively (BITRA, 2013). Among them, Serdang Bedagai has the largest area, but only consists of 13 organic rice farmers.

20 Husin et al. (2012) show that in Malaysia, environmental considerations appear to be one of the entrepreneurial drivers in the agricultural sector. Farmers find that environmental friendly products, such as organic products give higher profit but with more challenges than non organic ones (Vonne et al., 2003). Moreover, the demand for environmentally friendly goods tends to keep increasing in the future (James and Stellingwerf, 2012). To analyze such a condition, this study was conducted to identify the characteristics of entrepreneurship among organic rice farmers in Sumatera Utara. Method This study is was conducted at Desa Lubuk Bayas, Kecamatan Perbaungan, Kabupaten Serdang Bedagai, which appear to be the largest organic paddy farming in North Sumatra. Data are collected through 13, 12 and 20 organic, semi organic and conventional farmers, respectively. Organic farmers are determined through census sampling method, while the semi organic and conventional farmers are determined with convenient sampling method. The data are then analized with Kruskal Wallis Test and Structural Equation Model (SEM). In the Kruskal Wallis Test, the data are divided into 3 groups namely the organic, semi organic and conventional farmers, while in the SEM estimation all of them are used to estimate a single model. Figure 1. Indicators and Variables in the Structural Equation Model Entrepreneurial attitude is measured by (1) networking, (2) the ability to identify and solve problems, (3) the reason to choose farming and its commodity, and (4) the attitude towards risk. Networking is assessed from the relationship and involvement of farmers with farmer group, agricultural extension, agricultural agencies and rice millers. The ability to identify and solve problems includes problems in production, selling price, availability and price of inputs. Traikova et.al (2012) call these as push and pull factors in deciding to start a business. Push factors emphasis on meeting the financial needs, while pull factors refer to the utilization of opportunities for business development. Risk takers associate with farmers decisions to cultivate new commodities and to invest, or to distribute risk through product diversification or having side jobs. Nowadays, farmers tend to face a higher risk because of the higher uncertainties either in the input and output volatility, climate change, international trade restrictions or more stringent food safety standards (Broll et al., 2013). Each component of these factors was scored with the lowest value for the most inappropriate, while the highest for the most appropriate condition in accordance with the entrepreneurial characteristics. The total scores were then divided into low, medium and high level of entrepreneurship, with a 30% interval of the total range between the minimum and maximum scores. The importance of each of these factors to the farmers entrepreneurship level is determined through their loading factor values, which is the correlation of the variable and the factor. The square of the loading factor values are the interpreted as the contribution to the entrepreneurship level variance. Factor loading in between 0.3 and 0.4, 0.4 and 0.5 and greater than 0.5, which equals to a 9% and 16%, 16% and 25%, and greater than 25% variance, considers as minimum, more important and significant (Hair et al, 1998,

21 p.111). Finally, difference in entrepreneurship level among farmers groups was analyzed with the Kruskal-Wallis Test. To analyze the influencing factors for entrepreneurial characteristics, 4 independent variables namely (1) land area, (2) education, (3) age, and (4) the level of cosmopolitan were regressed to the dependent variable using the Structural Equation Model. Farmers' cosmopolitan level is measured with the frequencies of participating exhibitions, taking trips outside their village to search for information related with their business, or actively looking for the information in newspapers or televisions. The Goodness of Fit of the model is justified with the Values of Chi Square, CFI and RMSEA. Results and Discussion The results on the four independent variables influencing entrepreneurial characteristics are as follows. Concerning land space, on average farmers in Desa Lubuk Bayas own less than 1 ha of land area, with 0.54 ha, 0.71 ha, and 0.78 ha of the organic, semi-organic, and conventional ones, respectively. Many farmers only use a small part of their land area to cultivate organic rice for family consumption, as they realize organic rice is good for health, but consider that the risk is still too high while the benefit is still unclear. On education, all farmers have only finished their junior high school formal education. In general, farmers are still in the productive age with an average of 46 years. The development of organic rice in Lubuk Bayas is supported with a leader farmer, Mr. Kamaruddin s entrepreneurship, who tries to make the organic rice farming as a profitable business. For example, Mr.Kamaruddin differentiates organic rice by applying different labels. By doing this, the rice can be sold with a higher price, with a range of Rp9.000,- to Rp15,000,- per kg (US$0.72 US$1.2) In addition, Mr Kamaruddin also tries to provide organic pesticide, so that there is no constraint for the paddy farmers in Lubuk Bayas to apply the organic farming system. Loans for farmers to pay their previous chemical fertilizer usage and substitute to organic farming systems are also provided (Chalil, 2014). The result shows that farmers entrepreneurial attitude level is still low, although that of the organic farmers is higher than the semi-organic and conventional farmers. In detail, 53.85% of organic rice farmers are within the moderate level, and 46.15% are within the low level of entrepreneurship. Semiorganic farmers have 50% each for the low and medium entrepreneurship levels, while all conventional farmers have low entrepreneurial level. Kruskal- Wallis Test shows that the difference is significant at α 5%. The data shows that the main factor that effects entrepreneurial attitude level among groups is the networking system. Organic farmers tend to be more active and have broader networking and are slightly more cosmopolite than the others, with total cosmopolitan scores of 6.80, 9.00 and 9.23 for the conventional, semi organic and organic farmers, respectively. The estimation indicates that organic farmers have higher score because they are more active in attending exhibitions. In addition, conventional and semi organic farmers have low risk taking value, reflecting by their reluctance to change to the organic farming system. Although organic rice is priced higher than its nonorganic counterpart, the price difference is not enough to compensate the relatively low organic paddy productivity in the first three years, even though the selling price could be higher if the organic rice has been certified. In Medan, North Sumatra, certified organic rice is offered at a price range from IDR24,450 to IDR37,500 (US$1.95 US$3.00) per kg, while uncertified organic rice offered at IDR12,000 to IDR16,500 per kg (US$0.96 US$1.32). Overall 71% of the total respondents are willing to pay higher price for than their actual payment for the organic rice they consume (Siregar, 2014). Unfortunately, organic rice from Desa Lubuk Bayas is not eligible for certification because it still uses the same irrigation with conventional paddy farming (Figure 2). However, no organized and systematic effort has been taken in dealing with the problem.

22 Source: Chalil 2014, 526 Figure 2. Map of Lubuk Bayas Village In addition, paddy farmers in Lubuk Bayas still have various misunderstandings about the organic rice farming system. Some farmers assume that in organic farming they can still use some chemical herbicides along with the organic fertilizers and pesticides as long as it is not directly applied to the paddy crop. Such a condition has often slipped through, as the surveillance system through Internal Control System (ICS) also needs to be improved. Differently, Kruskal-Wallis Test shows no significant difference in the farmers ability to identify and solve problems, which is low for all groups. Some farmers cannot identify the causes, but even those who can identify were still unable to solve it. Organic farmers, for example, still have low productivity, although the 4 seasons of transition period has passed away. This is partly due to the un-optimal implementation of organic rice farming system. For example, the usage of manure as a substitute for chemical fertilizers is recommended 2 tons/ha. However, many farmers do not fulfill the recommendation due to high labor costs for bringing the manure to their farms. Similarly, on average the usage of organic pesticides are still un-optimal because farmers need to make and provide it by themselves. In addition, results of using organic pesticides are considered to be less effective because not only repel and kill pests of rice. Most farmers do not dare to take the risk of crop failure due to the pest attack and begin to use the chemical pesticides again (Amala, 2013). The Kruskal-Wallis Test also shows no significant difference among farmers attitude towards risk, which is risk-averse for all groups. Less than 10% has changed commodities that have been inherited from their parents, although they tend to wait until other farmers have proved the benefit of implementing new commodities or techniques. McElwee (2005), states that entrepreneurs take calculated risks. However, this is rather difficult for the sample farmers because most of them do not have farm records. These influencing actors are then analyzed with SEM Model. The Goodness of Fit Tests show that the Structural Equation Model fit with the data set, as indicated by the chi-square value, less than chisquare table 28.87, CFI 0.93 less than 0.9 and RMSEA 0,06 less than 0:08. The estimation results are as follows.

23 Figure 3. Estimation Result of Structural Equation Modeling The estimation results show that 3 of the 4 variables used to measure entrepreneurial attitude, namely networking, identify and solve problems, and risk taker are significant with loading factors of 0.82, 0.39 and 0.76, respectively. Networking shows farmers ability to establish effective partnerships and relationships, by realizing the key stakeholders in their farming business, maintaining good contact, can negotiate and make deal with them (Kahan, 2012). Loading factor of the networking 0.82 > 0.5 shows that this factor is considered significant, and 67% of the entrepreneurship level variance could be explained by the networking factor. In Lubuk Bayas, 85% of the paddy farmer samples have established networks with extension agents and agriculture office staffs, and consult problems they encountered in the field. However, conventional and semi organic paddy farmers have not established networks with large mills, and only sell their yields to village traders, which in turn sell them to the large mills. Farmers do not know the large mills price and receive the selling price determined by the village traders. In contrast, organic farmers have a better marketing networking. They sell their harvest directly to the mill, which is managed by Mr. Kamaruddin and can have the information about the cost and profit margins. Loading factor of the identify and solve problems 0.39 < 0.4 shows that the minimum level, with only 15% of the entrepreneurship level variance could be explained by the identify and solve problems. One of the farmers main problems is the lack of capital, thus makes farmers use fertilizers less than recommendations. In general farmers borrow money from their relatives of village traders, because the procedure is relatively easy and no extra interest comparing those from the banks. Loading factor of the risk taking 0.76 < 0.5 shows that this factor is considered significant, with 58% of the entrepreneurship level variance could be explained by the risk taking factor. Such an important significance mainly stems from the organic farmers that took the risk to try new farming system, experience the productivity decrease in the first years, and expect to enjoy higher profit in the feature. However, from the total respondent only 27% choose paddy based on their expectation of the good price and demand. 64% only continue thise have been started by their parents, as their paddy field areas are also inherited from their parents. To estimate infuencing factors of the enterpreneurship level, 4 independent variables namely land area, eduaction, age and cosmopolitan are included. The estimation result shows that only cosmopolitan is significant, with a relatively strong correlation value, This is consistent with Chaudhari et al. (2007) finding which shows that cosmopolitan is one of the important factors in entrepreneurial characters. However, in this case, on average farmers cosmopolitan level is still low, which is 2.09 of the maximum score 4. This might be explained from the data that shows from 4 activities used to measure the cosmopolitan, only exhibitions are always relevant with their business. A number of farmers often take trips outside their village, but only few are related with organic farming.

24 Most farmers always watch televisions, but rarely about agriculture, while only few of them read newspapers. Other independent variables namely land area, level of education and age are insignificant. Land area is insignificant because most farmers only use a small part of their total land area for organic rice farming. In theory capital endowment such as land area is positively related with entrepreneur attitude. However, this is not the case in organic rice farmers in Serdang Bedagai. This might be explained by the low organic rice productivity. In addition, as organic farms are not separated with the semi organic and conventional ones, the risk to be attacked by pests and diseases are relatively high. Conclusion On average, organic farmers in Serdang Bedagai still have a low entrepreneurial level. The estimation result shows that the farmers entrepreneurial level is determined by their networking and risk taking behavior. In fact, they still have poor networking and risk taking behavior. Farmers still considers that the risk of organic rice farming is still too high while the benefit is still unclear, thus avoid taking the risk. Most of them cultivate organic rice just in some part of their land area for family consumption, because they realize that organic rice is good for health but is not enough to compensate for the risks. The estimation results also show that the organic farmers entrepreneurial level is only influenced by their cosmopolitan level, but not by their land size, level of education or age. Unfortunately, on average, paddy farmers in Lubuk Bayas also have a low cosmopolitan level that needs to be improved. To do so, the government and private stakeholders could provide more required information, and conduct more training for paddy farmers in Lubuk Bayas. References Amala, T. A. and Chalil, Diana (2013). Faktor-faktor yang Berhubungan dengan Tingkat Adopsi Petani terhadap Sistem Pertanian Padi Organik (Studi Kasus: Desa Lubuk Bayas Kecamatan Perbaungan Kabupaten Serdang Bedagai). Jurnal Ceress, 2(10). BITRA Indonesia (2013). Data Produksi Padi Organik di Sumatera Utara. Medan. Broll et al., (2013). Price Risk and Risk Management in Agriculture. Contemporary Economics, 7(2), Chalil, Diana (2014). Analyzing Farmers Learning Process in Sustainable Development: The Case of Organic Paddy Farmers in North Sumatra, Indonesia. Handbook of Research on Pedagogical Innovations for Sustainable Development, edited by Ken D. Thomas and Helen E. Muga, USA: IGI Global. Chaudhari, R.R. et al. (2007), A Scale for Measurement of Entrepreneurial Behaviour of Dairy Farmers, Karnataka J. Agric. Sci 20 (4), Hair et al. (1998). Multivariate Data Analysis. United States of America: Prentice-Hall International. Husin et al. (2012). Small Farmers And Factors That Motivate Them Towards Agricultural Entrepreneurship Activities. Journal of Agribusiness Marketing, 5, James, B. and Stellingwerf, J.J. (2012). Sustainable Entrepreneurship: The Motivations and Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry. Master Thesis in Business Administration: Strategic Entrepreneurship. Jonkoping International Business School. Kahan, David (2012). Entrepreneurship in Farming. Farm Management Extension Guide, Food and Agriculture Organization of the United Nations. Rome. McElwee, G. (2005). Developing Entrepreneurial Skills of Farmers, SSPE-CT , ESOF and University of Lincoln.

25 Siregar, D.K. (2014). Faktor-Faktor yang Mempengaruhi Kesediaan Konsumen Membayar Harga Premium Beras Organik di Kota Medan. Master Thesis in Magister Agribusiness. Universitas Sumatera Utara. Traikova et al. (2012). How Farmers Become Entrepreneurs: Prenatal Diagnostic of Rural Firms in Bulgaria. Poster Presentation. IAAE Trienniel Conference. Brazil, August Vonne et al., (2003). Natural Behavior, Animal Rights, or Making Money A Study of Swedish Organic Farmers View of Animal Issues. Journal of Agricultural and Environmental Ethics, 17(2),

26 CAgE MODEL OF DEVELOPMENT AND THE ENHANCEMENT OF MEDAN RATTAN PRODUCT COMPETITIVENESS Ritha F. Dalimunthe, Setri Hiyanti Siregar Faculty of Economics and Business, University of Sumatera Utara Abstract The purpose of this study was to overcome the problems of rattan SMEs. Therefore, a strategy that can be used to enhance the competitiveness of rattan products and to predict how a business can be a instrument for furniture makers to improve their performance. The data for this study were obtained through direct observation, documentation study, in-depth interview, and Focus Group Discussion (FGD). SWOT analysis with SWOT matrix was used to prepare the strategic factors of good rattan craftsmen and artisans in the city of Medan compared to those of the city of Cirebon. The result of SWOT analysis through quantitative approach showed that the value of External Factor Evaluation Matrix (EFE) was 2.67 and the value of Internal Factor Evaluation Matrix (IFE) was The position of Medan rattan craft in the diagram of SWOT analysis is in the first Quadrant. Keywords: Competitiveness, Rattan, Medan Introduction Competitiveness is a strength owned by a company to exceeded or outperform the other companies. According to Kotler (2009:2), a company can identify its competitors through the competition from the industry and marketpoint of view. Kuncoro (2006:86) argued that competition is a circumstance when an organization plays its role or races to achieve the desired results and goals such as the consumers, the market share, survey rank or resources needed. According to the marketing perspective, competitor is an organization that is able to meet the needs of the same customer in other words the one that identifies who our competitors is the perspective of strategic group, namely, a group of companies competing in an industry (Kuncoro, 2006: 87). High competitiveness of the company will create a competitive advantage. According to Kotler (2001: 55) competitive advantage is an advantage over the competition which is obtained by giving customers the great value, through lower prices or by providing more benefits that correspond to higher pricing. Rattan is one of the creative industries which are seriously affected by the environmental changes occurred in the city of Medan,Province of Sumatera Utara. For example, rattan as raw material has been very difficult to obtained since one year after the financial crisis of 1997/1998 up to the present (2014) due to the government regulations prohibiting to sell the unprocessed raw materials that one by one the rattan craftsmen began to close down and move on to other business. In addition, a lot of furniture made from non-rattan raw materials has emerged. At the beginning, there were 80 rattan craftsmen belonged to the rattan small and small and medium industries, now there are only 30 craftsmen left. In addition, the global market requiresstandard quality of a product based on ISO 9000, and that related to the environmental issues based on ISO 14,000, although according to the observers, this issue is often unfairly used by the developed countries as non-tariff barriers (Kuncoro and Abimanyu, 1995). Current condition of rattan industry is experiencing a shortage of raw material supply due to the regulation on the supply of rattan raw material, and this phenomenon can be seen especially in the craftsmen who day by day are increasingly difficult to get a supply of rattan. Another challenge that must be considered in assisting the development of this rattan small industry is the competence of its human resources (the craftsmen) in improving their skills and knowledge to face the significant challenges in the future. These internal factors are entirely found within the organization itself.

27 The purpose of this study was to overcome the problems faced by the rattan SMEs and to find out the strategy that should be used to improve the competitiveness of the rattan products and to predict how a business can be a forum to improve the performance of rattan craftsmen. Theoretical Overview The success in managing internal factors has a very significant contribution to the success of a business ((Michael Hitt et al, 2008).In addition to internal factors, external factors also have a great influence on the competitiveness of rattan craftsmen because the success in managing external factors influencing the success of rattan business is an empirical issue. Therefore, the issue mentioned above is very interesting to study as a phenomenon occuring to the rattan craftsmen by focusing the attention on what the actual weaknesses and strength of the rattan small industries area. Kuncoro (2000) argued that the challenges faced by the rattan craftsmen can be divided into two categories: first, in general, the challenge faced by the Small Industries with the turnover of less that Rp. 50 millions is how to keep their business surviving. Usually, they do not need big capital to expand their business, just to help the cashflow go smoothly. Second, the challenge faced by the Small Industries with the turnover from Rp. 50 millions up to Rp. 1 billion is much more complex. In general, they have thought and planned to further expand their businesses. Business development is a concept related to a big and long-term decision determining the success or failure of an organization. By using a strategy of management, it will be very beneficial and promising. By using the strategy of management, a business practitioner can interact in an attempt of its implementation (Tjiptono, 2008). In general, the problem faced by the small industries especially rattan industries among other things are (Jafar Hafsah, 2004): a.internal factors 1). Lack of capital Capital is a major factor that is required to develop a business unit, generally due to the business belongs to an individual or the company which is closed in nature relies on the limited amount of capital belongs to the owner. 2). Limited Human Resources Most small businesses grow traditionally. 3). Weak Business Networking and Market Penetration Capabilities b. external factors 1) Business climate is not yet fully conducive Even though, the government's policy to cultivate Small and Medium Business has been perfected from year to year. 2) Lack of Busines Facilities and Infrastructures The lack of information related to the advancement of science and technology causesthe facilities and infrastructure they chosecannot grow fast either. 3) Implications for Regional Autonomy 4) Implications of Free Trade Research Method Research Informants Research informants consist of : 1. Rattan craftsmen. Rattan craftsmen are the core informants for the researcher 2. Cooperatives Management. The cooperatives management are functioned as accompanying informants for the researcher 3. The staff of the Medan City and Sumatera Utara Provincial Cooperatives Services. The staff of the Medan City and Sumatera Utara Provincial Cooperatives Services are functioned as the informants for the researcher Data Collection Techniques Primary data

28 The primary data related to the activities done by the rattan craftsmen or the management managing the activities done by the craftsmen in their operational activites to collect the rattan handicrafts related to the rattan handicraft management process about strengths, weaknesses, opportunities and threats faced by the rattan craftsmen. The primary data consists of the infoprmation found through: 1. Interview To obtain information about rattan business originated from the informants, the researcher conducted an interview with the rattan craftsmen, the management of Medan rattan cooperatives, the staff of Medan City Small and Medium Business and Cooperatives Service, and the staff of Cirebon District Trade and Industry Service that the data obtained were accurate and accountable. 2. Observasi In addition to interview, the researcher also made an observation on the object of study namely the rattan handicraft busines practitioners in the City of Medan and Cirebon District. 3. Focus Group Discussion(FGD) A directed Focus Group Discussion (FGD) or just Discussion Group is a process in collecting information about a very specific certain problem and it can also be conducted through interviewing a group of people guided by a moderator that the participants are able to openly and spontaneously express anything related to the topic of issues being discussed (Henning, 1990 and Irwanto, 1998). Interaction between the participants is the basic to obtain information. The participants have the same opportunity to to propose and give a statement, respond, comment or ask questions. Secondary Data The secondary data are the data needed related to the SWOT analysis and other support obtained through library research. The secondary data for this study were obtained from textbooks, scientific journal articles, internet and the findings of the previopus study related to this study through documentation study method. Data Analysis Techniques This is a phenomenological study with qualitative approach (Cresswell, 1994:138) to obtain indepth information about the experiences felt by the rattan craftsmen in the city of Medan. The purpose of this descriptive study was to systematically and accurately clarify the description the facts being studied. Based on this, the Data Analysis Techniques used includes: 1. The data obtained were then analyzed through Qualitative Descriptive Analysis method. Qualitative Descriptive Analysis is an analysis method to find a thoroughand precise relationship ofa situation. 2. SWOT Matrix was used in formulating the strategic factors of the rattan craftsmen in the city of Medan. This matrix clearly describes about the opportunity or external threats being faced by the rattan craftsmen that can be adjusted to the strengths and weaknesses they have. This matrix may be able to produce 4 (four) sets of strategy alternative possibilities. 3. Matrix SPACE consisting of 4 (four) quadrants showing whether or not the aggressive, conservative, defensive, or competitive strategy which is the most suitable for a particular business. 4. EFE (External Factor Evaluation) Matrix is used to allow the formulation of a strategy to make a summary and to evaluate the marketing, production processes, raw materials, and human resources. 5. IFE (Internal Factor Evaluation) Matrix is a strategy formulating tool used to summarize and evaluate the major strengths and weaknesses based on the functional activities of the business, and is the basis for identifying and evaluating relationships to develop IFE matrix. Result Of Study The result of this study using the 5 (five) data analysis techniques mentioned above showed that: 1. The strengths of rattan handicraft business in the city of Medan are that the rattan product has been adequately known in the city of Medan, the competitive price and the availability of on-line selling, and the government policy under Law No.32/2004 on Prohibition to Export Raw

29 Material, while the weaknesses of the business are the weak product production process (R&D), lack of variation and product quality, weak financial condition, low equipment facility to produce product, limited human resources and low distribution network. 2. The threats to rattan handicraft business are a lot of new competitors, the availability of various synthetic rattan products, the availability of culinary product made of rattan shoot (pakkat), globalization, the reasonable price of competitor s product. 3. The SWOT analysis through quantitative approach showed that the value of EFE Matrix was 2.67 and the value of IFE Matrix was The position of the product of rattan handicraft in the City of Medan was in Quadrant I of SWOT analysis diagram. Therefore, the strategy suggested to the rattan craftsmen in the City of Medan to maintain their business is progressive strategy including several attempts such as to improve their ability to produce creative rattan handicraft, to increase their market segments through online media and create unique products that can meet market demand, to strengthen their access to the banks to obtain working capital and to improve their financial management that becomes the constraint of their financial system and to keep increasing the number of human resources who are active in the field rattan handicraft as a creative small industry that can settle the unemployment problem and look for the raw material suppliers to be able to meet the increasing order in the future.

30 CAgE ANALYSIS OF PROCESSING METHODS, MARKETING CHANNELS AND PROFITABILITY DETERMINANTS OF SELECTED CASSAVA PRODUCTS IN KOGI STATE, NIGERIA Ekpa, D 1., Adeola, S.S 1., Umar, M 2 and Ekpa, M.O Department of Agricultural Economics & Extension, Federal University Dutsin-Ma, Katsina State, Nigeria 2. Department of Agricultural Economics and Extension, Federal University, Dutse, Jigawa State, Nigeria 3. Department of Vocational and Teacher Education, University of Nigeria, Nsukka. Abstract: The study is an analysis of processing methods, marketing channels, and profitability determinants ofselected cassava products in Kogi state, Nigeria. The study was carried out in Kogi East senatorial District of the state. A multi-stage sampling technique was employed in the selection of 120 respondents from who information were collected and analyzed. The data used for the study were collected using structured questionnaire and analyzed using descriptive statistics and profit function analysis. The study showed that there are three processing methods and three marketing channels for each of the cassava products selected. The study also showed that the variable costs and fixed costs were both significant in profit determination. The study concluded that processing and marketing activities of cassava products are prominent and profitable in the study area. It was recommended that capital base of the respondents be boosted so that they can use modern processing and packaging techniques. Key words: cassava, fufu, gari, cassava flour. Introduction: Cassava (Manihotspp) is believed to have originated from Brazil and was introduced into West Africa countries by the Portuguese (Antonio, 2002). Benue and KogiStates in the north central zone of Nigeria are the largest producers of cassava in the country (IITA, 2004). Cassava s comparative advantage compared with other food crops lies in its efficient production of cheap food energy. In addition, cassava is available all year round as well as tolerant to extreme conditions. These qualities contribute in alleviating African food crises (Nweke, Dixon, Asiedu and Folayan, 1994). This accounts for why Philip (2005) referred to cassava as the famine security crop. Studies have shown that cassava contains substances known as cyanogenicglucosides, which break down into hydrocyanic acid (HCN) after the crop must have been harvested. This acid makes raw cassava very poisonous for human consumption. Processing is therefore important as a means of removing this poison by reducing its toxicity and increasing its palatability (Adegeye, 1999). After harvest, cassava roots are processed to stop physiological and microbial spoilage, reduce the cyanogenicglucosides content and convert the roots to other products that are more acceptable (Asiedu, 1989). Major products derived from cassava are cassava flour (alibo), fufu, garri, starch, tapioca, sliced cassava chips (abacha) and other cassava-based products. Rural based cassava processing activities offer opportunities in terms of employment. It is estimated that 60 percent of the labour force in Sub-Saharan Africa are gainfully employed in small-scale food processing enterprises and majority are women (ITDG, 2005). Cassava may in fact hold the key to fully land use intensification in Africa (Enete, 1995). This is because population increase is often accompanied by switch to crops previously thought to be inferior due to protein, essential minerals and vitamins content but with higher yield as is the case with Africa where cassava has ousted the traditional yam (Griggs, 1980). The market for cassava can be divided into two categories, the traditional food-oriented market and the new emerging market for industrially processed cassava. The vast majority of the cassava grown in Nigeria is processed and sold through the traditional market channels which are fairly well known.in 2002, cassava suddenly gained national prominence following the pronouncement of a Presidential

31 Initiative. The intent of the Initiative was to use cassava as the engine of growth in Nigeria. To put Nigeria in the global context for competition, the country needs to upgrade the use of cassava in primary industrial manufacturing of starch, ethanol, chips and flour in order to provide an industrial base for further diversification of its national economy. Cassava can be used to improve rural and urban income and development in Nigeria if investments in the downstream sector or the industry are made more effective through value addition. The value chain describes the full range of activities which are required to bring products from conception, through different phases of processing involving a combination ofphysical transformation and the input of various producers, before delivery to the final consumers and final disposal after use (Kaplinsky and Moris, 2000). Most of the processors prefer to offer the commodity to the market without bearing the cost involved in value adding because of the uncertainty in the market. The continuous fluctuation of prices of final goods in the market poses a serious problem to processors who are interested in adding value to their products.this study therefore examines the different processing methods, marketing channels adopted by the processors of cassava in the study areas well as the input factors that influence profit in the cassava processing and marketing enterprises. Methodology The studyarea is Kogi East in KogiStateand comprises of nine (9) local government areas. Located on latitudes N and N and longitudes E and E (KSADP, 1995), Kogi East has a population of 1,449,091 people almost 50% of Kogi State s population of 3,278,487 people. With a total land mass of 13, 937 sq. km; the area has common boundaries with river Benue on the North, river Niger on the West, Anambra and Enugu States on the South and Benue State on the East. Kogi East are divided for administrative purposes into two (2) agricultural zones namely:- Zone B, and Zone D. Zone B comprises of Ankpa, Bassa, Dekina, Olamoboro and Omala Local Government with Anyigba as the head quarters. Zone D, comprises of Ibaji, Idah, Igala-MelaOdolu and Ofu, Local Government Area with Aloma as its head quarters A Multi-stage purposive random sampling techniques was employed in selecting respondents. This is because the study area is contiguous in terms of cassava processing and marketing. First, two (2) local government areas were purposely selected from each of the two agricultural zones giving rise to four (4) Local Government Areas. Secondly, three (3) communities were randomly selected from each local government to give twelve communities. Thirdly, two (2) villages was randomly selected from each community to make up twenty four villages. Fourthly, five (5) cassava processors and marketers were randomly selected from each village counting to a total of one hundred and twenty (120) respondents from whom relevant information were collected for analysis using a well structured questionnaire. Descriptive statistics such as mean, frequency distribution, and percentages were used to determine the methods of processing and channels of marketing used in the study area whileprofit function analysis was applied to estimate the relationship between input and output prices used by the firm and its profit level. The generalized profit function model is given as follows: * = * (Py, P 1, P 2, P 3, Z 1,Z 2 ) Where : * = amount of maximum profit N Py = price of output of cassava products N P 1 = per unit price of water N P 2 = per unit price of transportation N P 3 = Per unit price of storage N Z 1 = land rent N Z 2 = depreciated value of basins, knives, bags and sieves N Note: Nis the sign for Naira, the currency used in Nigeria.

32 Results and Discussions Techniques for Garri Processing The results of the study showed that, there are three distinct processing channels or different stages in transforming cassava to garri product in the research area. The first channel is depicted thus, Peeling- Washing-Grating-Dehydration-Fermentation-Frying. While the second channel is depicted as Peeling- Washing-Grating-Dehydration-Fermentation-Oiling-Frying and the third channel is Peeling-Washing- Grating-Dehydration-Frying. The frequency distribution of respondents according to their channels of processing cassava into garri is shown in Table 1. The result shows that majority (58%) of the respondents adopted channel 1 of the processing stages in the transformation of fresh cassava to garri. Meanwhile, 38% of the respondents adopted channel 2 in their processing of cassava to garri while 4% of the respondents adopted channel 3 in the transformation processes. These implied that the majority of the respondents preferred processing channel 1 probably due to the demand for fermented garri, because of its taste and the cost implication of adding oil to their garri during processing period. The channel 2 has more respondents than channel 3 due to its nutritional value of vitamin A contents in oil palm. This channel was better in terms of value addition in the processing stages. Techniques for Cassava Flour Processing The results of this study show that, there are three major processing channels in transforming cassava to flour product in the study area. The first channel is depicted thus Peeling-Washing-Soaking-Sifting- Dewatering-Molding-Drying. While the second channel is depicted as Peeling-Washing-Soaking-Sifting- Dewatering-Molding- Drying- Milling and the third channel is Peeling-Washing-Soaking-Sifting- Dewatering-Drying- Milling. Table 1 Distributions of Respondents According Processing Techniquesin three cassava products Frequency Percentage Distributions of Respondents According to Garri Processing Techniques. Processing channel Processing channel Processing channel Distribution of Respondents According to Cassava Flour Processing Techniques Processing channel Processing channel Processing channel Distribution of Respondents According to Fufu Processing Techniques Processing channel Processing channel Processing channel TOTAL Table 1 show that majority (70%) of the respondents adopted processing channel 1 stages as their major practice in the study area. The implication of this was that, most of the respondents do not mill their dried molded cassava, before taking it to the market in order to ease transportation hence reduced cost of transportation, occupy little space and reduced white dusty powder. Meanwhile, 28% of the respondents adopted channel 2 while 2% of the respondents adopted channel 3 in the transformation of fresh cassava to cassava flour

33 Techniquesfor Fufu Processing The results of the study showed that there are three distinct processing channels of different stages in transforming cassava to fufu product in the study area. The first channel is depicted thus, Peeling- Washing-Soaking-Fermentation-Sifting-Dewatering-Boiling-Molding. While the second channel is depicted as Peeling-Washing-Soaking-Fermentation-Sifting-Dewatering-Molding-Boiling and the third channel is Peeling-Washing-Soaking-Sifting-Dewatering-Molding-Boiling. The frequency distribution of respondents according to their cassava to fufu processing channels is shown also in the Table 1. The study showed that 88% of the respondents adopted processing channel 1 as the major channel of transforming fresh cassava tubers into fufu. Meanwhile 8% of the respondents adopted processing channel 2 in transforming the fresh cassava tubers into fufu, whereas, 4% of the respondents adopted processing channel 3. The implication of the above results was due to lack of fermentation in the processing channel 3 hence reduction in the popular demand by the respondents because fermentation in the cassava processing channel reduce or eliminate cyanide contents in fresh cassava tubers. Channels for Garri Marketing The result of the study showed that there are three distinct marketing channels in moving the garri products to the final consumers. The first channel is Packaging-Transportation-Wholesaling-Retailing- Final Consumers. While the second channel is depicted as Packaging-Wholesaling-Retailing-Final Consumer and the third channel is Packaging- Retailing-Final Consumers. The frequency distribution of respondents according to their garri marketing channels is shown in figure 1.This result showed that, 60% (majority) of the respondents adopted marketing channel 1 in the marketing of garri product. Meanwhile, 37% of the respondents adopted the marketing channel 2 while 3% of the respondents adopted marketing channel 3 and this implies that most of the respondents transported their garri products to the market and sold to larger outlets comprising of wholesalingretailing and final consumers hence more profit, unlike in fufu marketing channels which adopted marketing channel 3 that involved selling the product directly to the retailers and final consumers only, without involving wholesalers and the need to transport their products to the market as a result of bulkiness and low profit. Table 2: Profit function analysis for Garri Model Unstandardized Standardized coefficient B Std. Beta coefficients Error T Sig 1 (const Per unit price of water Per unit of transportation **.036 Per unit of storage Land rent Depreciated value of basin, knives, bags and sieves **.044

34 Channels for Cassava Flour Marketing The results of the study showed that, there are three major marketing channels of different stages in moving the cassava flour products to the final consumers. The first channel is Packaging-Transportation- Wholesaling-Retailing-Final Consumers. While the second channel is depicted as Packaging - Wholesaling-Retailing-Final Consumers and third channel is Packaging-Retailing-Final Consumers. The frequency distribution of respondents according to their cassava flour marketing channels is shown in figure 2. This indicated that, 53% of the respondents adopted marketing channel 1 in the marketing of cassava flour product. Meanwhile, 36% of the respondents adopted the marketing channel 2 while 11% of the respondents adopted the marketing channel 3 and this implied that some of the respondents are not involved in selling their cassava flour product at home to retailers and final consumers but rather preferred transporting the cassava flour to the market where they can sell their products to wholesalers, retailers and final consumers in order to make more profit via sale to larger buyers. Channels for Fufu Marketing The results of the study showed that, there are three distinct marketing channels of different stages in moving the fufu products to the final consumers. The first channel is Packaging- Transportation- Wholesaling-Retailing-Final Consumers. While the second channel is depicted as Packaging- Wholesaling-Retailing-Final Consumers and third channel is Packaging-Retailing-Final Consumers. The frequency distribution of respondents according to their fufu marketing channels is shown in figure 3. This indicated that, 27% of the respondents adopted marketing channel 1 in marketing fufu product. Meanwhile, 16% of the respondents adopted marketing channel 2 while 57% of the respondents adopted marketing channel 3 and this implied that most of the respondents do not like transporting the bulky wet fufu to the market with little profit hence preferred to sell their fufu products at home to retailers and final consumers which account for the 57% of the respondents hence maximizing their profit. Majority of the respondents don t like transporting their fufu products to the market due to the offensive odour which also repel some buyers. Factors that influence profitability in garri processing/marketing In the garri enterprise, the combined effects of all the variable and fixed inputs in the profit function explained 78.9% of the variation in the maximum variable profit. The t values revealed that all the variable costs were significant in influencing profit except unit cost of water, and storage that were insignificant. Transportation:- The transportation was one of the variable input that contributes positively to garri product output and was significant at 5% level of probability. This positive relationship was in agreement with Ibrahim 2009, as transportation facilitates the movement of garri products to the market for sales. Basin:- Basin was one of the fixed input that contributes positively to output of garri products and was significant at 5% level of probability. This positive relationship was in agreement with a priori expectation because, more basins will increase more output. Sieves:- This was one of the fixed input which contributes positively to garri product output and was significant at 5% level of probability. This positive relationship was in agreement with a priori expectation because sieves help in adding value to the garri products hence more quality output and income.however, the results suggest that garri product enterprises were operating within the rational area of the profit function using the cost items and the significant output prices.

35 The Factors That Influence Profitability in Cassava Flour Processing/Marketing. Table 3 evaluates the factors that influence profitability in cassava flour processing/marketing enterprises in the study area showing the variables unstandardized and standardized coefficients, standard error and its level of significant. The resultant model for flour product showed that in the cassava flour product enterprise, the combined influence of all the variables and fixed inputs in the profit function explained 80.1% of the variation in the maximum variable profit. The t-value showed that all the variable costs were significant in affecting profit except cost of water and storage that were insignificant. Their positive relationship was as expected. The t statistics also showed that fixed cost items that were significant at 5% level of probability were depreciated expense of basin, knives and sieves while depreciated expense of bags only was insignificant. Transportation: - This transportation was among the variable input that contributes positively to cassava flour product output and was significant at 5% level of probability. This positive relationship was in agreement with a priori expectation. The transportation aid the movements of the cassava products to the final consumers in order to achieve the aim of marketing processes. Basin: - Basin was among the fixed input that contributed positively to the output of cassava flour product and was significant at 5% level of probability. This positive relationship was in agreement with a priori expectation because the basin adds value to the processing/marketing activities hence more output. Knives:- This was also one of the fixed items which contributes positively to cassava flour product output and was significant at 5% level of probability. This positive relationship agrees with a priori expectation because knives help in the value addition process of transforming cassava tubers into cassava flour product hence more quality output. Sieves:- The sieves as a fixed input, it contributes positively to cassava flour product output and was significant at 5% level of probability. This positive relationship is in agreement with a priori expectation because sieves aid value addition in the processing and conversion of cassava tubers into cassava flour hence more quality output. From the above, the results showed that cassava flour product enterprises were operating within the rational area of the profit function using the cost items and the significant output prices. The Factors That Influence Profitability InFufu Processing/Marketing. Table 4 evaluate the factors that influence profitability in fufuprocessing/marketing enterprises in the study area showing the variables unstandardized and standardized coefficients, standard error and its level of significant.the resultant model for fufu product showed that in the fufu processing enterprise, the combined effect of all the variables and fixed inputs in the profit function explained 84.4% of the variation in the maximum variable profit. The t values showed that all the variable costs were significant in influencing profit except cost of water and storage that were insignificant. Their positive relationship was as expected. The t- statistics also revealed that fixed cost items that were significant at 5% level of probability were depreciated expense of basin, knives and sieves while depreciated expense of bags was insignificant. Transportation :- The transportation as a variable input, contributes positively to cassava fufu product output and was significant at 5% level of probability. This positive relationship was in agreement with a priori expectation because this transportation aid output of those processors/marketers through the movement of the cassava product fufu to the final consumer.

36 Frequency/Percentage Frequency/Percentage Fig. 1: Distribution of Respondent According to Garri marketing Techniques channel 1 channel 2 channel 3 Fig 2: Distribution of Respondent According to cassava flour marketing Techniques channel 1 channel 2 channel 3 CAgE Fig. 3 Distribution of respondents according to fufu marketing techniques channel 1 channel 2 channel 3 27% 57% 16%

37 Basin :- Basin as a fixed input, contributes positively to the output of cassava flour product and was significant at 5% level of probability. This positive relationship was in agreement with a priori expectation because basin aid processing activities via value addition, this help to increase output. Knives :- This was one of the fixed input which contributes positively to cassava fufu product output and was significant at 5% level of probability. This positive relationship agrees with a priori expectation because knives are used in processing the cassava roots into edible and sellable products hence more output. Sieves :- Sieves as fixed input, contributes positively to cassava fufu product output and was significant at 5% level of probability. This positive relationship is in agreement with a priori expectation because sieves help in the process of value addition to the quality of cassava fufu output.the results showed that, fufu product enterprises were operating within the rational area of the profit function using the cost items and the significant output prices. Conclusion and Recommendation Cassava products handling in the form of processing and marketing are prominent activities in the study area. Each of processing and marketing are profitable in the study area. However, it was noted that the strategies were still not fully automated. Using sophisticated machines for processing and better packaging will increase the profit margins for the respondents. It is therefore recommended that the respondents be empowered by increasing their capital base so to increase their productivity and hence their profit margin. References Adegeye, A.J. (1999). Issues and Options in Expanding the Cassava Industry (Production and Processing) in Nigeria.Report submitted to International Fund for Agricultural Development (IFAD). Antonio, C.A. (2002). Cassava Biology, Production and Utilization: The Origin and Taxonomy of Cassava.CABI Publishing; Brazil. Pp Asiedu, J.J. (1989).Processing Tropical Crops A Technical Approach.Macmillan Press Ltd. London and Basingstock. Pp Enete, A.A. (1995). Trends in Food Crops yield under Demographic pressure conditions in Sub- Sahara Africa: The case of cassava in South East Nigeria, (Unpublished M.Sc thesis, Department of Agricultural Economics, University of Nigeria, Nsukka. P. 30. Griggs D. (1980). Population Growth and Agrarian Change: A Historical perspective, Winrock International Pub. USA. Pp Ibrahim M.K. (2009): An Economic study of cassava processing in Kogi State. Unpublished M.Sc.tIhesis, Department of Agricultural Economics University of Nigeria Nsukka. International Institute of Tropical Agriculture (IITA) (2004). Nigeria s Cassava Industry Statistical Handbook. ITDG (2005).Agro-processing; Practical Answers to Poverty. Retrieved August, 2007 from Kaplinsky, R and M. Moris (2000).A Hand book for Value Chain Research.Prepared for theidrc.retrieved March 2008 from KSADP (Kogi State Agricultural Development Projects) (1995). A colossus in Agricultural Transformation.. In: Agric Digest, A publication of the Ministry of Agriculture, Kogi State, vol. V No. 1. Pp 5-6. Nweke, F.I.; A.G. Dixion; R. Asiedu and S.A. Folayan (1994). Cassava Varietal Needs of Farmers and the Potential for Production Growth in Africa. COSCAWorking paper No10. Pp Phillip, D.O.A. (2005). The Potentials of Cassava in the Nigeria Economy: The Case of Ogun State. Paper presented at the Second Quarterly Buisness Forum, in Ota, Ogun state.

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