**2. Conceptualization of commercialization**

Commercialization has different meanings and concepts. Many scholars provide that commercialization is to do with the production side, while others stress the importance of the marketing and distribution channels. Commercialization is thus a relation of the process of production, processing, transportation, and marketing of the product. Commercialization is involving several agencies to fulfill different tasks of production, processing, transportation, and marketing. Taking commercialization as a process, nature and rate of commercialization are concerned with a group of farmers, peasants, whose livelihood is relying on agriculture.

Commercialization is defined by various disciplines. Over time, most literature on commercialization has operated the definition of commercialization in a number of ways; in most cases, commercialization has been found in the concept of development studies relating to agriculture. In common term, "commercialization" refers to the process and the proportion to finalize agricultural production into the market. It is a subset of the broader process of innovation that is driven by market and profit motives, with firms and others seeking to gain a positive return on investment and marketing, including through the creation of competitive niche markets ([25], p.37). Commercialization is thus a process to marketing, particularly high-value cash crops such as horticultural crops and primary food crops such as wheat [6]. However, others view commercialization not only for the marketing, but also commercialization should be profit maximization, response to the needs and interests of buyers, and fulfill the achievements of business [8]. Some scholars focus

*Coffee - Production and Research*

subsistence agriculture.

increase the export earnings.

Generally, agriculture commercialization is the process of changing the path of putting agricultural production into the market. It is an approach to changing farmers' perspective on farming as a subsistence activity toward a profitable business, if economic sustenance in developing countries is to be achieved ([17], p.172). Other five decisive characteristics of agricultural commercialization apart from profit maximization are production for sales, fulfill the needs and preference of customers, business-oriented, and gaining success [8]. Some highlight agricultural commercialization "as an agricultural transformation process in which farmers shift from mainly consumption-oriented subsistence production toward the market and profit-oriented production systems" [7]. Therefore, agricultural commercialization has become the first priority to boost economy and development by enhancing food security and increasing crop productivity for export. However, commercializing agriculture is a crucial and challenging option when the core question is required to take into consideration of "how farmers can adapt and develop a subsistence farming into a profitable business and how to promote commercial agriculture". Besides this, the concern of food security also requires the commercial transformation of

Agriculture is a strategic sector promoting economic growth, development, and sustainability in most least developed and developing nations including that of Lao PDR. It underpins food security, rural development, and export expenditure, which is the mainstay of economic contribution. Agriculture is also becoming dominant to livelihood activity of smallholder and large-scale farmers. Despite the fact that agriculture production in many least/developing countries tended to be lag behind and experienced a chronic problem causing the rise of poverty and food insecurity. However, with the growing integration of the global market, agriculture production tended to be increasingly integrated into the regional, national, and global market; while agricultural commodity tends to

Hence, least developed and developing nations have to confront many difficulties to develop and promote the agriculture sector, both internal and external. The internal difficulties include low productivity, lack of technical support, low skill capacity, poor infrastructure, and deficient institutional. Also, the external difficulties mean highly competitive within the market as the trend of globalization, liberalization, and particularly commercialization are leading to the growth of market integration. Therefore, transforming agriculture outputs from a subsistence economy to market-oriented is an option, called "agriculture commercialization." Lao People's Democratic Republic or Laos has policy to support agricultural commercialization of cash crop products, including coffee. Lao's agriculture system was subsistence farming in the past. People produced a little surplus for exchange after household consumptions. In the last four decade, the country started agricultural transformation by introducing the New Economic Mechanism strategy (NEM) in the Fourth Party Congress in 1986. This strategy is aiming to commercialize agriculture by increasing cash crop production and encourage smallholder farmer to become integrated in regional and international markets. The transformation of agriculture through the commercialization process has been carried out with a strategy of "an open market economy." Various programs have been introduced by the government promotion of commodity production (PCP) and to support the transformation of commercialization by reviewing a significant issue related to the agriculture system of Lao PDR. Hence, agricultural production has been implemented under the PCP. Therefore,

commercial plantations have expanded dramatically, including coffee.

Coffee plantations were first introduced to Laos around 1920s by the French Colonial Empire in the Bolaven Plateau, southern of Laos [18], which is a top commodity for export-led in Laos nowadays [19]. Today, about 99% of Lao coffee is

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on the issues of market management to have stable procurement of raw materials and the capacity to access regional and foreign markets [26]. This part deflated the viewpoint that commercialization processes enhance the economy of the local livelihood and business sector. On the one hand, in order to achieve developed and sustainable status, agricultural commercialization has to follow a pathway from subsistence farming to a more profitable business of market-oriented economy and shifting to cash crops cultivation. In that case, commercialization of agriculture is a process of cash crop production which is produced for sale [27].

In this context, the concept of commercialization is set around the framework of agriculture involving the transformation pattern from subsistence-oriented economy to the market-oriented economy by commercializing agricultural cash crop productivity. This also underlined that the transition of smallholder farming from subsistence to more commercialized enterprises is a key feature of agricultural transformation in the process of economic development [28, 29]. Collectively, the agriculture commercialization allows numerous smallholder farmers to participate in the market economy. Following the pattern of agriculture commercialization, this transformation creates different opportunities which may lead to the raising in return of farmer's assets such as land and labor, encouraging women empowerment and an integrated of market. Hence, commercialization is defined in this chapter as shifting from a highly subsistence-oriented of food production for home consumption toward more cultivate of cash crops, more specialized production and targeting both domestic and international markets.

Viewing the process of commercialization, various scholars highlight of different dimensions. Some researchers specify that process of commercialization is defined by three levels, including subsistence systems, semi-commercial systems, and commercial systems [6, 17]. These processes may be defined as a mean of generating more income into the household by leaning the advantages of subsistence production**.** Commercialization process is certain to modernize agriculture by increasingly using the complexity of the production process, and utilizing new technology and mechanization in the production process [4]. Processes in smallholder commercialization are also seen as a pathway of non-agricultural sectors integration to overall economic structure [13]. In that sense, various agencies, both public and private institutions, involve with commercialization at different magnitudes and contribute to the success and failure of commercialization. Some of the factors contributing to the success and failure of the commercialization are, for instance, (1) effective institution, (2) improved infrastructure, (3) knowledge management, (4) adequate incentives, (5) stakeholders' initiative, and (6) a conducive environment [30]. For the achievement of the commercialization of agriculture, it has to take all factors into account as such.

## **3. Nexus of commercialization and agriculture**

What is the relation between commercialization and agriculture? The relation of the commercialization and agriculture is involving market surplus, productive resource, and value chain. A relation of commercialization and agriculture can be seen through the market surplus. The market surplus of agricultural produce is an indicator of commercialization measurement. The greater market orientation of the producers means commercialization, whereas small proportions of surpluses are more subsistence-oriented [8]. Besides, Bandara [8] define that the commercialization of agriculture is supplying of agricultural production to market which target high profit ratio and ensuring that meet the need of consumers' interests. This type

**97**

*Coffee Commercialization in the Bolaven Plateau in the Southern of Lao PDR*

of business is called "agri-business" that use business management concept to help

Goletti et al. [26] stated that agricultural commercialization is a complex process that comprising various dimension (e.g. famers, technology, market and marketing, finance, institution, infrastructure, consumers). Also, the transition from subsistence to different degrees of commercialize (e.g. low, medium, high, and advance) leads in different value. They highlight that it is possible to measure agriculture commercialization and suggested that to promote commercial agriculture should

Mahaliyanaarachchi [31] also stated that agricultural extension is an on-going and informal educational process that takes place for a long time. Also, agricultural extension's benefits cause farmers' livelihood development. Therefore, it is recommended that it needs to improve farmers' knowledge, skills and influence their new way of thinking in agriculture activity such as apply new technologies, farming

Rivera [32] mentioned that agricultural extension is also primary element that impact the degree of commercialization of agriculture. Nowadays, agricultural extension is a primary agricultural product with a stable price (commodification of agricultural extension and the transforming of knowledge into a product for sale) supported transforming both public sector extension and private business sector on technology transfer in agriculture sector [8, 32]. Concepts of commercial agriculture extension can be observed in three dimensions. Firstly, the agricultural extension is observed as a commercial product or service that exchanged by two parties. First party is extension providers as sellers and other party (farmers) as buyers. Secondly, it is applying primary concept as supply and demand. Hence, agricultural extension become a demand-oriented activity. Finally, extension can be viewed as inputs (e.g. fertilizer, hybrid seeds, agro-chemicals, machinery, and others), which

Some studies discovered that most developing countries in Asian and Latin American used the land for cash crop production since the 1980s [2, 3] because of encourage to increase cash crop export and local income improvement [2]. At the same time, a study of Omiti et al. [4] found that agricultural commercialization in Kenya has a constraint in creating a value chain. Various crops take different forms of market access such as maize has inadequate market access, while tomatoes, milk, and kales production have good market access. In short, high market integration and reasonable market access support diversification into high-value mixed enterprises [4]. One research on an impact of cooperatives on smallholders' commercialization behavior revealed that smaller farmers tend to supply less product because they target to increase the price while larger farmers maximize their farm product [33]. Jaleta et al. [13] pointed out that smallholder commercialization concept goes beyond the marketing of surplus staple products because it consists of household input use decisions, major objectives of production, household participation in input and output markets, degree of specialization in production, and dependence on markets for income and consumption. It is a highlight to emphasize on small-

Based on Zhou et al. [7]'s study in the southern africa who pointed out that agricultual commercialization produces both positive and negative effects. The authors pointed out some key findings that agricultural commercialization produces both positive and negative effects. The positive effects at the household level reflected from increased productivity, family employment, more household income through market participation and employment, a better consumption diversity, nutritional welfare development, improved education, health and welfare, and household living conditions development [7, 34]. Besides, at the society arena,

*DOI: http://dx.doi.org/10.5772/intechopen.90105*

farmers'success in their business ([8]: 6).

activities, and marketing ([8, 31]: 14).

holder commercialization level [13].

create applicable systematic of commercialization [26].

is fundamental for the commercially oriented farming [8].

#### *Coffee Commercialization in the Bolaven Plateau in the Southern of Lao PDR DOI: http://dx.doi.org/10.5772/intechopen.90105*

of business is called "agri-business" that use business management concept to help farmers'success in their business ([8]: 6).

Goletti et al. [26] stated that agricultural commercialization is a complex process that comprising various dimension (e.g. famers, technology, market and marketing, finance, institution, infrastructure, consumers). Also, the transition from subsistence to different degrees of commercialize (e.g. low, medium, high, and advance) leads in different value. They highlight that it is possible to measure agriculture commercialization and suggested that to promote commercial agriculture should create applicable systematic of commercialization [26].

Mahaliyanaarachchi [31] also stated that agricultural extension is an on-going and informal educational process that takes place for a long time. Also, agricultural extension's benefits cause farmers' livelihood development. Therefore, it is recommended that it needs to improve farmers' knowledge, skills and influence their new way of thinking in agriculture activity such as apply new technologies, farming activities, and marketing ([8, 31]: 14).

Rivera [32] mentioned that agricultural extension is also primary element that impact the degree of commercialization of agriculture. Nowadays, agricultural extension is a primary agricultural product with a stable price (commodification of agricultural extension and the transforming of knowledge into a product for sale) supported transforming both public sector extension and private business sector on technology transfer in agriculture sector [8, 32]. Concepts of commercial agriculture extension can be observed in three dimensions. Firstly, the agricultural extension is observed as a commercial product or service that exchanged by two parties. First party is extension providers as sellers and other party (farmers) as buyers. Secondly, it is applying primary concept as supply and demand. Hence, agricultural extension become a demand-oriented activity. Finally, extension can be viewed as inputs (e.g. fertilizer, hybrid seeds, agro-chemicals, machinery, and others), which is fundamental for the commercially oriented farming [8].

Some studies discovered that most developing countries in Asian and Latin American used the land for cash crop production since the 1980s [2, 3] because of encourage to increase cash crop export and local income improvement [2]. At the same time, a study of Omiti et al. [4] found that agricultural commercialization in Kenya has a constraint in creating a value chain. Various crops take different forms of market access such as maize has inadequate market access, while tomatoes, milk, and kales production have good market access. In short, high market integration and reasonable market access support diversification into high-value mixed enterprises [4]. One research on an impact of cooperatives on smallholders' commercialization behavior revealed that smaller farmers tend to supply less product because they target to increase the price while larger farmers maximize their farm product [33]. Jaleta et al. [13] pointed out that smallholder commercialization concept goes beyond the marketing of surplus staple products because it consists of household input use decisions, major objectives of production, household participation in input and output markets, degree of specialization in production, and dependence on markets for income and consumption. It is a highlight to emphasize on smallholder commercialization level [13].

Based on Zhou et al. [7]'s study in the southern africa who pointed out that agricultual commercialization produces both positive and negative effects. The authors pointed out some key findings that agricultural commercialization produces both positive and negative effects. The positive effects at the household level reflected from increased productivity, family employment, more household income through market participation and employment, a better consumption diversity, nutritional welfare development, improved education, health and welfare, and household living conditions development [7, 34]. Besides, at the society arena,

*Coffee - Production and Research*

on the issues of market management to have stable procurement of raw materials and the capacity to access regional and foreign markets [26]. This part deflated the viewpoint that commercialization processes enhance the economy of the local livelihood and business sector. On the one hand, in order to achieve developed and sustainable status, agricultural commercialization has to follow a pathway from subsistence farming to a more profitable business of market-oriented economy and shifting to cash crops cultivation. In that case, commercialization of agriculture is a

In this context, the concept of commercialization is set around the framework of agriculture involving the transformation pattern from subsistence-oriented economy to the market-oriented economy by commercializing agricultural cash crop productivity. This also underlined that the transition of smallholder farming from subsistence to more commercialized enterprises is a key feature of agricultural transformation in the process of economic development [28, 29]. Collectively, the agriculture commercialization allows numerous smallholder farmers to participate in the market economy. Following the pattern of agriculture commercialization, this transformation creates different opportunities which may lead to the raising in return of farmer's assets such as land and labor, encouraging women empowerment and an integrated of market. Hence, commercialization is defined in this chapter as shifting from a highly subsistence-oriented of food production for home consumption toward more cultivate of cash crops, more specialized production and targeting

Viewing the process of commercialization, various scholars highlight of different dimensions. Some researchers specify that process of commercialization is defined by three levels, including subsistence systems, semi-commercial systems, and commercial systems [6, 17]. These processes may be defined as a mean of generating more income into the household by leaning the advantages of subsistence production**.** Commercialization process is certain to modernize agriculture by increasingly using the complexity of the production process, and utilizing new technology and mechanization in the production process [4]. Processes in smallholder commercialization are also seen as a pathway of non-agricultural sectors integration to overall economic structure [13]. In that sense, various agencies, both public and private institutions, involve with commercialization at different magnitudes and contribute to the success and failure of commercialization. Some of the factors contributing to the success and failure of the commercialization are, for instance, (1) effective institution, (2) improved infrastructure, (3) knowledge management, (4) adequate incentives, (5) stakeholders' initiative, and (6) a conducive environment [30]. For the achievement of the commercialization of agriculture, it has to take all factors

What is the relation between commercialization and agriculture? The relation of the commercialization and agriculture is involving market surplus, productive resource, and value chain. A relation of commercialization and agriculture can be seen through the market surplus. The market surplus of agricultural produce is an indicator of commercialization measurement. The greater market orientation of the producers means commercialization, whereas small proportions of surpluses are more subsistence-oriented [8]. Besides, Bandara [8] define that the commercialization of agriculture is supplying of agricultural production to market which target high profit ratio and ensuring that meet the need of consumers' interests. This type

process of cash crop production which is produced for sale [27].

both domestic and international markets.

**96**

into account as such.

**3. Nexus of commercialization and agriculture**

commercialization contributes to food security, poverty alleviation, rural and urban employment creation, improved livelihoods and social status, and economic growth via productivity and investment [7, 34]. The commercialized leads to negative effects such as no improvement household nutrition and livelihoods of the poorest, more risk complex market, household food insecurity, and insufficiency food [7, 17, 34]. Besides, the commercialization influences to income inequalities [7, 17]. Agricultural commercialization among poor smallholders is an issue that requires to pay attention to reduce poverty, improve household food and nutrition security, and foster growth in rural areas [35].
