Blagodyr L. Making Processing Enterprises Effective with Employment of Production Function Models

Having investigated the approaches to enterprise performance treatment of foreign and Ukrainian economists, the categorical concept of enterprise perfor-mance is defined more exactly proceeding from enterprise's functions, goals and tasks. The modern methodological approaches to enterprise performance estima-tion are investigated. The key principles of performance measurement are defined. On that ground the use of simulation analysis is argued. The main trends of the Ukrainian oil seed processing industry evolution during the last decade are found out. The main oil bearing crop is a sunflower. Oil availability from five oil bearing crops cultivated in Ukraine (sunflower, rape, soybeans, flax, mustard) amounts to 4 500 mln tones. Aggregate concentration of vegetable oil industry is estimated with the use of Gini coefficient and Herfindahl-Hirschman index. As the analysis has shown, the vegetable oil market is competitive; there are more than 50 both national and regional brands of edible oil in the market. Nearly 90 % of oil seeds are processed by oil seed crushing plants or solvent extraction plants. Large-scale enterprises belong to either multinationals or Ukrainian vertically-integrated companies. The processing of sun flower seeds is of the highest efficiency irrespective of the technology being employed. Trade policy reforms in the end of 1990-s fuelled the increase in edible oil production, which now meets 1.5-2 mln tons. As a result the export of edible oil during the period of 1999-2009 has increased in eleven fold. Despite these positive results the Ukrainian government decided to decrease export duty rates on oil seeds. This forced concession was made when negotiating Ukraine's WTO accession. Besides efficiency in the oil seed production sector is hampered by poor farming standards. That is why Ukraine is unlikely to be self sufficient in oil seeds in the next decade. As a result the processing capacity of Ukrainian oil seed crushing plants and solvent extraction plants is to be underutilized. The modern approach to performance measurement based on unique needs of a processing enterprise and author's definition of enterprise performance is presented here. Simulation analysis of production output and labour efficiency on the factory floor has shown that in the current context the oilseeds' quality, viz. oil content, is a limiting factor for the vegetable oils' production expansion. Simulation analysis of production output for the Ukrainian oil seed processing industry has shown that under present conditions the oilseed volume being processed is a limiting factor for the vegetable oil production expansion. The production of sunflower oil has economies of scale. And in the future long run agglomerative tendencies aimed at providing production efficiency will be retained. The developed model of production output gives an option of formulating two "what-if" scenarios. Taking into consideration the business environment of oil seed processing complex the "business as usual" scenario and optimistic scenario were formulated. The "business as usual" scenario relies on the extrapolations of current industry developments trends and supposes no changes in the enterprises' performance. The optimistic scenario stipulates intensive economic growth and minimization of raw materials provision risk by means of processing of the home-grown vegetable raw materials and capacity output, which is to consolidate oil seeds producers and processing enterprises. The optimistic scenario implementation stipulates the development of the national vegetable oil production concept targeted at the providing of export potential for the Ukrainian fat-and-oil industry under Ukraine's WTO membership and worsening world food crisis. The developed concept includes the incentives for both oil seed producers and oil seed processing enterprises. The peculiarities of cooperation between farm business and processing plants as part of a whole agro food chain are considered. It is established that the agro-industrial integration is to be motivated by the necessity of quality as-surance procedures and food safety.