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1 Vinnytsia National Agrarian University, Ukraine (corresponding author)
Email: liudmyla.boltovska@gmail.com
ORCID: https://orcid.org/0000-0002-6202-998X
ResearcherID: L-3460-2018

This is an Open Access article, distributed under the terms 
of the Creative Commons Attribution CC BY 4.0

DOI: https://doi.org/10.30525/2661-5150/2023-2-2

INTEGRATION LINKS AND METHODS  
OF THEIR IMPROVEMENT FOR THE EFFECTIVE FUNCTIONING 

OF THE MEAT AND FOOD SUBCOMPLEX

Liudmyla Boltovska1

Abstract. The subject of research is the current trends in the development of the meat products sub-complex 
of Ukraine and the formation of integration ties as an integral factor of influence on the effective activity  
of the livestock industry. Among the branches of agriculture, animal husbandry is a source of important food 
products for humans: milk, meat, eggs, and supplies various types of raw materials for industry (food, light 
pharmaceuticals, etc.). The growth of animal husbandry in the agricultural sector of Ukraine is formed in the  
meat products subcomplex, which unites producers of agricultural (animal) products, trade organisations and 
enterprises of the meat processing industry in the process of livestock and poultry breeding, their processing  
and sale of finished products. An important factor contributing to the sustainable development of the meat  
products sub-complex is the effective use of its components, i.e., agricultural enterprises, peasant farms, private 
farms of the population. The problem of sustainability in agricultural production is more complex than in other  
sectors of the economy. This is due to the fact that agricultural products are almost irreplaceable and the  
demand for them is inelastic. Methodology. The theoretical and methodological basis of the research were  
general and special methods of studying economic phenomena and processes, basic rules of management  
theory and general scientific principles of economics, logical and qualitative analysis and synthesis, system  
structural analysis. The research was conducted on the basis of the application of general scientific methods and 
techniques: the method of cause-effect analysis – to identify problems in the development of enterprises of the  
meat products sub-complex and the industry; logical generalisation – to form conclusions and proposals; factor 
analysis – to identify the influence of certain factors on the development of enterprises of the meat products 
subcomplex. The results of the research will broaden the scientific understanding of the integration processes 
in the meat products subcomplex, help to overcome the fragmentation of scientific knowledge in this area,  
contribute to the formation of information and applied research, and can be used in the development of 
programmes for the development of the meat products subcomplex. Practical implications. The choice of any 
development strategy requires the study of all factors affecting the effective operation of the company in 
the future, therefore the study of integration relations and the study of methods for their improvement is an  
important aspect in the formation of the company's development strategy. Value/оriginality. On the basis of 
the peculiarities of the activities of the enterprises of the meat products subcomplex, it is worthwhile to focus 
on the directions of improving the integration relations of the functioning of the meat products subcomplex on 
the basis of the use of vertical integration, which will contribute to the coordination of the economic interests 
of the participants and, in general, to the growth of production volumes, the improvement of the quality of  
animal products and food and environmental safety in general, in solving an important scientific task of 
the development of the food products subcomplex on the basis of a complex system of measures aimed at  
preserving and restoring the potential of the interrelated industries.

Key words: meat product subcomplex, market of meat and meat products, sustainable development,  
management of dynamic processes, integration links.

JEL Classification: A10, A11, B17, B27, D13, D24



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1. Introduction
The meat subcomplex is an important part  

of the economy and the main component of the 
country 's food security. However, due to the  
decline in animal husbandry, the number of 
livestock, with the exception of poultry, is 
decreasing every year, which has a negative  
impact not only on the population's consumption  
of meat products, but also on the country 's 
economy in general.

The development of the meat market in  
Ukraine requires scientifically based actions, one  
of which is the management of the integration  
ties of the meat products subcomplex.

Ukraine is currently implementing a model  
for the development of the meat products  
subcomplex based on vertically integrated 
industrial complexes with a full production 
cycle – from compound feed production to 
meat processing. Vertical integration is mainly 
characteristic of poultry and pig farming  
enterprises and the processing of their products, 
since in these industries there is a high level 
of concentration and mechanisation, which 
contributes to achieving efficiency due to the  
scale of production in large enterprises.

The purpose of the study is a theoretical 
substantiation and development of methodical 
and practical approaches to the formation of 
organizational and economic principles of 
management of integration ties of the meat 
products subcomplex.

The objective of this study is to select  
directions for improving the integration links  
of the meat and food subcomplex.

2. Development of Integration Processes  
in the Meat and Food Subсomplex

The development of integration processes 
in the industry, skipping the stage of the  
contractual form of relations characteristic of 
world practice, immediately began with the  
most rigid option of integration, based on the 
transfer of ownership and the centralisation 
of management in the hands of the integrator 
company.

In many countries, particularly in Europe,  
vertical integration through ownership is  
practically non-existent, and is instead based on 
feed mills and meat processing plants operating 
independently of each other, and on livestock 

farming providing the raw materials needed for 
meat processing. The integration of agriculture 
into big business takes place through the  
conclusion of long-term contracts for the supply  
of products (Chumachenko, 2018). In Ukraine, 
small farms are not integrated into vertical 
production chains and occupy separate, narrow 
niches in the food market.

In addition, the vertical integration of  
production makes it possible to provide the raw 
material base for meat processing in the required 
quantities and with guaranteed quality; to reduce 
transaction costs; to minimise logistics costs by 
clustering the entire production cycle in a given 
area; to optimise the tax burden by excluding 
taxes on intermediate products and by relocating 
production to the area with more favourable 
tax conditions; to reduce business risks by 
allocating them to different market segments and  
controlling the entire production and sales  
chain; by providing full control over the quality 
of raw materials and their complex processing,  
expand the range of products, respond to changing 
consumer demands, increase the competitiveness 
of products, reduce the cost price; to improve 
information security of activities.

As a result of the combination of the above-
mentioned advantages, a synergistic effect 
occurs – the appearance of new system properties 
in the integrated formation, which ensure that 
the overall effect is greater than the sum of the  
effects of its participants acting separately.

At the same time, the integration processes in  
the domestic meat products sub-complex had 
negative economic and social consequences. These 
include the monopolisation of the market and 
the reduction of competition, the reduction of 
opportunities for development and the displace-
ment of small and medium-sized enterprises from 
the sector, the creation of barriers to market entry, 
the unavailability of agricultural land to small 
producers and owners of personal subsidiary 
farms, which were put at the disposal of integrated 
structures and in some cases formed latifundia; 
political and economic lobbying, including the 
obtaining of state support; the emergence of 
contradictions in the economic interests of the 
participants in integrated formations; the increase 
in unproductive costs of managing the extensive 
organisational structures of agricultural holdings.

For the further development and effective 
functioning of the meat subcomplex in the 



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conditions of market relations, it is necessary to 
combine the efforts of enterprises and branches 
of the agricultural sector and the food industry  
on the basis of cooperation and integration.  
This will make it possible to concentrate labour, 
material and financial resources on the production 
of final products, to restore the equivalence of 
exchange between industries, to use available 
production capacities and resources rationally,  
to harmonise the economic interests of  
commodity producers and to coordinate actions 
for their protection on the market.

In society, as industrial relations develop, 
the processes of cooperation and integration 
converge and take on a new character. And here 
the emphasis is on the "interpenetration", the 
"fusion" of industries or business units, i.e., closer  
industrial relations. The intensity of these links 
is not the same. It is determined by the degree 
of unity of purpose of the integrating units.  
Therefore, an important feature of cooperation 
and integration is the unity of the final useful  
result as a general objective of the functioning  
of agro-industrial formations (Radchenko, 2019).

Cooperative forms of management are of 
particular interest in integration processes. They 
offer great opportunities for establishing closer 
production and economic links of mutual interest.

Cooperation is carried out in three directions: 
intra-enterprise cooperation; cooperation of 
subjects of entrepreneurial activity in the field 
of agribusiness and individual farms; interfarm 
cooperation at the district and regional levels.  
At the first level of cooperation, the association 
of labour collectives makes it possible to already 
develop cooperative relations within the  
enterprise, to direct them towards a common 
interest in increasing the efficiency of production.

The second direction of cooperation develop-
ment is the creation of agricultural production  
cooperatives on the basis of reorganised  
agricultural enterprises.

Cooperatives of subjects of entrepreneurial 
activity in the field of agriculture and 
individual farms are created for the purpose of  
consolidation of production, unification of  
separate production functions – distribution, 
processing, sale of products; implementation 
of financial and accounting operations and 
maintenance of services, etc.

The development of the cooperative movement 
at the district level includes the production 

of agricultural products, their harvesting, 
storage, processing, trade, credit operations and 
other business activities at the district level. 
Inter-economic cooperation is based on the  
development of two inseparable and inter-
dependent processes: the division of labour 
(specialisation) and the expansion of production 
links between specialised enterprises.

Depending on the natural and economic 
conditions, the type of production relations 
and the composition of cooperative enterprises 
in agriculture, the following main areas of  
cooperation have developed:
– on the basis of intra-industry division of labour;
– by organising joint production on a share basis;
– on the basis of unification of all production 
activities of specialised farms;
– on the basis of the union of agricultural 
enterprises with processing enterprises,  
production maintenance with scientific  
institutions (Dovhal, 2013).

Each of these directions corresponds to  
a specific form of organisation: a company  
specialising in technology; a joint inter- 
economic association; an agricultural-industrial 
association; a scientific-industrial association.

As the primary form of inter-economic 
organisation, agricultural cooperation acts as 
one of the tools of the market mechanism, which  
allows the enterprise to easily adapt to the 
conditions of the market situation, while at the 
same time protecting agricultural production  
from the elements of the market. On the other  
hand, the cooperative system in the form of 
branch unions is a reliable means (instrument)  
of state regulation of agricultural production  
for the implementation of large state and local 
programmes for the introduction of technical 
agronomic innovations and the implementation  
of a rational financial policy. The basis of the 
cooperative development of enterprises in 
the agricultural sector is currently seen in the 
combination of the vertical (branch) principle 
of building a primary (grassroots) network 
of cooperation with the territorial principle 
of organising a system of cooperative unions 
(associations).

This allows material, financial and labour 
resources to be centralised and reallocated for 
structural change to maximise returns from 
technologically networked production. Savings 
in capital costs are achieved by making it  



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impossible for agricultural producers to build 
their own processing facilities. The creation 
of general services, including marketing, the  
absence of taxes at intermediate stages of 
production, the acceleration of the circulation 
of working capital, the increase in the rhythm  
of the supply of raw materials and the loading  
of meat processing plants, ensures the reduction  
of selling prices and the increase in the production 
of competitive products.

The fragmentation of agricultural production  
into small business structures that took place  
during the reform years has strengthened the 
situation in agriculture. Today it is necessary for 
agricultural producers to unite on a cooperative 
basis and not to divide production into natural 
farms of individuals. Cooperatives for the 
production of agricultural products should unite 
in branch cooperatives and associations. The 
experience of many countries shows that the  
most successful elements of the market are  
those that face difficulties together and win.

3. Integration Links – Experience  
of the World's Leading Countries

Domestic and foreign experience shows 
that in large agricultural areas it is advisable to 
build processing plants of adequate capacity 
and to create agro-industrial cooperatives or  
associations in which capital can be transferred 
from processing plants to producers of agri-
cultural raw materials. Banks are more willing  
to invest money in large enterprises. Worldwide, 
35% of farms are created and supported by thestate 
(Revutska, 2014). Well-established cooperative 
relations of farmers and private farms with large 
agricultural and processing enterprises will allow 
them to receive support from them both in cash 
and in kind: feed, veterinary medicines, seeds of 
agricultural crops, fertilisers and other services.

Cooperation between agricultural producers 
is widespread in other countries, where credit 
and loans to farmers are provided by rural credit 
cooperatives and other financial cooperative 
organisations that support producers of  
agricultural products on preferential terms. In 
many countries, compensation is paid to farmers 
in the event of natural disasters and payments  
are deferred for several years (Shahrayuk- 
Onofrey, 2013).

The activities of cooperatives differ from 
other forms of production in a number of ways. 

Cooperatives, created on the initiative of the 
producers themselves and managed by them at 
their own risk and peril, are characterised by the 
existence of collective ownership. The main task  
of the cooperative is to provide services to its 
members and to produce goods, and the profit 
generated by its activities is mainly used to  
replenish the reserve and other funds of the 
association. The remaining part of the profit is 
distributed among the members in proportion to 
their capital participation.

The peculiarity of the collective form of vertical 
cooperation is that each enterprise is linked to 
several cooperatives at the same time. Some of 
them deliver agricultural raw materials from 
farms to cooperative enterprises, ensure their 
processing and sale of finished products; others 
supply commodity producers with tools and  
means of production; third parties provide loans. 
In each country there is a system of cooperative 
production services for cooperative members, 
including the provision of technical assistance, 
advice and other production services.

Cooperatives engaged in the collection, 
processing and sale of products produced 
by farmers are the most developed area of  
cooperative activity, and the key role is played 
by marketing cooperatives, which determine  
the direction of activity of producers and  
processors of products in the given market  
situation. The inclusion of this link in the system 
of vertical links allows farmers and cooperatives  
to work with confidence and stability.

Farmers' cooperatives are grouped at regional, 
national and state levels into large sectoral, product 
and territorial unions. National cooperative 
federations represent cooperative farmers in 
negotiations with the government of their  
country and actively participate in the develop-
ment of agricultural policy, defending the interests 
of cooperatives. They also represent national 
cooperation in various international cooperative 
organisations, in a number of countries and in the 
governing bodies of the EU (Berezivskyi, 2013).

The main legal basis for the activities of 
cooperatives are specific laws on cooperation,  
which regulate the status of a cooperative 
organisation as a voluntary association of  
farmers operating on a democratic basis. However, 
these laws vary from country to country.

The basic law of the internal life of the coope-
rative is its statute. It contains the definition of  



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the purpose of the company, regulates the 
procedure for joining the company, determines 
the amount and the procedure for paying the  
share contributions, establishes the rules of 
commercial relations between the company and 
its members and the procedure for forming the 
governing bodies. The content of the statutes  
must fully comply with the norms of the 
legislation in force. Usually, the statutes are  
drawn up according to a single model, for which 
purpose there are model statutes for cooperatives 
in certain sectors, recommended by central 
associations.

The Charter is supported by a number of legal 
acts. During the organisation of the cooperative, 
its direction should be determined. Legislation 
does not describe the objectives of cooperatives 
of different specialisations, with the exception of 
credit cooperatives. The manner of establishing 
cooperatives is regulated by a number of legal 
acts. Any person can become a member of a coope-
rative. Agricultural cooperatives are governed by 
law. The highest governing body of a cooperative 
is a general meeting of members or (in very large 
associations) a meeting of commissioners.

For the operational management of the 
cooperative, the general assembly elects the  
board of directors or the management and  
control bodies (supervisory board).

The administrative bodies are elected for 1-4 years, 
with an obligation to report on their activities 
to the general meeting of the cooperative and to 
the supervisory bodies. It is allowed to involve 
salaried employees in the administration and to 
hire a paid director for the day-to-day management 
of the cooperative. Cooperative activities require 
significant working capital (in the form of cash) 
and fixed assets (in the form of investment capital). 
Agricultural cooperatives are financed from their 
own resources and from state and supranational 
subsidies. The source of cooperatives' own funds 
is their members' shares and annual contributions, as 
well as deductions from profits. The compulsory 
financial participation of each member in the 
cooperative's activities is regulated by law and is 
included in the statutes of most countries.

Capital contributions are registered (entered  
in the register), they cannot be inherited, they 
cannot be waived in favour of someone else.

In the event of withdrawal from the cooperative, 
shares will be paid out at the nominal value or  
book value at the time of withdrawal.

In addition to share capital, agricultural 
cooperatives use other internal sources to 
increase their funds, including initial and 
annual contributions. These contributions are  
mandatory, especially for cooperatives that create 
share capital. For example, Swiss legislation 
stipulates that the amount of the annual 
contributions is determined by the cooperative's 
general meeting, depending on the needs of the 
association (Rybak, 2014).

In addition to share capital, cooperatives 
sometimes require new members to pay a "right  
of entry " contribution.

The profits (or savings) generated by the 
cooperative's activities are allocated to reserves  
and other funds (insurance, depreciation, 
investment, development, etc.). These funds 
are important sources for the formation of  
cooperative capital and are of great importance 
because, unlike share capital, this part of the  
funds remains in the cooperative and is not  
subject to return in the event of withdrawal from  
the cooperative. The part of the profit remaining 
after the deduction of the funds is distributed  
among the members of the association in 
proportion to their equity participation.

If the financial year ends with a profit, the  
general meeting may decide to pay interest on 
the capital belonging to the members of the  
cooperative. The amount of interest is often  
limited.

4. Mechanism for Building Relationships 
Between the Subjects of Integration Links

The organisational and economic mechanism 
of relations between subjects of the integration 
system is a multifaceted economic category 
and includes the following main components  
(Figure 1). Successful development of economic 
relations in agro-industrial formations is possible 
if the main rules of their development and 
implementation are observed. These include:  
social orientation of economic relations; effective 
use of production potential; respect for the 
interests of all participants of the integrated 
formation; material and moral responsibility  
of the participants; transparency of economic 
relations for the employees of the agro-industrial 
formation; state regulation and support of 
economic relations for the employees of the  
agro-industrial formation; state regulation and 
support of economic relations.



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Priority attention should be paid to the  
process of creating an integrated formation,  
since it is at the stages of creation of the  
association that the foundations of the 
economic mechanism of its functioning and the  

prerequisites for successful further activities 
are laid. In the economic literature, the  
authors highlight the following leading  
principles for the creation of integrated  
formations:

Formation of a package of legal documents of the integrated association. Provisions to 
ensure strict compliance with legal acts. Coordination of the basic principles of operation 
with district and regional administrative authorities.

Determination of production and investment programmes. Promising areas of technical 
and technological upgrading of production. Terms of purchase of material and technical 
resources.

Organisation of financial support for current operations and production development. 
Terms of advance payments, lending and repayment of funds received. The system of anti-
crisis measures during the break-even operation of the enterprise.

Organisation of an effective marketing service. The main work in this area is carried out by 
the investor, but the efforts of each agricultural enterprise are not excluded.

Justification of the need to create an integrated formation. Definition of the organisational 
and legal form. General principles of functioning of an integrated formation.

Property relations between investors and agricultural enterprises. Basic conditions for the 
use of property of former agricultural enterprises and newly acquired ones.

Land relations between the owner of a land plot, an agricultural enterprise and an investor. 
Lease, trust management are the most important factors of land use in rural areas. Рurpose.
Pledge Transfer to the charter capital.

Organisation of day-to-day operations and management. Management functions of
integrated units, district agricultural departments, and regional industrial departments. 
List of management functions performed by integrated formations.

The social sphere of the village, its development in the context of the creation of integrated 
formations. Mandatory preservation of rural settlements as a prerequisite for a viable state.

Justification of the need to create an integrated formation. Determination of the 
organisational and legal form. Development of the principles of functioning of the 
integrated formation.

Problems of motivation, organisation of material incentives and measures of responsibility. 
Level of earnings.

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Figure 1. The main components of the mechanism of economic relations  
of agribusiness enterprises in technologically interconnected integrated formations

Source: author's own development



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– the principle of voluntariness. The decision  
to join the integrated structure is made in 
accordance with their charters: by a decision  
of the shareholders' meeting (in joint-stock 
companies), depositors (in limited liability 
companies), members (in cooperatives);
– the principle of adaptability. Integration  
entities should choose the form of association  
that best suits the existing economic conditions 
and be able to respond adequately and quickly  
to changes in the external environment;
– the principle of phasing. As the material,  
technical and economic conditions are created, it 
is possible to move from simple to more complex 
forms of integration (from horizontal to vertical, 
from production to production and trade, etc.);
– the principle of territorial integrity and  
optimality. For a balanced resource provision, 
territorial integrity and clear coordination  
between all links (participants) of the integrated 
process must be observed;
– the principle of the "leading link" – the  
integrator. When creating an agro-industrial 
formation, it is necessary to choose an integrator 
enterprise, the functions of which can be  
performed by a financially stable enterprise with 
production potential (Abduroimova, 2013).

5. Assessment of Integration Links  
in the Meat and Food Subcomplex

To assess the integration processes in the 
agricultural sector, it is proposed to introduce 
the following system of indicators for assessing  
agro-industrial integration (Table 1).

The indicators of the first Block are used to 
determine the level of integration potential 
of enterprises and changes in their individual 

characteristics in the process of integration. The 
presented indicators make it possible to study 
the quality and assortment of products in order 
to assess business prospects, the degree of wear 
and tear of fixed assets, the level of utilization 
of production facilities, financial stability,  
business activity, solvency. In addition, the 
indicators in this block make it possible to  
study the legal status of the fixed assets: whether 
they belong to the company or not, and  
whether they will be lost as a result of the merger.

Similarly, the investment policy of the  
enterprise, the relations of the owners with its 
management, the attitude of the authorities to 
possible integration, the prospects and forms 
of return of invested financial resources are  
evaluated. An important criterion for assessing 
the feasibility of integration is the degree of 
mutual importance of the enterprises in terms 
of supply to each other and their share in total  
sales (consumption), the existence of alternative 
sales channels (alternative consumers) in 
the association and in each of its members, 
the uniqueness of the enterprise for the  
technological chain.

The indicators of Block II require an  
assessment of the extent to which the change  
in the final indicators of agro-industrial  
formation is directly caused by the interaction  
of the participants.

The criteria of Block III can be used to assess  
the efficiency of the agro-industrial formation.  
The competitiveness of a type of product  
produced by the integrated formation can 
be determined as the ratio of its price to the  
assessment of consumer properties in points  
or by calculating the integral indicator of 
competitiveness in the form of a price index –  

Table 1
System of indicators for agro-industrial integration
Block I
A system of indicators to assess  
the feasibility of integration

1. General description of the technological process and applied technology
2. Indicators of financial stability
3. Legal status of fixed assets
4. The degree of mutual importance of enterprises

Block II
System of indicators of the level  
of integration

1. Level of intensification of management decisions
2. Level of integration of production with science
3. Degree of production integration
4. Level of marketing integration

Block III 
Integration performance indicators

1. Competitiveness of the final product
2. Social and economic efficiency
3. Cumulative effect of joint activities

Source: author's own development



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the ratio of the selling price of the products  
of the agro-industrial formation to the average 
market price on the regional market.

The socio-economic efficiency of agro- 
industrial formations can be expressed through 
a system of indicators: wages, the size of the  
public funds of the association, the level of 
mechanisation, the equipment of the workforce, 
the improvement of the qualifications of the 
employees, etc.

The cumulative effect of the joint activity  
of the participants in the agro-industrial  
integration is determined by the ratio of the  
total profit obtained as a result of the integration  
to the cost price of the final products.

When making a final decision on the creation 
of an integrated agro-industrial complex, it is 
necessary to determine its possible significance  
for the socio-economic development of the  
district (region) in which its activities are planned.

The developing processes of cooperation and 
integration should not happen spontaneously, 
when creating long-term relations between 
agricultural and processing enterprises, the 
experience of previous stages of management 
should not be forgotten, because the placement  
of production capacities of processing  
enterprises was made taking into account the 
rational use of the raw material base, formed 
agricultural zones and needs of the population 
living in the respective territory.

The following factors can be highlighted as 
criteria that determine the direction and form of 
agro-industrial integration.

1. The availability of large markets. Satisfying  
the needs of customers is the purpose of any 
business. Proximity to potential consumers 
is not only a strong incentive for the creation 
of large-scale agro-industrial production, but 
also influences its specific form. For example, 
the organisation of processing directly by  
agricultural enterprises (meat processing plants  
of agricultural enterprises and processing 
cooperatives set up by small producers) only  
makes sense in the vicinity of sales markets, 
otherwise the commercial costs become  
prohibitive for producers.

2. The presence in a given area of companies 
that are links in a single technological chain 
"production-processing". The essence and 
concept of agro-industrial integration implies 
the combination in a single structure of two or 

more links of agro-industrial production and, first  
of all, of agriculture and processing. The 
presence in the agricultural zone of economic 
entities – producers of agricultural products and a  
processing enterprise capable of providing 
the necessary amount of processing of raw  
materials is the main condition for the formation  
of an agro-industrial association in this territory.

3. The volume of production of agricultural 
producers. This factor is not the last one that 
influences the expediency of choosing one 
or another form of unification processes.  
The creation of agricultural holdings tends  
to focus on large-scale production, as this reduces 
transport costs and allows the capacities of 
processing enterprises, which act as the main 
initiators of integration in the creation of holding 
structures, to be quickly utilised.

4. Financial situation of potential integration 
participants. When carrying out integration 
processes, it becomes necessary to select the 
main integrators – one, less often – several large, 
financially stable enterprises, capable of taking 
on all the organisational difficulties of creating an 
association. The formed financial position of the 
subjects of the adjacent stages of the technological 
chain determines the direction of integration: 
a stable economic condition and access to  
financial resources of the enterprises of the 
processing sector in case of an agricultural crisis 
will lead to "backward" integration, the opposite 
situation can contribute to the development of 
"forward" integration. Given the unfavourable 
financial situation of both spheres, it will most 
likely be necessary to turn to external sources 
of financing, i.e., there will be conditions for the 
development of lateral integration.

5. Organisational and legal status of the  
potential participants. This factor is important  
for the choice of one or another form of 
agro-industrial formation. For example, the 
predominance of agricultural enterprises  
operating in the form of production cooperatives 
in the region will make it difficult to create  
holding structures based on the ownership  
of large blocks of shares or cash capital of the 
organisations included in the association by the 
main company.

At the regional level, in order to coordinate 
the activities of agro-industrial formations, it is 
advisable to create an association (union) of meat 
producers and processors.



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The work of the Meat Union should be carried 
out with the active support of the regional 
administration, which is interested in stabilising 
and increasing the efficiency of the industry.  
Its main tasks should be:
– representation and protection of producers' 
interests in local and state authorities;
– participation in the development of national  
and regional programmes for the development  
and support of livestock farming;
– initiating and participating in the development  
of programmes aimed at stimulating the 
development of cooperation and integration in  
the livestock sector;
– cooperation with research and educational 
institutions, financial and industrial organisations 
to provide organisational, scientific, technical, 
economic and investment support to its members;
– coordination of economic activities of the 
association's members, which includes: analysis 
and assessment of the industry, development 
of proposals for its development, planning and 
coordination of programmes for the introduction 
of intensive technologies for the production and 
processing of livestock products;
– promoting the development of market 
infrastructure (creation of wholesale food 
and resource and technical markets, credit  
cooperatives, insurance institutions);
– assisting union members in selling products, 
finding potential investors, obtaining loans, tax  
and other benefits for leasing operations;
– conducting research on economic, technological 
and other issues of the livestock industry;
– providing legal assistance to the union members.

In order to function effectively, this union  
must first be supported by the state and  
recognised by the regional authorities as an 
equal partner in the management system of the 
agricultural sector.

Integration and cooperation processes are 
just beginning to develop and are currently  
spontaneous and fragmented, which cannot 
significantly affect the state of the livestock  
industry in general. Only a comprehensive  
approach to the creation and development of  
agro-industrial formations, taking into account 
the management conditions of each territorial  
zone of the region, is capable of changing the 
situation.

A comprehensive approach to the reform of the 
system of intra-economic relations is necessary  

for the successful entry of an agricultural  
enterprise into an integrated formation. Studies  
have shown that the improvement of intra- 
economic relations in agricultural cooperative 
formations is a necessary condition for their  
financial recovery and increase in production 
efficiency. In order to achieve these goals, it 
is necessary to reform intra-farm labour and 
organisational relations based on the coordination 
of the general farm interests and the individual 
interests of the members of the cooperative. 
Economic calculation corresponds most closely 
to such relations. Modern agricultural production 
cooperatives differ significantly in the level of 
application of elements of intra-farm calculation.

The highest category is the use of all elements 
of intra-economic calculation, when each 
unit of the cooperative formation and even 
individual employees are in a relationship of 
complete self-sufficiency with the cooperative  
administration.

The first category consists of cooperatives that 
establish intra-economic relations according 
to the principles of intra-economic calculation.  
Self-sufficiency and self-financing, material  
interest and economic responsibility are 
practised here. In these enterprises, the optimal  
production and organisational structures of the 
cooperative have been determined and the order 
of relations between structural divisions has  
been clearly regulated on the basis of estimated 
intra-farm prices. Expenditure standards are 
applied to the units and bonuses are paid for  
their reduction, financial incentives depend  
on the income received, the responsibility  
of the units towards the cooperative  
administration and other units for violations  
of production conditions is provided.

The second category consists of cooperatives 
where only the basic elements of internal  
accounting have been mastered. The relationship 
between the units and the management of 
the cooperative does not clearly differentiate 
responsibility for failure to fulfil obligations, 
compliance with regulations.

In the third category of cooperatives, elements 
of intra-household calculation are also applied. 
The order of interrelationships between  
structural subdivisions is determined on the 
basis of intra-household estimated prices, 
financial incentives are related to the results of  
operations but are not fully dependent on them,  



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i.e. payment is made for the products produced, 
but there is no bonus for reducing costs.  
There is no clear division of responsibility  
between the units and the cooperative manage-
ment for failure to meet commitments.

The fourth category includes all other forms 
of cooperatives in which intra-enterprise  
calculations are practically not used, intra-
enterprise relations are based on the conditions 
of management methods, and the remuneration 
of the members of the cooperative is not directly 
related to the results of the units' activities.

At present, the main task of the cooperative is 
to fulfil the contractual obligations between the 
units, between the cooperative and the units, 
between the cooperative and the employees, and 
between the cooperative and external partners. 
The development of self-supporting relations,  
the granting of real independence to the  
structural units provides an opportunity for 
the self-realisation of specialists, promotes the  
increase of material interests of all employees  
and activates entrepreneurial activity. State 
accounting increases the effectiveness of the  
system of control and accounting for the 
consumption of production resources, ensures an 
increase in the material interest and responsibility 
of all members of the cooperative. In order 
to improve the organisational and economic  
relations in the cooperative, it is proposed to 
introduce additional measures to stimulate the 

work of managers and specialists, to establish  
the standard of their salaries (from the gross 
income, profit or the amount of revenue for the 
economy), as well as a fixed amount of other 
planned expenses (the content of fixed assets 
attached to the equipment, stationery, expenses 
for business trips, personnel training, etc.).  
During the year, employees are paid an advance 
salary (shareholders receive a guaranteed  
minimum, employees receive full salary). At the 
end of the year, the actual salary is determined 
according to the approved standard. Savings 
on fixed costs are added to this amount (or the 
excess is retained). The total amount is adjusted  
according to the fulfilment of obligations. If the 
cooperative manager and the equipment staff 
have fulfilled all their obligations, this amount is 
increased by 35%, but is reduced by 11% for each 
unfulfilled item, as is the fixed amount of other 
planned expenses (maintenance of fixed assets 
assigned to the equipment, stationery, travel 
expenses, staff training, etc.).

The proposed system is designed to ensure 
a sufficiently close link between the level of  
material participation, increased employee 
responsibility and the level of gross income of  
the cooperative, thus contributing to the growth  
of production and improving product quality.

In today 's conditions, increasing the efficiency 
of production can be achieved mainly through 
the development of innovative processes, which 

Table 2
Classification of agricultural production cooperatives according  
to the degree of application of elements of on-farm accounting

Elements of intra-accounting transactions
Categories of agricultural cooperative organisations

Higher category 1 2 3 4
1. The optimal production and organisational structure  
of the cooperative is determined

+ + +

2. The procedure for relations between structural units  
on the basis of internal business estimates is determined

+ + + +

3. Prove cost standards + + + + -
4. Reward for cost savings was introduced + + +
5. Employees' financial incentives are entirely dependent 
on the income of the divisions

+ + + +

6. Provides for liability of departments and 
administration for violation of the terms of proceedings

+ +

7. Each unit is fully self-supporting with the cooperative's 
administration

+

8. An automated system was introduced to record  
the work of each unit and the cooperative as a whole,  
as well as their relationships

+

Source: author's own development



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find their final expression in new technologies, 
new types of competitive products. Finding 
and using innovations directly in enterprises is 
a real problem. The development of new technical 
and organisational-technological solutions, 
the improvement of the main principles of  
management in relation to the specifics of 
the domestic market create conditions for 
the restoration of reproduction processes in  
enterprises and provide additional impetus 
for economic growth. Constant updating of  
equipment and technologies makes the  
innovation process the main condition for the 
production of competitive products, gaining  
and maintaining positions of enterprises on the 
market, increasing productivity and efficiency of 
the enterprise.

6. Distributional Relations in the Activities  
of Integrated Formations

In the process of economic activity of  
integrated formations, an important place is 
occupied by the distribution relations of the 
achieved joint effect, the mechanism of which  
must be ensured:
– firstly, the determination of the fair individual 
contribution of each participant to the overall  
result of the joint activity;
– secondly, the identification of a real criterion 
for the distribution of the achieved joint results 
(income, profit).

The choice of the organisational and economic 
mechanism and the rules for the distribution 
of the general additional effect must, of course,  
be determined as the result of negotiations  
between the participants of the integrated 
formation. The process of finding a "fair  
compromise solution" can be clearly determined 
by the variety of formations created, if only  
because the concept of "justice" itself is very 
complex, multifaceted and can be interpreted 
differently by different members of the 
association (Karmazina, 2012).

This circumstance requires the development of 
methodological approaches to the distribution 
of the general co-benefit based on a combination 
of different economic interests, focusing on the 
different perceptions of the participants regarding  
the fairness of such a distribution. Such a  
technique should be multi-variant, gradually 
leading to the maximum consideration of all 
interests and arguments of the integration 

participants in order to reach an agreed solution. 
The most modern and effective method of 
obtaining a compromise solution is the method 
of modelling the created or functioning  
integrated formation in the meat products  
sub-complex based on the use of personal 
computers. It allows to visually present 
various options based on different distribution  
principles and different states of the external 
economic environment.

Specific options for the distribution of income 
between meat producers, meat processors and 
traders can be reviewed and clarified both at the 
stage of establishment and during its operation,  
in the event of unforeseen changes in conditions  
or a reassessment of the interests of some 
participants in the integration structure.

According to the assessment, there is no doubt 
about the multivariate and interactive nature 
of the process of coordinating the interests of 
the integration subjects. Studies show that it is  
useful to define the basic reference options  
for the distribution of the total additional  
financial result.

For example, in the first basic version, the 
additional effect is distributed between the 
integration subjects in proportion to their 
production contribution.

The second basic option is to allocate the  
effect in proportion to the value added in each  
firm and in each link of the technological chain,  
but the apparent fairness of such an allocation  
may be distorted by existing price differentials.  
If one of these options is taken as the basic one, 
the other should be used to adjust it. On the  
basis of the above provisions, it is possible 
to propose methodical approaches to the  
distribution of the benefit received, as well as 
the choice of the organisational and economic 
mechanism of the functioning of the integrated 
formation.

The choice of mechanisms can be based on  
several important approaches. Without  
pretending to be exhaustive, some principles  
will be presented that should be applied with  
regard to the importance of the individual 
organisations involved in the integration and, 
indirectly, the validity of their claims to a share of 
the overall benefits (profit).

First. The basis of the distribution of impact 
by contribution (specific weight) is most often 
economic indicators that determine the relative 



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economic power of each subject of integration. 
The basic version of the distribution based on  
the economic contribution of organisations to  
the total value added has already been shown.  
In order to clarify or reshape this distribution, 
it is necessary to take into account such  
important economic indicators as the profit  
before the organisation of the integration  
structure, the balance of liquid assets, fixed  
assets, working capital and some of their 
combinations. The choice of a particular 
combination of indicators is made on the basis of 
the analysis of the functioning of the integrated 
formation or the project of its functioning,  
taking into account the specifics of individual 
participants.

Second. The distribution of the effect  
according to where it occurs. To determine this,  
all possible options are considered. This  
principle is derived from the distribution of  
income received in proportion to the additional 
value created in each company or in each link  
of a single technological chain.

Third. The distribution of the additional effect 
by the amount of assets and fixed assets can 
be used with a small number of participants 
in the formation and a large uniformity of the  
products produced.

Fourth. Distribution according to the principle 
of coalition power, since the importance of each 
member of the alliance is determined purely by 
economic indicators. According to the assessment, 
the importance of the individual participants  
(and therefore their share of the profit) is higher 
the more important their entry into the alliance  
is for its successful functioning.

Fifth. The principle of the distribution of  
benefits, based on the theory of threats, is to 
determine the importance of the principle of 
coalition power. It is obvious that a member of the 
coalition (in this case, an integrated formation) 
is stronger or more important for the group the 
greater the number of threats associated with its 
exit from various options of the coalition; the 
remaining members do not find counter-threats.

On the basis of the application of one of the 
principles described above or of another principle 
obtained, for example, by their synthesis, the 
possibility of distributing the total income among  
the participants of the integration is determined.

Furthermore, the resulting options for 
the distribution of the total benefit can be 

implemented both in an explicit form, i.e., by 
determining the absolute amounts allocated to 
each organisation, and through more complex, 
"hidden" schemes of mutual calculation, e.g., 
through the mechanisms of internal settlement 
prices or internal taxes, which are subdivisions  
of the organisational-economic mechanism.

Distribution relations in integrated formations  
of the meat products subcomplex can be 
constructed according to two models:
– price, which in practice can be applied in two 
ways: at current market prices or at estimated 
domestic prices;
– normative-distributive, which differs from 
the price model in that the calculations are not  
made on the basis of the intermediate result, but  
on the basis of the final result.

In the price (or cost-technological) model, 
calculations are made according to the costs 
of the technological process, starting from the 
producer of raw materials and ending with the 
trading organisation for the sale of semi-finished 
and finished meat products. It is advisable to use 
such a scheme in those integrated formations 
in which the participants either retain legal 
and economic independence, or retain only  
economic independence, but do not have the 
rights of a legal entity. Since the price model  
is built according to the stages of the  
technological process, the prices of meat products  
passing through successive stages can be  
determined in two ways:
– based on the normative or actual costs and the 
applied meat production technology, while the 
cost of the final products is determined on a cost 
basis, starting from the first stage of production  
and ending with the last – trade, taking into  
account the increase in added value;
– based on the retail price of the final type of  
meat products, i.e., a reversible model is used, 
according to which the estimated price of raw 
materials is determined in reverse order. The 
peculiarity of this method is that the starting  
point of the calculations is the actual market  
price for a specific type of semi-finished or  
finished product and the final point is the  
calculated price for a specific type of raw material 
(increase in cattle, pigs, poultry).

The application of the pricing model in the  
market relations of the participants of the joint 
activity has constraining moments, because each 
participant of the integrated chain proceeds 



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from its own interests and tries to obtain the  
maximum profit through the price. In integrated 
formations of a closed type, the concept of 
pricing is built primarily with the orientation 
of all participants to obtain the maximum  
aggregate income from integrated activities 
in general, and here it should not act as an in 
dependent tool of distribution relations, but  
serve as a value basis for the distribution of the  
final financial result.

In the normative-distributive model, economic 
relations are established by distributing the 
final financial outcome (sales revenue, profit) in 
proportion to the participants' contribution to the 
joint production. The amount of this contribution 
for each participant can be determined by one of 
three normative methods: cost, price, resource.  
The regulatory cost method calculates the 
regulatory costs at each stage of product  
promotion. The contribution of agricultural 
producers is determined on the basis of the 
normative (full) cost price, the rest on the basis 
of its increase. One of the main conditions for 
using this method of calculation is that the right 
of product ownership must belong to the main 
integrator of the group. This has the effect of 
deferring the tax assessment, since in this system 
the profit is calculated only at the end of the 
technological cycle, i.e. at the stage of sale of semi-
finished or finished meat products. However, 
given the practical difficulty of determining the 
normative level of costs for the production of the 
meat products sub-complex, it is possible to use 
a more modified option.

The standard price method differs from the  
price method in that the standard profit indicator 
is added to the calculation procedure. The 
contribution of the participants is determined as 
follows: for agricultural cooperatives – according 
to the standard value, for others – according  
to the added standard value. This option can 
be used for any form of integration – both with 
the loss and with the preservation of the legal 
independence of the participants – economic 
units. The full calculation is carried out through  
the distribution of the profit received at the 
final stage of the integrated association's activity, 
and earlier an advance is paid to the supplier of  
livestock after the sale (handover) of the products 
for processing.

The use of a cost-price variant of distribution 
relations will allow agro-industrial formations to 

effectively influence the interests of integrators  
in order to reorient them towards the final results  
of joint activities. The formation of the profit  
of each of the participants should be carried 
out taking into account the real conditions of  
operation.

The normative-resource method determines 
the resource intensity of the production of 
weight gain and its processed products. To do 
this, all types of production resources used 
in agricultural production and processing are 
summed up in a monetary estimate and the share 
of each participant is determined. The application 
of this method is limited by the complexity of  
comparing the costs of resources of different 
quality (labour, fixed assets) and of the same type 
but belonging to different activities (e.g., livestock 
farming and meat processing).

For agro-industrial formations of the meat 
products subcomplex of the joint-stock type 
with the maximum degree of integration, which  
implies the loss of the legal entity status of the 
participants, the given distribution relations of the 
obtained general effect are the most acceptable. 
Participants who do not have legal independence, 
operating under the conditions of internal 
commercial settlement, have collective economic 
interests, the totality of which affects the formation 
of the mechanism of distribution relations, 
especially when justifying the ratio between 
accumulation and consumption.

7. Conclusions
The author's position is to recognise the need 

for a reasonable combination of large agro-
industrial formations, medium-sized agricultural  
enterprises, farms and private peasant households  
in the subcomplex, which allows for the  
realisation of the advantages of each form of 
management, economic growth in the industry 
and sustainable development of rural areas. The 
results of the study provide grounds to identify 
the following areas for the effective development 
of integration processes and integrated structures 
in the meat and food subcomplex, on which 
it is proposed to focus the efforts of the state,  
business, industry associations and the  
scientific community:
– ensuring effective entry of integrated structures 
into the global agri-food market;
– implementation of full-scale anti-epizootic 
measures to combat animal diseases, primarily 



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African swine fever, which poses a major threat  
to the development of pig production;
– еstablishing a legal framework for property  
and distribution relations between participants  
in integrated structures, including the adoption  
of the Law of Ukraine "On Holding";
– development of scientific and methodological 
support in the field of organisational and  
economic mechanism of integrated formations, 
taking into account the interests of all participants;
– organisation of state statistical monitoring of 
the functioning of integrated structures in order 
to form a system of statistical indicators that 
comprehensively characterise their activities;
– focusing investment activities of integrated 
entities on modernising production and sales, 
developing the breeding, genetic and feed base;
– vertical integration of producers with research 
and development organisations with the creation 
of research and production associations to 
create an innovative direction for the industry 's 
development;
– creation and expansion of contractual forms of 
integration, inter-organisational interactions and 
institutional arrangements;
– developing the diversification of the integrated 
units' activities (towards deep processing,  
coverage of new regions, meat and livestock 
projects), increasing production volumes for 
emerging market segments (turkey, duck, rabbit, 
etc.), improving product safety and quality;
– use of modern scientific and methodological 
support for corporate strategic management, 
business process and quality management, and 
marketing;

– state regulation of the activities of integrated 
structures, including by improving land  
legislation, in order to mitigate the negative  
impact on the competitive environment, 
environmental situation and socio-economic 
situation in rural areas;
– regionalisation of the state policy of supporting 
integrated structures, taking into account the 
specifics of business entities and the current level 
of development of vertically integrated industries 
in the respective territories;
– increased focus on corporate social respon-
sibility of agro-industrial integrated entities and 
their social objectives;
– development of mechanisms of public-private 
partnership in the creation of integrated structures 
in "growth points" and implementation of 
large investment projects by integrated entities 
(Boltovska, 2021).

The results of the conducted research, which 
systematize and specify the content and genesis 
of agro-industrial integration, taking into  
account the specifics of the industry, expand 
scientific ideas about integration processes in 
the meat products subcomplex, contribute 
to overcoming the fragmentation of scientific 
knowledge in this area, contribute to the  
formation of information and applied research,  
and can be used in the development of programs 
for the development of the meat products 
subcomplex and rural areas, mechanisms of 
state support for meat production, and in the  
preparation of proposals for improving the 
regulatory and legal framework for the activities  
of integrated structures.

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Received on: 27th of April, 2023
Accepted on: 29th of May, 2023

Published on: 30th of June, 2023