Strategic Business Planning for Commercial Producers

What Tools Are Useful in Assessing Strengths and Weaknesses?

Resources, Capabilities, and Core Competencies

Strategic Business Planning for Commercial Producers

Strengths and Weaknesses

Goal: objective assessment of your strengths and weaknesses
relative to competitors important to customers

Note: This is difficult to do well.

Strategic Business Planning for Commercial Producers

Challenge of Internal Analysis

Identifying, developing, protecting, and deploying resources, capabilities, and core competencies

Strategic Business Planning for Commercial Producers

Resources
Inputs into a firms production process such as capital equipment, skill of individual employees, patents, finance, and talented managers
Tangible Resources Assets that can be seen and quantified Intangible Resources Family commitment, networks, organizational culture, reputation, intellectual property rights, trademarks, copyrights

By themselves, resources do not create a strategic advantage for the firm.

Strategic Business Planning for Commercial Producers

Capabilities
Capacity to deploy resources that have been purposely integrated to achieve a desired end state. Primary base for the firms capabilities is the skills and knowledge of its employees. Just because the firm has a strong capacity for deploying resources does not mean it has a competitive advantage.

Strategic Business Planning for Commercial Producers

Core Competencies
Resources and capabilities serve as a source of competitive advantage for a firm over its rival. Not all resources and capabilities are core competencies. Many suggest that firms should identify and concentrate on only 3 or 4 core competencies.

Strategic Business Planning for Commercial Producers

Identifying and Building Core Competencies

Core competencies must be distinctive.
Capabilities that are done better than competitors

Identifying core competencies is key to development of sound strategy. We use the value chain to help identify core competencies.

Strategic Business Planning for Commercial Producers

The Value Chain

A framework for identifying core competencies
Inside the firm In the supply chain

Can be used to
Identify strengths and weaknesses Identify sources of competitive advantage Identify market opportunities

Strategic Business Planning for Commercial Producers

The Value Chain

Firm Infrastructure

Supporting Activities

Human Resource Management Technological Development Procurement

Inbound Operations Logistics

Outbound Marketing Service Logistics & Sales

Relationship with Suppliers

Relationship with Buyers

Elapsed Time - Value added time cost

Strategic Business Planning for Commercial Producers

Primary Activities in the Value Chain

Inbound Logistics
Materials handling, warehousing, inventory control used to receive, store and disseminate inputs to a product Fertilizer and chemical storage, delivery of inputs, application of inputs

Operations
Take inputs from inbound logistics and convert to final products Plowing, planting, spraying, harvesting, feeding, medicating, weighing,etc.

Outbound Logistics
Collecting, Storing, and physical distribution of the final product. Crop storage, finished hog handling, Processing and determining delivery dates, delivery to the packer or elevator etc.
Procurement Technology Firm Infrastructure Human Resource management Service Inbound Logistics Operations Outbound Logistics Marketing and Sales

Strategic Business Planning for Commercial Producers

Primary Activities in the Value Chain

Marketing and Sales
Provide means through which customers can purchase products and to induce them to do so Advertising, communicating with buyers, developing customer relationships, pricing products (futures, hedging, forward contracting, etc.), delivery scheduling

Service
Activities designed to enhance or maintain a products value Timely delivery, identity preservation, ISO9000, certifying as organic, etc.
Procurement Human Resource management Human Resources Firm Infrastructure

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Service

Strategic Business Planning for Commercial Producers

Supporting Activities in the Value Chain

Procurement
Inbound Logistics

Procurement Technological Development Human Resources Firm Infrastructure

Service Operations Outbound Logistics Marketing and Sales

Activities to purchase the inputs needed to produce products Negotiating with suppliers, standard timing of replenishing parts and tools, setting up buying groups, etc.

Technological Development
Activities that improve the firms products and/or processes Volunteering for test plots, being a part of feeding trials, attending technology seminars/field days, designing equipment to make specific production tasks more efficient, etc.

Human Resources
Recruiting, hiring, training, developing, and compensating all personnel

Strategic Business Planning for Commercial Producers

Supporting Activities in the Value Chain

Inbound Logistics

Human Resource management Procurement

Technology Firm Infrastructure

Service Operations Outbound Logistics Marketing and Sales

Firm Infrastructure
General Management, planning, finance, accounting, legal support, governmental relations, etc. Establishment of accounting practices, management information systems, compliance with environmental regulations, tracking and reporting for government programs, etc. Where strategy development takes place identifying opportunities and threats, resources and capabilities, and support of core competencies

Strategic Business Planning for Commercial Producers

The Result of the Value Chain

Margins
Capture the value from performing value-creating activities as cheaply as possible The basic idea is that the consumer is willing to pay a certain amount for the value you create. This is depicted as the size of the overall pentagon. The size of the individual activity boxes represents the cost of performing those particular activities. Thus, the smaller the size of the individual activity boxes relative to the value the consumer is willing to pay, the greater the MARGIN will be for the firm.

Strategic Business Planning for Commercial Producers

The Value Chain Grains Farm

Firm Infrastructure

Supporting Activities

Human Resource Management Technological Development Procurement

Inbound Operations Logistics

Outbound Marketing Service Logistics & Sales

Relationship with Suppliers

Relationship with Buyers

Elapsed Time - Value added time cost

Strategic Business Planning for Commercial Producers

Primary Activities for a Grain Farm

Service Outbound Marketing On-time delLogistics ivery Inbound Operations & Sales Forward Logistics contract Grain
transport Fwd. contracts to elevator Futures or buyer Options IP grain Grain Value added transport grain to storage IP Storage Tracing QA

Tillage Planning Fertilizer and Fertilizing chemical storage, Spraying custom Cultivate application Harvest of inputs

Relationship with Suppliers Relationship with Buyers

Strategic Business Planning for Commercial Producers

Supporting Activities for a Grain Farm

Infrastructure: management, planning, finance,
accounting, government compliance, quality control

Human Resource: motivation tools, compensation,

training, and directing farm employees, including family, management, and laborers

Technological Development: research and adoption practices

for things like GPS, VRT, GMOs, No-Till, the Internet, IP storage facilities

Procurement: Purchasing inputs: seed, fertilizer, chemicals,

fuel, land, Machinery, storage equipment, office supplies, parts, tools, insurance etc. with focus on negotiating capabilities

Strategic Business Planning for Commercial Producers

Value Chain Analysis

A firms value chain must be compared to competitors value chains to determine where competitive advantages exist. To be a source of competitive advantage a resource or capability must allow a firm to:
Perform an activity in a manner that is superior to competitors performances Perform a value-creating activity that competitors cannot complete

Strategic Business Planning for Commercial Producers

Linkages within the Value Chain

Optimization and coordination of activities in the value chain Linkages exist between support activities and primary activities and between separate primary activities Generic causes for linkages
Same function can be performed in different ways Efforts in indirect activities Activities performed inside the firm reduce the need for activities in the field Quality Assurance can be performed in different ways

Strategic Business Planning for Commercial Producers

Value Chain Linkages in the Supply Chain

Buyer Chain Supplier Chain Firm Chain Buyer Chain

Supplier Chain
Buyer Chain

Strategic Business Planning for Commercial Producers

Linkages with Supplier Value Chain

Linkages between suppliers value chains and a firms chain provide opportunities for the firm to enhance competitive advantage. Division of benefits between firm and its suppliers is a function of suppliers bargaining power and reflecting in suppliers margins. Both coordination with suppliers and hard bargaining are important to competitive advantage.

Strategic Business Planning for Commercial Producers

The Buyers Value Chain

A firms differentiation stems from how its value chain relates to its buyers chain. Differentiation derives fundamentally from creating value for the buyer through a firms impact on the buyers value chain. Value is created when a firm creates a competitive advantage for its buyer. The buyer must perceive the value to pay a premium price.

Strategic Business Planning for Commercial Producers

Internal Factor Analysis Summary (IFAS)

Assesses strengths and weaknesses Provides one overall number for the strength of your firms internal position

Strategic Business Planning for Commercial Producers

Exercise: Identifying Strengths and Weaknesses

Internal Factor Analysis Summary (IFAS) Table
List up to 6 to 10 factors (strengths and weaknesses) in your farms internal environment Give each item a relative ranking in terms of the importance to your farm business competitive advantage
0 is not important to 1 being most important must sum to 1

Assess your firms current actions to take advantage of this strength or improve on this weakness
5 is well positioned to 1 being poorly positioned

Multiply the two together and sum

Source: Wheelen and Hunger

Strategic Business Planning for Commercial Producers

IFAS Table grains production

Internal Factors
Strengths Good management Soil fertility Equipment Financial position Information management Weaknesses Spread too thin, several different crops Hay and silage equipment Commodity pricing Total 0.25 0.10 0.10 1.0 2 2 4 0.50 0.20 0.40 3.00 Craig seems to have too many things to do. Out dated and in constant need of repair. Trying to improve by using marketing consultant. 0.15 0.10 0.05 0.10 0.15 5 4 3 3 3 0.75 0.40 0.15 0.30 0.30 Use Craig and Mikes abilities very well. Key to productivity. Manure from dairy helps keep fertilizer costs low. Generally in good shape but aging. Profitable, low debt, too many assets. Well maintained crop production data by field. Record system, capacity, etc. well designed.

Weight

Rating

Weighted Score

Comments

Strategic Business Planning for Commercial Producers

Strategic Business Planning for Commercial Producers