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 firm’s 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 firm’s 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
Supporting
Activities
Firm Infrastructure
Human Resource Management
Technological Development
Procurement
Inbound
Operations
Logistics
Outbound Marketing Service
Logistics & Sales
Relationship with Suppliers
Elapsed Time - Value added time cost
Relationship with Buyers
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 product’s 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
Procurement
Technological Development
Human Resources
Firm Infrastructure
Service
Inbound
Logistics
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 firm’s products and/or processes
– Volunteering for test plots, being a part of feeding trials, attending
technology seminars/field days, designing equipment to make specifi
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
Human Resource management
Procurement
Technology
Firm Infrastructure
Service
Inbound
Logistics
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
Supporting
Activities
Firm Infrastructure
Human Resource Management
Technological Development
Procurement
Inbound
Operations
Logistics
Outbound Marketing Service
Logistics & Sales
Relationship with Suppliers
Elapsed Time - Value added time cost
Relationship with Buyers
Strategic Business Planning for Commercial Producers
Primary Activities for a Grain Farm
Service
Outbound
On-time delMarketing
Logistics
ivery
Inbound Operations
& Sales Forward
Logistics
contract
Grain
Tillage
Planning
Fertilizer and
Fertilizing
chemical storage, Spraying
custom
Cultivate
application
Harvest
of inputs
transport Fwd. contracts
to elevator
Futures
or buyer
Options
IP grain
Grain
Value added
transport
grain
to storage
IP
Storage
Tracing
QA
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, GMO’s, 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 firm’s 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
competitor’s 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 supplier’s
bargaining power and reflecting in
supplier’s margins.
• Both coordination with suppliers and hard
bargaining are important to competitive
advantage.
Strategic Business Planning for Commercial Producers
The Buyer’s Value Chain
• A firm’s differentiation stems from how its
value chain relates to its buyer’s chain.
• Differentiation derives fundamentally from
creating value for the buyer through a
firm’s impact on the buyer’s 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
Generating Alternative
Strategies From SWOT
• SWOT analysis is a tool for helping assess
the current situation for the firm.
• However, we need to be able to combine
the information in the SWOT analysis in a
meaningful way to generate alternative
strategies that we might pursue.
• The TOWS matrix is a tool designed to
match external opportunities and threats
with our internal strengths and weaknesses
Strategic Business Planning for Commercial Producers
SWOT Analysis
Internal
Environment
Strengths
1.
2.
3.
Weaknesses
1.
2.
3.
External
Environment
Opportunities
1.
2.
3.
Threats
1.
2.
3.
Strategic Business Planning for Commercial Producers
TOWS Matrix
• Technique used in strategy formulation
for combining
– External analysis
• Opportunities
• Threats
– Internal analysis
• Strengths
• Weaknesses
Strategic Business Planning for Commercial Producers
TOWS Matrix
From
Internal Analysis
(IFAS)
From External Analysis (EFAS)
Opportunities:
1.
2.
3.
Strengths:
1.
2.
3.
Weaknesses:
1.
2.
3.
SO Strategies
Use strengths to
take advantage
of opportunities
Threats:
1.
2.
3.
ST Strategies
Take advantage of
Strengths to
avoid
threats
WT Strategies
WO Strategies
Defensive strategies
Use Opportunities to
to minimize
overcome weaknesses
weaknesses and
avoid threats
Source: Weihrich