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 technolog
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
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
Internal Factor Analysis Summary
(IFAS)
• Assesses strengths and weaknesses
• Provides one overall number for the
strength of your firm’s 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
farm’s 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 firm’s 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
Weight
Rating
Weighted
Score
Comments
Strengths
Good management
0.15
5
0.75
Use Craig and Mike’s abilities very well.
Soil fertility
0.10
4
0.40
Key to productivity. Manure from dairy helps
keep fertilizer costs low.
Equipment
0.05
3
0.15
Generally in good shape but aging.
Financial position
0.10
3
0.30
Profitable, low debt, too many assets.
Information management
0.15
3
0.30
Well maintained crop production data by field.
Record system, capacity, etc. well designed.
Spread too thin, several
different crops
0.25
2
0.50
Craig seems to have too many things to do.
Hay and silage equipment
0.10
2
0.20
Out dated and in constant need of repair.
Commodity pricing
0.10
4
0.40
Trying to improve by using marketing
consultant.
Total
1.0
Weaknesses
3.00
Strategic Business Planning for Commercial Producers
Strategic Business Planning for
Commercial Producers