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AGRB 428: AGRIBUSINESS STRATEGIC MANAGEMENT

Lecture material for BSc. Agribusiness Mgt IV

Compiled by:

Robert Aidoo, Ph...
Course Outline
• Course objective:
– This course aims at providing the student with strategic management
techniques needed...
1. INTRODUCTION
What is strategic management
• What we think, know, or believe in is, in the end, of little consequence. The
only conseque...
• Strategic planning …..is the process by which the
guiding members of an organization envision its
future and develop the...
• Strategic management is a systems approach to identifying and
making the necessary changes and measuring the organizatio...
The Strategic Management Process
• The five processes of strategic management are:
– pre-planning
– strategic planning
– D...
Role of senior managers/leaders
• It is the responsibility of senior leadership to strategically manage the
organization:
...
Benefits of strategic management?
• When an organization is practicing strategic management, thinking becomes
more visiona...
What is the first step towards strategic management?

• The first step toward strategic management is to develop a
strateg...
2. THE STRATEGIC PLANNING PROCESS
What is Strategic Planning?
• Process to establish priorities on what you will accomplish in the
future
• Forces you to ma...
Why do Strategic Planning?
• If you fail to plan, then you plan to fail – be
about the future

proactive

• Strategic plan...
Benefits of Strategic Planning
• Defines mission, vision &
values

• Provides base to measure
progress

• Establishes real...
A Good Strategic Plan should . . .
• Address critical performance issues
• Create the right balance between what the organ...
Fundamental questions:

• Where are we now? (Assessment)
• Where do we need to be? (Gap / Future End State)

• How will we...
Planning to Plan (Pre-planning)

• Discuss the planning phase of strategic planning by
brainstorming on some pre-requisite...
• Planning to plan requires:
– Organizational readiness
• Recognition of need to plan
• Readiness to plan
– Organizational...
– Organizational Capacity
• Human resources
– Staff
– Volunteers
– Board committees
– Special/Standing committees
• Financ...
Strategic Planning Model
ABCDE

Where we are

Assessment

• Environmental Scan

Where we want to be

Baseline

Components
...
Assessment
Strategic Analysis/assessment
– External assessment (Environmental Scan)
• gathering of information that concerns the orga...
SWOT
Internal Assessment: Organizational
assets, resources, people, culture, system
s, partnerships, suppliers, . . .

Ext...
Strengths
•

What are some internal positive things about your organization?

•

What does the community see as your stren...
•

Weaknesses

What are some weaknesses in organization?
• What does the community see as your weaknesses?
•Weaknesses – T...
Opportunities
•

What are some opportunities in your community or region?
• What are some emerging trends?

•Opportunities...
Threats
•

What are some district, regional or national issues facing the organization?
• What are some technology issues ...
Baseline
Why create a baseline?
• Puts everything about the organization into a
single context for comparability and planning
• Des...
Organizational Profile
1. Operating Environment
• Products and Services – Suppliers, Delivery
Channels, Contracts, Arrange...
Organizational Profile
2. Business Relationships
• Organizational Structure – Business Units,
Functions, Board, Management...
B
Organizational Profile
3. Key Performance Categories

aseline

• Customer
• Products and Services
• Financial
• Human Ca...
Gap Analysis
Baseline / Org Profile

Baseline

Challenges / SWOT

Gap = Basis for LongTerm Strategic Plan
Components
Major Components of the
Strategic Plan / Down to Action
Strategic Plan

Goals

Initiatives

Measures
Targets

AI1

M1 M2
T...
Mission Statement
• Captures the essence of why the organization
exists – Who we are, what we do
• Explains the basic need...
Examples – Good and Bad
Mission Statements
NASA
To Explore the
Universe and Search
for Life and to
Inspire the Next
Genera...
Vision
• How the organization wants to be perceived in the
future – what success looks like
• An expression of the desired...
Guiding Principles and Values
• Every organization should be guided by a set of
values and beliefs
• Provides an underlyin...
Examples of
Guiding Principles and Values
We obey the law and do not compromise moral or ethical principles – ever!
We exp...
Goals
• Describe a future end-state – desired outcome
that is supportive of the mission and vision.
• Shapes the way ahead...
Developing Goals
• Cascade from the top of the Strategic Plan –
Mission, Vision, Guiding Principles.
• Look at your strate...
Examples of Goals
Reorganize the entire organization for better responsiveness to customers
We will partner with other bus...
Objectives
• Relevant - directly supports the goal
• Compels the organization into action
• Specific enough so we can quan...
Goals vs. Objectives
GOALS

OBJECTIVES

Very short and general
statement, few words

Very specific statement, more
descrip...
Examples of Objectives
Develop a customer intelligence database system to capture and analyze patterns in purchasing
behav...
Action Plans?
• The Action Plan identifies the specific steps that will be taken to
achieve the strategic objectives
• Req...
Note the following about Action Plans
•

Assign responsibility for the successful completion of the Action Plan. Who is
re...
Measurements/Milestones
• Measure your milestones – short-term outcomes at
the Action Item level.
• Measure the outcomes o...
Examples of Measurements/milestones
• Average time to initiate customer contact =>
shorter time should lead to better cust...
Targets
• For each measurement, you should have at least
one target
• Targets should stretch the organization to higher
le...
Examples of Targets
Milestone

Targets

Average Time to Process
New Employee Setups in DB

65 days
Year 2014

60 days
Year...
Sanity Check . . .
Make sure everything is linked and connected for a tight end-to-end model for
driving strategic executi...
Link Budgets to Strategic Plan
• The world’s best Strategic Plan will fail if it is not
adequately resourced through the b...
What Resources?
Every Action Plan should identify the following:
• The people resources needed to succeed
• The time resou...
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  1. 1. AGRB 428: AGRIBUSINESS STRATEGIC MANAGEMENT Lecture material for BSc. Agribusiness Mgt IV Compiled by: Robert Aidoo, Ph.D Dept. of Agric. Economics, Agribusiness & Extension, KNUST, Kumasi
  2. 2. Course Outline • Course objective: – This course aims at providing the student with strategic management techniques needed to manage agribusinesses. • Outline: – – – – – Introduction The strategic Planning process Strategic management issues in agribusiness Formulation of agribusiness strategies and solutions to strategic problems Integration of operations, marketing, finance and human resource management in agribusiness enterprises • Basic Text: • Strategic Management by C.W.L. Hillaw and G.R Jones, Student Text: An Integrated Approach.
  3. 3. 1. INTRODUCTION
  4. 4. What is strategic management • What we think, know, or believe in is, in the end, of little consequence. The only consequence . . .. is what we do…. (Haines, 1995). • Strategic management as a concept is not new. – The term was first used in the 1970’s, when some strategic planners more or less thought up strategic programs and then tried to sell them to decision makers. • From the 1990’s coming, the view of strategic planning and strategic management is much different. • Now the definition of strategic planning takes us away from the notion that strategic planning is a staff job and focuses us more on a process that requires the senior leaders of an organization to set its strategic direction.
  5. 5. • Strategic planning …..is the process by which the guiding members of an organization envision its future and develop the necessary procedures and operations to achieve that future.. (Goodstein, Nolan, and Pfeiffer, 1992). • The concept of strategic management builds on this definition of strategic planning, ------ recognizing that although planning is the prelude of strategic management, it is insufficient if not followed by the deployment and implementation of the plan and the evaluation of the plan in action.
  6. 6. • Strategic management is a systems approach to identifying and making the necessary changes and measuring the organization’s performance as it moves toward its vision. • It has been defined as a management system that links strategic planning and decision making with the day-to-day business of operational management (Gluck, Kaufman, and Walleck, 1982)
  7. 7. The Strategic Management Process • The five processes of strategic management are: – pre-planning – strategic planning – Deployment – Implementation – measurement and evaluation.
  8. 8. Role of senior managers/leaders • It is the responsibility of senior leadership to strategically manage the organization: – Strategic management is a continuous process rather than a one-time event. – Therefore, the senior leaders must become strategic thinkers and leaders of the organization and its culture, changing it as necessary. • To be most successful, leaders need facilitators, coaches, consultants, and consensus-builders. • to be Transformational leadership is described by Bernard Bass as, superior leadership performance that occurs when leaders broaden and elevate the interests of their employees, when they generate awareness and acceptance of the purposes and mission of the group, and when they stir their employees to look beyond their own self-interest for the good of the group. • Acquiring transformational leadership traits requires hard work and dedication, willingness to take some risks, and internalizing the organization’s vision and guiding principles.
  9. 9. Benefits of strategic management? • When an organization is practicing strategic management, thinking becomes more visionary, which is characterized by: – Breakthrough thinking about the future; organizational boundaries are more flexible – A shift in focus from the inputs that are used to run the business to the outputs and outcomes the organization desires to achieve – A focus on optimizing organizational performance and process quality as keys to delivering quality products and services – A move toward an organizational culture that adapts easily to change. • With practice, patience, dedication, and hard work, the organizational learning that takes place through the application of strategic management will bring the organization closer to realizing its goals and vision. • With each update of the strategic plan, senior leaders will become better able to deploy the plan, implement changes, and measure organizational performance.
  10. 10. What is the first step towards strategic management? • The first step toward strategic management is to develop a strategic plan for the organization
  11. 11. 2. THE STRATEGIC PLANNING PROCESS
  12. 12. What is Strategic Planning? • Process to establish priorities on what you will accomplish in the future • Forces you to make choices on what you will do and what you will not do • Pulls the entire organization together around a single game plan for execution • Broad outline on where resources will get allocated • It is used by community, groups, government departments, organizations and businesses to develop blueprint for action and change • The process should be community based, inclusive and participatory to allow for maximum stakeholder involvement and input.
  13. 13. Why do Strategic Planning? • If you fail to plan, then you plan to fail – be about the future proactive • Strategic planning improves performance • Counters excessive inward and short-term thinking • Solves major issues at a macro level • Communicates to everyone what is most important
  14. 14. Benefits of Strategic Planning • Defines mission, vision & values • Provides base to measure progress • Establishes realistic goals, objectives & strategies • Develops consensus on future direction • Builds strong teams • Ensures effective use of resources • Solves major problems
  15. 15. A Good Strategic Plan should . . . • Address critical performance issues • Create the right balance between what the organization is capable of doing vs. what the organization would like to do • Cover a sufficient time period to close the performance gap • Visionary – convey a desired future end state • Flexible – allow and accommodate change • Guide decision making operational, tactical, individual at lower levels –
  16. 16. Fundamental questions: • Where are we now? (Assessment) • Where do we need to be? (Gap / Future End State) • How will we close the gap (Strategic Plan) • How will we monitor our progress
  17. 17. Planning to Plan (Pre-planning) • Discuss the planning phase of strategic planning by brainstorming on some pre-requisites needed to undertake the strategic planning process
  18. 18. • Planning to plan requires: – Organizational readiness • Recognition of need to plan • Readiness to plan – Organizational commitment • Board commitment • Senior managers’ commitment • Staff commitment
  19. 19. – Organizational Capacity • Human resources – Staff – Volunteers – Board committees – Special/Standing committees • Financial resources – Determine resources – Identify budget • Time – Allocate organizational time – Determine realistic time lines
  20. 20. Strategic Planning Model ABCDE Where we are Assessment • Environmental Scan Where we want to be Baseline Components How we will do it Down to Specifics How are we doing Evaluate • Situation – Past, Present and Future • Significant Issues • Mission & Vision • Performance Measurement • Performance Management • Values / Guiding Principles • Targets / Standards of Performance • Review Progress – Balanced Scorecard • Situational Analysis • Align / Fit with Capabilities • Major Goals • Initiatives and Projects • Take Corrective Actions • SWOT – Strength’s, Weakness es, Opportunities, Thr eats • Gaps • Specific Objectives • Action Plans • Feedback upstream – revise plans • Background Information
  21. 21. Assessment
  22. 22. Strategic Analysis/assessment – External assessment (Environmental Scan) • gathering of information that concerns the organization’s environments – Internal assessment gathering of information that concerns the organization’s internal operational issues • analysis and interpretation of this information • application of this analyzed information in decision making – Summarize this analysis/assessment with the SWOT model
  23. 23. SWOT Internal Assessment: Organizational assets, resources, people, culture, system s, partnerships, suppliers, . . . External Assessment: Marketplace, competitor’s, social trends, technology, regulatory environment, economic cycles . SWOT Good Points • Easy to Understand • Apply at any organizational level SWOT Possible Pitfalls • Needs to be Analytical and Specific • Be honest about your weaknesses
  24. 24. Strengths • What are some internal positive things about your organization? • What does the community see as your strengths? •Strength’s – Those things that you do well, the high value or performance points • Strengths can be tangible: Loyal customers, efficient distribution channels, very high quality products, excellent financial condition • Strengths can be intangible: Good leadership, strategic insights, customer intelligence, solid reputation, high skilled workforce • Often considered “Core Competencies” – Best leverage points for growth without draining your resources
  25. 25. • Weaknesses What are some weaknesses in organization? • What does the community see as your weaknesses? •Weaknesses – Those things that prevent you from doing what you really need to do • Since weaknesses are internal, they are within your control • Weaknesses include: Bad leadership, unskilled workforce, insufficient resources, poor product quality, slow distribution and delivery channels, outdated technologies, lack of planning, . . .
  26. 26. Opportunities • What are some opportunities in your community or region? • What are some emerging trends? •Opportunities – Potential areas for growth and higher performance • External in nature – marketplace, unhappy customers with competitor’s, better economic conditions, more open trading policies, . . • Internal opportunities should be classified as Strength’s • Timing may be important for capitalizing on opportunities
  27. 27. Threats • What are some district, regional or national issues facing the organization? • What are some technology issues that face the organization? •Threats – Challenges confronting the organization, external in nature • Threats can take a wide range – bad press coverage, shifts in consumer behavior, substitute products, new regulations, . . . • May be useful to classify or assign probabilities to threats • The more accurate you are in identifying threats, the better position you are for dealing with the “sudden ripples” of change
  28. 28. Baseline
  29. 29. Why create a baseline? • Puts everything about the organization into a single context for comparability and planning • Descriptive about the company as well as the overall environment • Include information about relationships – customers, suppliers, partners, . . . • Preferred format is the Organizational Profile Baseline
  30. 30. Organizational Profile 1. Operating Environment • Products and Services – Suppliers, Delivery Channels, Contracts, Arrangements, . . . • Organizational Culture – Barriers, Leadership, Communication, Cohesiveness . . . . • Workforce Productivity – Skill levels, diversity, contractor’s, aging workforce, . . . • Infrastructure – Systems, technology, facilities, . . • Regulatory – Product / Service Regulation, ISO Quality Standards, Safety, Environmental, . . . Baseline
  31. 31. Organizational Profile 2. Business Relationships • Organizational Structure – Business Units, Functions, Board, Management Layers, . . . • Customer Relationships – Requirements, Satisfaction, Loyalty, Expectations, . . . • Value Chain – Relationship between everyone in the value chain . . . . • Partner Relationships – Alliances, long-term suppliers, customer partnerships, . . . Baseline
  32. 32. B Organizational Profile 3. Key Performance Categories aseline • Customer • Products and Services • Financial • Human Capital • Operational • External (Regulatory Compliance, Social Responsibility, . . . )
  33. 33. Gap Analysis Baseline / Org Profile Baseline Challenges / SWOT Gap = Basis for LongTerm Strategic Plan
  34. 34. Components
  35. 35. Major Components of the Strategic Plan / Down to Action Strategic Plan Goals Initiatives Measures Targets AI1 M1 M2 T1 T1 Evaluate Progress What we want to be Vision Objectives Action Plans Why we exist Mission What we must achieve to be successful O1 AI2 M3 T1 O2 AI3 Specific outcomes expressed in measurable terms (NOT activities) Planned Actions to Achieve Objectives Indicators and Monitors of success Desired level of performance and timelines
  36. 36. Mission Statement • Captures the essence of why the organization exists – Who we are, what we do • Explains the basic needs that you fulfill • Expresses the core values of the organization • Should be brief and to the point • Easy to understand • If possible, try to convey the unique nature of your organization and the role it plays that differentiates it from others
  37. 37. Examples – Good and Bad Mission Statements NASA To Explore the Universe and Search for Life and to Inspire the Next Generation of Explorers Does a good job of expressing the core values of the organization. Also conveys unique qualities about the organization. Walt Disney To Make People Happy Too vague and and unclear. Need more descriptive information about what makes the organization special.
  38. 38. Vision • How the organization wants to be perceived in the future – what success looks like • An expression of the desired end state • Challenges everyone to reach for something significant – inspires a compelling future • Provides a long-term focus for the entire organization
  39. 39. Guiding Principles and Values • Every organization should be guided by a set of values and beliefs • Provides an underlying framework for making decisions – part of the organization’s culture • Values are often rooted in ethical themes, such as honesty, trust, integrity, respect, fairness, . . . . • Values should be applicable across the entire organization • Values may be appropriate for certain best management practices – best in terms of quality, exceptional customer service, etc.
  40. 40. Examples of Guiding Principles and Values We obey the law and do not compromise moral or ethical principles – ever! We expect to be measured by what we do, as well as what we say. We treat everyone with respect and appreciate individual differences. We carefully consider the impact of business decisions on our people and we recognize exceptional contributions. We are strategically entrepreneurial in the pursuit of excellence, encouraging original thought and its application, and willing to take risks based on sound business judgment. We are committed to forging public and private partnerships that combine diverse strengths, skills and resources.
  41. 41. Goals • Describe a future end-state – desired outcome that is supportive of the mission and vision. • Shapes the way ahead in actionable terms. • Best applied where there are clear choices about the future. • Puts strategic focus into the organization – specific ownership of the goal should be assigned to someone within the organization.
  42. 42. Developing Goals • Cascade from the top of the Strategic Plan – Mission, Vision, Guiding Principles. • Look at your strategic analysis – SWOT, Past Performance, Gaps . . • Limit to a critical few – such as five to eight goals. • Broad participation in the development of goals: Consensus from above – buy-in at the execution level. • Should drive higher levels of performance and close a critical performance gap.
  43. 43. Examples of Goals Reorganize the entire organization for better responsiveness to customers We will partner with other businesses, industry leaders, and government agencies in order to better meet the needs of stakeholders across the entire value chain. Manage our resources with fiscal responsibility and efficiency through a single comprehensive process that is aligned to our strategic plan. Improve the quality and accuracy of service support information provided to our internal customers. Establish a means by which our decision making process is market and customer focus. Maintain and enhance the physical conditions of our public facilities.
  44. 44. Objectives • Relevant - directly supports the goal • Compels the organization into action • Specific enough so we can quantify and measure the results • Simple and easy to understand • Realistic and attainable • Convey responsibility and ownership • Acceptable to those who must execute • May need several objectives to meet a goal
  45. 45. Goals vs. Objectives GOALS OBJECTIVES Very short and general statement, few words Very specific statement, more descriptive Broad in scope Narrow in scope Directly relates to the Mission Indirectly relates to the Mission Statement Statement Covers long time period (such as 10 years) Covers short time period (such 1 year budget cycle)
  46. 46. Examples of Objectives Develop a customer intelligence database system to capture and analyze patterns in purchasing behavior across our product line. Launch at least two new products to meet the needs of our customers. Centralize the procurement process for improvement and efficiency in procurement. To train at least 10 staff in customer relations/customer care over the next three years. Establish at least one distribution center in each of the ten regions in Ghana over the next two years. To procure at least two rice milling equipment with de-stoners over the next two years to improve the quality of our milled rice Monitor and address employee morale issues through an annual employee satisfaction survey. To increase workers salaries by at least 10% per annum to reduce the current high attrition rate . To establish a subsidiary to produce our own feed internally in the next one year.
  47. 47. Action Plans? • The Action Plan identifies the specific steps that will be taken to achieve the strategic objectives • Requires that you have answered the Who, What, How, Where, and When questions related to the project or initiative that drives strategic execution • Action Plans are geared toward operations, procedures, and processes • Each Initiative/objective has a supporting Action Plan(s) attached to it • They describe who does what, when it will be completed, and how the organization knows when steps are completed • Action Plans require monitoring of progress on Objectives
  48. 48. Note the following about Action Plans • Assign responsibility for the successful completion of the Action Plan. Who is responsible? What are the roles and responsibilities? • Detail all required steps to achieve the Initiative that the Action Plan is supporting. Where will the actions be taken? • Establish a time frame for the completion of each step. When will we need to take these actions? • Establish the resources required to complete the steps. How much will it take to execute these actions? • Monitor progress against milestones and measurements • Provide a brief status report on each step, whether completed or not. What communication process will we follow? How well are we doing in executing our action plan? • Correct and revise action plans per comparison of actual results against original action plan • If you have several action plans, you may have to prioritize.
  49. 49. Measurements/Milestones • Measure your milestones – short-term outcomes at the Action Item level. • Measure the outcomes of your objectives. • Try to keep your measures one per objective.
  50. 50. Examples of Measurements/milestones • Average time to initiate customer contact => shorter time should lead to better customer service • Average response time to incident => below average response times should lead to increased effectiveness in dealing with incident • Facilities that meet A1 quality rating => should lead to improved operational readiness for meeting customer needs • Overall customer satisfaction rating => how well you are doing looking back
  51. 51. Targets • For each measurement, you should have at least one target • Targets should stretch the organization to higher levels of performance • Incremental improvements over current performance can be used to establish your targets • Targets put focus on your strategy • When you reach your targets, you have successfully executed your strategy
  52. 52. Examples of Targets Milestone Targets Average Time to Process New Employee Setups in DB 65 days Year 2014 60 days Year 2015 55 days Year 2016 Personnel Fully Trained in customer care 65% by 2rd Quarter in 2014 75% by 4th Quarter in 2014 90% by 4th Quarter in 2015 Open Positions Filled after 30 75 positions 100 day promotion period Sept 2007 positions Jan 2008 135 positions July 2008 % Reduction in Orders Filled Short 85% by Year 2016 50% by Year 2014 65% by Year 2015
  53. 53. Sanity Check . . . Make sure everything is linked and connected for a tight end-to-end model for driving strategic execution. OBJECTIVE Improve Employee Satisfaction MEASURE / TARGET 90% Employee Satisfaction Survey Rating Target 90% favorable overall Percent Satisfaction Measure gap 45% INITIATIVE Employee Satisfaction Improvement Program Target Actual ACTION PLAN Identify issues per a company wide survey
  54. 54. Link Budgets to Strategic Plan • The world’s best Strategic Plan will fail if it is not adequately resourced through the budgeting process • Strategic Plans cannot succeed without people, time, money, and other key resources • Aligning resources validates that initiatives and action plans comprising the strategic plan support the strategic objectives
  55. 55. What Resources? Every Action Plan should identify the following: • The people resources needed to succeed • The time resources needed to succeed • The money resources needed to succeed • The physical resources (facilities, technology, etc.) needed to succeed Resource information is gathered by Objective Owners which is provided to the Budget Coordinators for each Business Unit. Budgets for different Business Units are consolidated to create the Operating budget
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