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Internal

  1. 1. Strategic Business Planning for Commercial ProducersWhat Tools Are Useful inAssessing Strengths andWeaknesses? Resources, Capabilities, and Core Competencies
  2. 2. Strategic Business Planning for Commercial ProducersStrengths and Weaknesses• Goal: objective assessment of your strengths and weaknesses – relative to competitors – important to customers Note: This is difficult to do well.
  3. 3. Strategic Business Planning for Commercial ProducersChallenge of Internal Analysis• Identifying, developing, protecting, an d deploying resources, capabilities, and core competencies
  4. 4. Strategic Business Planning for Commercial ProducersResources• 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.
  5. 5. Strategic Business Planning for Commercial ProducersCapabilities • 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.
  6. 6. Strategic Business Planning for Commercial ProducersCore 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.
  7. 7. Strategic Business Planning for Commercial ProducersIdentifying and Building CoreCompetencies• 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.
  8. 8. Strategic Business Planning for Commercial ProducersThe 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
  9. 9. Strategic Business Planning for Commercial ProducersThe Value Chain Firm Infrastructure Human Resource ManagementSupportingActivities Technological Development Procurement Inbound Outbound Marketing Service Operations Logistics Logistics & Sales Relationship with Suppliers Relationship with Buyers Elapsed Time - Value added time cost
  10. 10. Strategic Business Planning for Commercial ProducersPrimary Activities in the ValueChain• 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 Procurement delivery dates, delivery to the packer or elevator etc. Technology Firm Infrastructure Human Resource management Service Inbound Outbound Marketing Operations Logistics Logistics and Sales
  11. 11. Strategic Business Planning for Commercial ProducersPrimary Activities in the ValueChain• 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 Outbound Marketing Service Operations Logistics Logistics and Sales
  12. 12. Strategic Business Planning for Commercial ProducersSupporting Activities in theValue Chain Procurement Technological Development Human Resources Firm Infrastructure• Procurement Service Inbound Outbound Marketing Operations Logistics Logistics 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
  13. 13. Strategic Business Planning for Commercial ProducersSupporting Activities in theValue Chain Human Resource management Procurement Technology Firm Infrastructure Service Inbound Outbound Marketing Operations Logistics Logistics 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
  14. 14. Strategic Business Planning for Commercial ProducersThe 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.
  15. 15. Strategic Business Planning for Commercial ProducersThe Value Chain – Grains Farm Firm Infrastructure Human Resource ManagementSupportingActivities Technological Development Procurement Inbound Outbound Marketing Service Operations Logistics Logistics & Sales Relationship with Suppliers Relationship with Buyers Elapsed Time - Value added time cost
  16. 16. Strategic Business Planning for Commercial ProducersPrimary Activities for a Grain Farm Outbound Service Logistics Marketing On-time del- Inbound Operations ivery & Sales Forward Logistics Grain contract Tillage Planning transport Fwd. contracts IP Fertilizer and Fertilizing to elevator Futures Storage chemical storage, Spraying or buyer Options Tracing custom Cultivate IP grain QA application Harvest Grain Value added of inputs transport grain to storage Relationship with Suppliers Relationship with Buyers
  17. 17. Strategic Business Planning for Commercial ProducersSupporting 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
  18. 18. Strategic Business Planning for Commercial ProducersValue 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
  19. 19. Strategic Business Planning for Commercial ProducersLinkages 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
  20. 20. Strategic Business Planning for Commercial ProducersValue Chain Linkages in theSupply Chain Buyer ChainSupplier Chain Firm Chain Buyer ChainSupplier Chain Buyer Chain
  21. 21. Strategic Business Planning for Commercial ProducersLinkages with Supplier ValueChain• 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.
  22. 22. Strategic Business Planning for Commercial ProducersThe 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.
  23. 23. Strategic Business Planning for Commercial ProducersGenerating AlternativeStrategies 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
  24. 24. Strategic Business Planning for Commercial ProducersSWOT Analysis Strengths Weaknesses 1. 1. Internal 2. 2.Environment 3. 3. Opportunities Threats 1. 1. External 2. 2.Environment 3. 3.
  25. 25. Strategic Business Planning for Commercial ProducersTOWS Matrix• Technique used in strategy formulation for combining – External analysis • Opportunities • Threats – Internal analysis • Strengths • Weaknesses
  26. 26. Strategic Business Planning for Commercial Producers TOWS Matrix From External Analysis (EFAS) From Opportunities: Threats:Internal Analysis 1. 1. (IFAS) 2. 2. 3. 3. ST Strategies Strengths: SO Strategies Take advantage of 1. Use strengths to Strengths to 2. take advantage avoid 3. of opportunities threats WT Strategies Weaknesses: WO Strategies Defensive strategies 1. Use Opportunities to to minimize 2. overcome weaknesses weaknesses and 3. avoid threats Source: Weihrich

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