Strategic and Tactical Farm Management

1. Farm
Management
AGRI 4411
Chapter 2
Management and Decision Making

2. 2 farm management chapter 2
Chapter Outline
 Functions of Management
 Strategic Farm Management
 Tactical Decision Making
 Characteristics of Decisions
 The Decision-Making Environment in
Agriculture

3. 3 farm management chapter 2
Chapter Objectives
1. To understand the functions of
management
2. To present the steps in developing a
strategic management plan for a farm or
ranch
3. To identify common goals of farm and
ranch managers, and to explain the steps
in the decision-making process
4. To explain the steps in decision making
5. To describe some unique characteristics
of the decision-making environment for
agriculture

4. 4 farm management chapter 2
Table 2-1
Comparison of Low- and High-Profit Farms
Item Iowa
in Highest Third Lowest Third
(Average) (Average)
Value of farm production $584,618 $220,433
Net farm income $171,054 $24,519
Return on assets 13.9% 0.7%
Crop acres farmed 537 365
Machinery value $148,212 $102,565
Months of labor utilized 18 11
Source: 2005 Iowa Farm Costs and Returns, Iowa State
University Extension, Iowa State University, Ames, Iowa

5. 5 farm management chapter 2
Objective 1:
To understand the functions of
management

6. 6 Functions of Management
Functions of Management
Planning
Implementation
Control
Adjustment

7. 7 Functions of Management
Planning
 Planning means choosing a course of action
 To plan, a manager must
1. establish goals,
2. identify resources, and
3. Identify all possible alternatives

8. 8 Functions of Management
Implementation
 Oncea plan is developed, it must be
implemented, or set in motion.
 To implement, the manager must:
1. acquire the resources needed for the
plan and oversee the process.
2. Coordinating, staffing, purchasing, and
supervising all fit under this function.

9. 9 Functions of Management
Control
 Control is the “feedback” function.
 To control, the manager must:
1. monitor results,
2. record information,
3. compare results to a standard, and
4. take corrective action as needed.

10. 10 Functions of Management
Adjustment
 If outcomes are not meeting the
manager’s objectives, adjustments
need to be made.
 This may involve:
1. Fine-tuning the technology being
used or
2. Changing enterprises
3. Collecting more detailed cost data to
identify specific problems

11. 11 Functions of Management
Figure 2-1
Management flow chart based on three
functions of management
Planning
Implementation
Control
New
Information
Adjustment

12. 12 Strategic Management
Objective 2
To present the steps in developing a
strategic management plan for a
farm or ranch

13. 13 Strategic Management
Strategic Farm Management
 Strategic management consists of
charting the overall long-term course of
the business
 Tactical management consists of taking
short-run actions that keep the business
moving along that course until the
destination is reached

14. 14 Strategic Management
Steps in Strategic
Management
1. Define the mission of the business
2. Formulate the goals for the farm and family
3. Assess the resources available to the
business (internal scanning)
4. Survey the world surrounding the business
(external scanning)
5. Identify and select appropriate strategies
that will reach goals
6. Implement and refine the selected
strategies

15. 15 Strategic Management
Defining the Mission of the
Business
 The mission statement is a short description of
why a business exists.
 It may include:
 Business accomplishments
 One component of the overall family mission if it
is a family-owned and operated business
 Should emphasize the special talents and
concerns of each farm business and its
managers

16. 16 Strategic Management
Sample Farm Mission
Statement
“Our mission is to produce safe and
nutritious milk at a reasonable costs, to
maintain and enhance the quality of the
natural resources under our control and to
contribute toward making our community a
satisfying place toe live.”

17. 17 Strategic Management
Objective 3
To identify common goals of farm and
ranch managers, and to explain the
steps in the decision-making process.

18. 18 Strategic Management
Table 2-2
Common Values Among Farmers and Ranchers
Do you agree or disagree?
1. A farm is a good place to raise a family.
2. A farm or ranch should be run as a business.
3. It is acceptable for farmers to borrow money.
4. A farmer should have at least two weeks of vacation.
5. It is better to be self-employed than to work for someone
else.
6. It is acceptable for a farmer to also work off the farm.
7. It is more enjoyable to work alone than with other people.
8. Farmers should strive to conserve soil and keep water and
air resources clean.
9. A family farm should be passed on to the next generation.
10. All family members should be involved in the operation.

19. 19 Strategic Management
Goals
 Goals should be written
 Everyone and see, agree and review them at a later
date
 Goals should be specific
 To own 240 acres of class I farm land in Jefferson
County versus “to own land”
 Goals should be measurable
 If measurable each year the manager can gauge
progress toward the goal
 Goals should have a timetable
 To own 240 acres ….. In five years

20. 20 Strategic Managment
Possible Goals
 Survive,stay in business
 Maximize profits
 Maintain or increase standard of living
 Increase equity, accumulate assets
 Reduce debt, become free of debt
 Maintain stable income
 Pass farm to next generation
 Increase free time
 Increase farm size (“growth”)
 Maintain or improve environmental quality
 Own or manage my own business

21. 21 Strategic Management
Assessing Resources
 Physicalresources:
land, buildings, fences, breeding
livestock, machinery and
equipment, established perennial crops
 Human resources: skills of the operator and
other employees, likes and dislikes of
individuals
 Financial
resources: cash, other capital and
available credit
 Anhonest and thorough assessment of these
resources called internal scanning will help in
choosing realistic strategies and achieving
business goals

22. 22 Strategic Management
Surveying the Business
Environment
 Called “External scanning”
 The major types of livestock and crops produced
haven’t changed much, but their characteristics are
changing
 Changing consumer taste –”leaner meats”
 Expanded international markets – “high protein grains”
 Changes in governmental regulations
 New production practices that lower costs per unit
 Price of key inputs such as fuel and fertilizer
 Lowering international trade barriers
 A change may provide an opportunity or a threat

23. 23 Strategic Management
Identifying
and Selecting Strategies
 Low -volume high-value producer
 High-volume, low-value producer
 Specialty service provider
 Part-time operator
 Form Strategic Alliances
 Feeder pig producer
 Custom hog finisher
 Cooperatives

24. 24 Strategic Managment
Identifying
and Selecting Strategies
 Use of land resources for pasture
 Cow/calf production
 Grazing stocker steers
 Sheep production
 Goat production
 Some businesses have more potential
routes for reaching their goals than others
because resources are more flexible.
 As the number of alternative uses for
resources increases, so does the
complexity of the manager’s decisions.

25. 25 Strategic Management
Implementing and Refining
 Managermust formulate action steps to
implement the plan
A formal business plan may be developed to
present to potential lenders or partners
 Concrete, short-term objectives need to be
set so that progress toward long-term goals
can be measured
 Manager must decide which information to
collect to evaluate the success or failure of
the plan
 Strategic management is an ongoing activity

26. 26 Tactical Management
Tactical Management
o Once an overall strategy for the farm has been
developed the manager can make tactical
decisions. For example:
o Where to market crops
o What rations to feed livestock
o Choosing what seed to use
o When to trade machinery
o Whom to hire
o Which field to till on a given day
o Which telephone service to buy

27. 27 Tactical Management
Tactical
Decision Making Steps
1. Identify and define the problem or
opportunity
2. Identify alternative solutions
3. Collect data and information
4. Analyze the alternatives and choose
one
5. Implement the decision
6. Monitor and evaluate results
7. Accept responsibility for the decision

28. 28 farm management chapter 2
Characteristics of Decisions
 Importance
 Number of dollars involved, size of potential
gain or lost
 Frequency
 One in a lifetime choosing a vocation, or buying
a farm or daily, setting breeding
schedules, scheduling field work activities
 Imminence
 Quickly or below a deadline - grain prices
moving up and down rapidly
 Revocability
 Reversible or mot reversible -constructing
building or irrigation well
 Number of alternatives “yes or no”, or
“either, or”

29. The Decision-Making
29 farm management chapter 2
Environment
 Fixedsupply of land: Land base is
essentially fixed, making decisions about
land use, sale, or acquisition critical
 Biological
processes and weather: Laws of
nature place limits on manager’s decisions
 Small
size: Often one person serves as
management and labor
 Perfect competition: Producers are price
takers

30. 30 farm management chapter 2
Summary
• Good management means the difference
between earning a profit or suffering a loss.
• The overall direction is defined through
strategic planning.
• The strategic plan is carried out via a number
of tactical decisions.
• Agricultural managers operate in an
environment that differs from that of most
other businesses.