what do you need to make strategic choices?

Strategic Business Planning for Commercial Producers

What Do You Need to Make Strategic Choices?


Objectives

• Present key decisions and their basic options

• Provide tools for selecting a strategy in your business


Key Strategic Decisions

I. Business Enterprise FocusII. Strategic DirectionIII. Marketing and Channel LinkagesIV. FinancialV. Organizational StructureVI. Social ResponsibilityVII. Managerial Style/Lifestyle



I. Business Enterprise Focus1. Product2. Product/process technology


Alternative Strategic Focus Strategies

Commodity Strategy

Differentiated Strategy

Production Emphasis End-User Focus

Manufacturing Mentality Distribution/Marketing Mentality

Low Cost Producer Value/Added Production

Large Scale Operation Smaller Scale Operation

Outsource Resources Own Resources

Open/Impersonal Markets

Negotiated Markets

Downside Price Risk Relationship Risk

Independent Decision-Making

Interdependent Decision Making


II. Direction1. Growth2. Delay3. Retrenchment




III. Marketing and Channel Linkages

1. Marketing Your Firm2. Merchandising and Selling

Products/Services3. Sourcing and Purchasing

Resources



IV. Financial1. Business/Legal Choices2. Financing/Leasing Options3. Equity Sources



V. Organizational Structure– Determining the Chain of

Command– Assigning Responsibility– Giving Authority to Those with

Responsibility



VI. Social Responsibility1. Communicating Your Good

stewardship Practices2. Being Involved in the Community3. Understanding the Needs and

Concerns of Your Neighbors



VII. Managerial Style/Lifestyle1. Time/Labor Contribution 2. Living Expenditures3. Risk/Stress Level and Attitudes4. Learning New Skills5. Organization Culture6. Leadership


Strategic Direction

Growth, Delay, or Retrenchment


• Common Direction Questions

– Should we grow?– Which business units should

we grow?– How do we grow the

business unit?– What activities, if any,

should we give up to grow?

Focus on Strategic Direction


Strategic Direction Options

Strategic Direction

Delay

Pause

DecisionTrigger

No Change Profit

Growth

Concentration Diversification

Vertical Horizontal Related Unrelated

Retrenchment

Turn around Exit

CaptiveCompany


Strategic Direction Options Growth

Concentration Diversification

Vertical Horizontal Related Unrelated

Integrate

Network

Cooperatives

Value-AddedInvestments

Intensify

Expand

Replicate

Network

Diversify intoRelated

AgriculturalProductionEnterprises

CaptureSynergies

Non-AgIndustries

Ignore synergy

For cash flowsOr

Risk reduction



Delay

Pause

DecisionTrigger

No Change Profit



ContractionConsolidationOutsourcing

Sole SupplierPreferred ProviderContract Grower

SelloutDivest

BankruptcyLiquidation

Retrenchment

Turn around ExitCaptiveCompany


Business Unit Growth Matrix– Based on EFAS and IFAS– 4 Quadrants

• Cash Cows – Low EFAS, High IFAS– Normally Delay Strategy

• Stars – High EFAS, High IFAS– Normally Growth Strategy

• Question Marks – High EFAS, Low IFAS

– Growth or Delay Strategy• Dogs – Low EFAS, Low IFAS

– Retrenchment Strategy

Which Units to Grow?


Business Unit Growth Matrix

IFASHigh

High

Low

Low

EFAS

Star ?

Cash Cow Dog


Growth Options Matrix– Based on Customers and Products– 4 Quadrants

• Market Penetration– More of Same Product to Same

Customers– Horizontal Growth

• Market Development– Same Product to New Customers– Horizontal and/or Vertical Growth

• Product Development– New Product to Same Customers– Vertical or Horizontal Growth

• Total Diversification– New Product to New Customers– Related or Unrelated Diversification

How Do We Grow?


Growth Options Matrix

Old

New

Old

New

Market Penetration

ProductDevelopment

MarketDevelopment

Total Diversification

Product/Service

Cu

sto

mer

Focu

s


Outsourcing Matrix– Based on Core Competencies

and Competitive Advantage– Source of Competitive

Advantage?• No = a Basic Activity• Possibly = an Emerging Activity• Absolutely = a Key Activity

– Competency?• Weak• Strong

What Do We Give Up?


Outsourcing Matrix

Adapted From Richard Insinga and Michael Werle, “Linking Outsourcing and Strategy.”

Sou

rce

of C

omp

etit

ive

Ad

van

tage

Capability and Cost (relative to others)

Yes(Key

Activities)

Possibly(Emerging Activities)

No(Basic

Activities)

Get Capability

Collaborate

Exit / Buy

Keep in-house

Partner

Consider Selling

Weak Strong


Firm Infrastructure

Human Resource Management

Technological Development

Procurement

Inbo

und

Log

isti

cs

Ope

rati

ons

Out

boun

d L

ogis

tics

Mar

keti

ng&

Sal

es Serv

ice

MA

RG

IN

MA

RG

IN

Supp

ortin

g

Activ

ities

Prim

ary

Activ

ities

Relationship with suppliers

Relationship with buyers

The Value Plate


Summary

• Doing things right versus doing the right things.

• Choosing what to do and what not to do.

• Answering the what, how, who, why, and when of strategy.

what do you need to make strategic choices?

Documents

key strategic

business enterprise

growth options

competitive

high ifas

low ifas

organizational

managerial