Internal

Strategic Business Planning for Commercial Producers

What Tools Are Useful in Assessing Strengths and Weaknesses?

Resources, Capabilities, and Core Competencies


Strengths and Weaknesses

• Goal: objective assessment of your strengths and weaknesses

– relative to competitors– important to customers

Note: This is difficult to do well.


Challenge of Internal Analysis

• Identifying, developing, protecting, and deploying resources, capabilities, and core competencies


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.


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.


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.


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.


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


The Value ChainFirm Infrastructure

Human Resource Management

Technological Development

Procurement

InboundLogistics

Operations Outbound Logistics

Marketing& Sales

Service

MA

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Relationship with Suppliers Relationship with Buyers

Elapsed Time - Value added time cost


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.

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations

Technology

Human Resource management

Procurement

Firm Infrastructure

Service


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.

Inbound Logistics

Marketing and Sales

Outbound Logistics

OperationsService


Firm Infrastructure

Human Resources

Procurement


Supporting Activities in the Value Chain• Procurement

– 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 specific production tasks more efficient, etc.

• Human Resources– Recruiting, hiring, training, developing, and compensating all

personnel

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations

Human Resources


Procurement

Service

Firm Infrastructure


Supporting Activities in the Value Chain• 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

Inbound Logistics

Marketing and Sales

Outbound Logistics

Operations


Firm Infrastructure

Service

Technology

Procurement


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 ProducersThe Value Chain – Grains Farm

Firm Infrastructure

Human Resource Management


Procurement

InboundLogistics

Operations Outbound Logistics

Marketing& Sales

Service

MA

RG

IN

MA

RG

IN

Sup

port

ing

Act

iviti

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rimar

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Elapsed Time - Value added time cost

Strategic Business Planning for Commercial ProducersPrimary Activities for a Grain Farm

InboundLogistics

Fertilizer and chemical storage,

custom application

of inputs

Operations

TillagePlanningFertilizingSprayingCultivateHarvest

Outbound Logistics

Grain transport

to elevator or buyer

Grain transport to storage

Marketing& Sales

Fwd. contractsFuturesOptionsIP grain

Value added grain

ServiceOn-time del-iveryForward contractIPStorageTracingQA


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


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


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


Value Chain Linkages in the Supply Chain

Supplier Chain

Firm Chain

Buyer Chain

Supplier Chain

Buyer Chain

Buyer Chain


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.


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.


Generating Alternative Strategies 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


SWOT Analysis

Opportunities1.2.3.

Strengths1.2.3.

Threats1.2.3.

Weaknesses1.2.3.

Internal Environment

ExternalEnvironment


TOWS Matrix• Technique used in strategy

formulation for combining – External analysis

• Opportunities• Threats

– Internal analysis• Strengths• Weaknesses


TOWS Matrix

Weaknesses:1.2.3.

Strengths:1.2.3.

WO StrategiesUse Opportunities to

overcome weaknesses

SO StrategiesUse strengths to take advantage of opportunities

Opportunities:1.2.3.

WT StrategiesDefensive strategies

to minimize weaknesses and

avoid threats

ST StrategiesTake advantage of

Strengths to avoid

threats

Threats:1.2.3.

From Internal Analysis

(IFAS)

From External Analysis (EFAS)

Source: Weihrich

Internal

Business

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