Marketing & Marketing & Strategic Strategic Management Management A Framework for A Framework for Agribusiness Agribusiness Strategy Strategy AEC 422 AEC 422 Fall 2014 Fall 2014 Lecture 1 Lecture 1
Jan 03, 2016
Marketing & Marketing & Strategic Strategic
ManagementManagementA Framework for A Framework for
Agribusiness Agribusiness StrategyStrategyAEC 422AEC 422
Fall 2014Fall 2014
Lecture 1Lecture 1
AgribusinessAgribusiness Input SupplyInput Supply ServicesServices ProductionProduction ProcessingProcessing DistributionDistribution WholesalingWholesaling RetailingRetailing
Science drivenScience driven Technology drivenTechnology driven Environmentally Environmentally
drivendriven Market drivenMarket driven Scale & scope Scale & scope
economieseconomies Regulations, Regulations,
competitioncompetition Many other factors Many other factors
shape the evolution of shape the evolution of the agribusiness sectorthe agribusiness sector
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Strategy & EconomicsStrategy & Economics
Strategy is….Strategy is…. ……the determination of the the determination of the basic long-basic long-
term goalsterm goals and objectives of an and objectives of an enterprise, and the adoption of enterprise, and the adoption of courses courses of actionof action and the and the allocation of allocation of resourcesresources necessary for carrying out necessary for carrying out these goals.these goals. Alfred Chandler, Strategy and Structure: Alfred Chandler, Strategy and Structure:
Chapters in the History of the American Chapters in the History of the American Industrial EnterpriseIndustrial Enterprise
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Strategy Integrates Many Strategy Integrates Many ConceptsConcepts
ManagementManagement MarketingMarketing FinancingFinancing
EconomicsEconomics Game theoryGame theory
….in order to understand the inter-relatedness of products, markets, and competition
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FIRM MANAGEMENT
FIRM MANAGEMENT
CHANNEL MANAGEMENT
STRATEGY MANAGEMENT5AEC 422 F14
FIRM MANAGEMENT
FIRM MANAGEMENT
Organize activities within the firm to reduce costs and maximize margins
Firm leadership focuses on efficiency and continuous improvement
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Firm ManagementFirm Management
““Classic” business management functionsClassic” business management functions PlanningPlanning – marketing, forecasting, – marketing, forecasting,
budgetingbudgeting OrganizingOrganizing – legal structure, authority and – legal structure, authority and
delegationdelegation ControllingControlling – Cost control, break-even – Cost control, break-even
analysis, asset managementanalysis, asset management DirectingDirecting – Supervising employees – Supervising employees EvaluationEvaluation – Financial performance, strategy – Financial performance, strategy
effectiveness, customer satisfactioneffectiveness, customer satisfaction
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Management of the FirmManagement of the Firm
Efficiency ratios – focus on productivityEfficiency ratios – focus on productivity Output/unit timeOutput/unit time boxes packed/hrboxes packed/hr Output/unit laborOutput/unit labor monthly monthly
sales/salespersonsales/salesperson Output/unit capitalOutput/unit capital annual sales/$ annual sales/$
investedinvested
Good managers increase productivity by…Good managers increase productivity by… Improving production systemsImproving production systems Adopting new toolsAdopting new tools Improving morale and employee incentivesImproving morale and employee incentives
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North Dakota Pasta North Dakota Pasta CooperativeCooperative
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Organization of the Organization of the BusinessBusiness
Primary activities
Supportactivities
Inb
ou
nd
Log
isti
cs
Op
era
tion
s
Ou
t bou
nd
Log
isti
cs
Mark
eti
ng
& S
ale
s
Serv
ice
Source: Michael Porter, 1985 10AEC 422 F14
Organization of the Organization of the BusinessBusiness
Primary activities
Supportactivities
Inb
ou
nd
Log
isti
cs
Op
era
tion
s
Ou
t bou
nd
Log
isti
cs
Mark
eti
ng
& S
ale
s
Serv
ice
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
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Organization of the Organization of the BusinessBusiness
Primary activities
Supportactivities
Inb
ou
nd
Log
isti
cs
Op
era
tion
s
Ou
t bou
nd
Log
isti
cs
Mark
eti
ng
& S
ale
s
Serv
ice
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
ProfitMargin
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Obstacles to Start-Up Ventures Obstacles to Start-Up Ventures Business Gap: Strengths vs. NeedsBusiness Gap: Strengths vs. Needs
HIGH
MEDIUM
LOW
Management
Marketing
FinancialProduction
Procurement
Strengths Needs
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FIRM MANAGEMENT
FIRM MANAGEMENT
CHANNEL MANAGEMENT
What are the firm’sbusiness activities?Focus: raise productivity lower costs improve margins
How does the firmcompete and relate toother businesses?Focus: marketing &Business alliances – “value chains”
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Fitting into the Supply Chain Fitting into the Supply Chain PicturePicture
YOUR FIRM
Competing Business
Competing Business
Key Downstream CustomerEX. Kroger, Walmart, Whole Foods
Strategies formed to become a preferred supplier
relationships
capabilities
value creation
(distributionIntermediaries)
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Supply Chain ManagementSupply Chain ManagementFacilitating TradeFacilitating Trade
Data exchangeData exchange Production or Production or
product product certificationcertification Labels, licenses, Labels, licenses,
auditsaudits DistributionDistribution
Packaging, Packaging, timingtiming
ContractsContracts
Joint venturesJoint ventures Category Category
managementmanagement Promotions, Promotions,
merchandising, merchandising, market researchmarket research
Product Product developmentdevelopment
YOUR FIRM Key CustomerKey Supplier or Partner16AEC 422 F14
Supply Chain Supply Chain ManagementManagement
Who is doing this stuff for our firm?Who is doing this stuff for our firm? Manager plays a critical role – but need Manager plays a critical role – but need
good leadership good leadership Need to provide opportunities for manager Need to provide opportunities for manager
to have GREAT communication with key to have GREAT communication with key customers and supplierscustomers and suppliers
Can your firm compete with other Can your firm compete with other businesses? Size, organization, businesses? Size, organization, distributiondistribution It’s tough – often need to be able to move It’s tough – often need to be able to move
quickly to implement programs or policiesquickly to implement programs or policies
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FIRM MANAGEMENT
FIRM MANAGEMENT
CHANNEL MANAGEMENT
STRATEGY MANAGEMENT
Where is the business headed? How do I build and keep competitive advantage?Focus: market and competitor positioning – creating isolating mechanisms
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The Strategy ProcessThe Strategy Process
Assumptions & Beliefs about the
Firm’s World
Development of Strategy
Operations (Strategy
Implementation)
Performance
Control
Select/Alter
Challenge
Change?
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Source: Complements of Jim LeCureaux 20AEC 422 F14
The Strategy ProcessThe Strategy Process
Assumptions & Beliefs about the
Firm’s World
Development of Strategy
Operations (Strategy
Implementation)
Performance
Control
Select/Alter
Challenge
Change?
FEASIBILITY STUDIESBUSINESS PLANS
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Strategic ManagementStrategic Management What is the longer term direction of our What is the longer term direction of our
business?business? Is our direction Is our direction sustainablesustainable?? What is the likely What is the likely competitive responsecompetitive response?? What is our business really about? Defines a What is our business really about? Defines a
focus on….focus on…. PartnershipsPartnerships Products (ex. Natural Products, Wine grapes, Soy Products (ex. Natural Products, Wine grapes, Soy
Products)Products) Processes (ex. Organic, frozen foods, distribution)Processes (ex. Organic, frozen foods, distribution)
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Core abilities of the firmCore abilities of the firm Understand what we do wellUnderstand what we do well Make, partner, outsource, eliminate kinds of Make, partner, outsource, eliminate kinds of
decisions decisions (ex.. Hubers’ Wine/cheese)(ex.. Hubers’ Wine/cheese)
Search for complementary business activitiesSearch for complementary business activities Strategy direction with input from Strategy direction with input from
financial partners and managerfinancial partners and manager Accounting focus: “viable going concern”Accounting focus: “viable going concern”
Strategic ManagementStrategic Management
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FIRM MANAGEMENT
FIRM MANAGEMENT
CHANNEL MANAGEMENT
STRATEGY MANAGEMENT24AEC 422 F14
Putting it all togetherPutting it all together
Strategy choicesStrategy choices should determine the should determine the market channel relationshipsmarket channel relationships
The market channel relationships and The market channel relationships and strategy should determine the strategy should determine the scope scope and focusand focus of the business activities of the business activities
AdaptabilityAdaptability of the firm to new of the firm to new opportunities is critical for long term opportunities is critical for long term successsuccess
Review Besanko Ch1, Ch2Review Besanko Ch1, Ch2 Application to Application to Nest Fresh EggsNest Fresh Eggs case case
Firm, channel, strategyFirm, channel, strategy 25AEC 422 F14