decision aiding process in the frame of the strategic farm management
TRANSCRIPT
Decision aiding process in the frame of the strategic farm management
Dr. Evangelia Krassadaki, Prof. Nikolaos F. Matsatsinis
Technical University of Crete, Production Engineering & Management School
TECHNICAL UNIVERSITY OF CRETEPRODUCTION ENGINEERING & MANAGEMENT SCHOOL
4th International Symposium & 26th National Conference on Operational Research, June 4-6, 2015, Chania-Greece
Strategic Analysis - Definition
• Is the process of conducting research on the business environment within which an organisation operates and on the organisationitself.
• The following attributes are common between different definitions in the literature: – Identification and evaluation of data relevant to
strategy formulation.– Definition of the external and internal environment.– A range of analytical tools that can be employed in the
analysis.
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Strategic Analysis - Goals
• In general, increase the profitability and competitiveness.
• In case of farm business it may refer to: develop a new enterprise-activity (i.e. organic production), on-farm processing, direct marketing of products to consumers, efficient production of commodities.
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Strategic Planning in farm business – family business• The purpose of strategic planning process is to design a farm
that allows the individuals involved to achieve their personal goals.
• Personal goals are not always ‘making money’. It may be goals like, spend more time with family, buying a vacation home, finishing a college degree.
• Or personal goals focusing on business activities like, providing employment for the entire family, producing safe and nutritious products.
• Personal goals may differ among family members because of:– Gender (Bankowska, 2005)– Age (Harman et al., 1972)– Education (Sahin et al., 2013)– Experience (Van Kooten et al., 1986)
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Who is the DM in farm business?• In this environment of contradictory personal goals, it
is reported that even if decisions are made by a single DM, they are made under the influence of other people’s opinion, often called ‘significant others’, as Solano et al. (2001) claim.
• Therefore a group decision making process is mostly applied. It could be of the following type:– Group decision makers, if all members of a family are
equally involved, or– Team decision makers, if the ‘head’ member of a farm
listens the opinion of the family members who may influence him but finally he makes the decisions.
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What is the environment of Decision Making in farm business?
• Furthermore, decisions about agricultural production usually involves multiple goals, sometimes conflicting.
• Numerous studies focus on the multiplicity of agricultural producers’ goals, motives and criteria (Hayashi, 2000; Wallace and Moss, 2002).
• Usually, there is a number of strategies (alternatives) to implement. The performance evaluation and selection of a strategy has multi-level and multi-criteria features.
• MCDA and MCDM are scientific disciplines which are applied last decades.
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What is the impact of Weights on the quality of agricultural multi-criteria prod. factors allocation models?• Equal or not equal weights? Sielska A. (2009) making the assumption of
equal weights of production factors, concluded by using the distance-to-the-negative-solution max models that they represent better the real allocation of production factors for the low percent of 36.86% of the farms in Poland.
• Later on, anonymous researchers (2015) based on Sielska A. results and by examining the importance of 4 criteria models (criteria: income, paid labor, rented capital & agricultural area), they concluded that weights can be very different for any individual producer.
• For the same set of 4 criteria, the same researchers (2015) claim that when numerous farms are taken into account the best model ranks the importance of a 3-criteria model as follows: – Income (1st important criterion)– Agricultural area (2nd important criterion)– Rented capital (3rd important criterion)
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Commonly used analytical tools and techniques for strategic analysis• SWOT: strengths – weaknesses, opportunities – threats. • PEST: scan of the external macro environment. Political,
economic, socio-cultural & technological.• Porter’s 5 forces: supplier power, buyer power, competitive
rivalry, threat of substitution, threat of new entry.• Four corner’s analysis introduced by Porter for analysing
competitors.• Value chain analysis. Is based on the principle that
organisations exist to create value for their customers.• Early warning system. Detection and prediction of
strategically important events asap.• War gaming systems. Identification of competitive
vulnerabilities and misguided internal assumptions about competitors’ strategies.
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STRAT Leonardo proposed tools – PerfEA©
based on SWOT, cognitive maps and Balanced Scorecard
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© Supagro (Montpellier SupAgro University, France)
Criterion level
Sub-criterion level
STRAT Leonardo proposed tools – Risk Wheel©
based on holistic risk management
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Goal and strategy
Risk mappingAssessment &
prioritiesHandling
Implementation & follow-up
Riskso Market – sales & sourceso Financial – interest rate and currencyo Productiono Human factoro Environment (i.e. law & regulations)
Various views for risko Accepto Avoido Share, spread of risk, insuranceo Reduce
o Probability (low, medium, high) o Importance (expressed in euros)
© DAAS – Danish Agricultural Advisory Service (Denmark)
crit
eria
STRAT Leonardo proposed tools – Clear Vision©
& Safari©
• Clear Vision. The advisor (a) facilitates a brain-storming conversation focusing on main issues stated by the farmer, (b) determines main issues of the farm, and (3) prepares a ‘road map’ for the farm as an action plan.
• Safari. Is based on the idea of facilitating a brain-storming process focusing on the mobilisation of farmers to explore all projects or activities that could be implemented on a farm level or a union of farmers level.
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© CYCPA-Resolia, France
© EFA, Galicia, Spain
Quality aspects of analytical tools and techniques
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Tool Focus on External / Internal environment
Focus on Macro/micro environment
SWOT E/I M/m
PEST E M
Porter’s 5 E M/m
4 corner’s E M
Value chain I M
Early warning E/I M/m
War gaming E M/m
PerfEA E/I M/m
Risk Wheel E/I M/m
Clear Vision E/I M/m
Safari E/I M/m
Strategy analytical tools and multi-criteria analysis• The strategy formulation process employs at least two
persons: (a) the advisor-analyst & (b) the ‘head’ of the farm.• The strategy formulation mainly focus on intelligence and
design activities. A small fraction of time is spent for evaluation of different choices (as 3 phases in Decision Theory are proposed by Simon, 1960).
• On the contrary, Decision Theory has been mainly concerned about evaluation of different choices.
• In this framework, operational research scientists have tried to combine strategy analytical tools with MCDM.
• In this case, the data mined by i.e. SWOT analysis are applied as criteria in MCDM. Methods that have been used are: AHP, Electre & DEA (Paelnick, 1976; Zavadskas et al., 2011).
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Conclusions
• Who is the DM? One or many.• In case of many DMs, do they agree? Sometimes yes,
sometimes no, because of their contradictory personal goals.• In the above case, is it a clear Group decision making process?
It depends. In any case, of group or team decision making the advisor-analyst has to listen all the farm members, and proceed in an agreement with them for the strategy of a farm (rather an intelligence phase which is accomplished via interviews with farm members).
• What is the weights of production factors for a farm? Every farm is a specific case.
• Equal or not equal goals-criteria? The multi-criteria approach has better results.
• Strategy tools can be combined with MCDM? Although strategy tools mainly focus on the first 2 Simon’s Phases while MCDM mainly on the last (3rd) Phase, they can be combined.
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THANK YOU FOR YOUR ATTENTION
Contact:Dr. Evangelia Krassadaki, Technical University of Crete, Production Engineering and Management School, DSS Laboratory - ERGASYA, University Campus, Chania, 73100, Greece. Tel.: +30-28210-37350, E-mail: [email protected]
Prof. Nikolaos Matsatsinis, Technical University of Crete, Production Engineering and Management School, DSS Laboratory – ERGASYA, University Campus, Chania, 73100, Greece. Tel.: +30-28210-37348, E-mail: [email protected]