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