Strategic Planning in Agribusiness

Compiled by: Robert Aidoo, Ph.D

outline

What is strategic management• What we think, know, or believe in is, in the end, of little consequence. The

only consequence . . .. is what we do…. (Haines, 1995).

• Strategic management as a concept is not new. – The term was first used in the 1970’s, when some strategic

planners more or less thought up strategic programs and then tried to sell them to decision makers.

• From the 1990’s coming, the view of strategic planning and strategic management is much different. • Now the definition of strategic planning takes us away from the notion

that strategic planning is a staff job and focuses us more on a process that requires the senior leaders of an organization to set its strategic direction.

• Strategic planning …..is the process by which the guiding members of an organization envision its future and develop the necessary procedures and operations to achieve that future.. (Goodstein, Nolan,

and Pfeiffer, 1992).

• The concept of strategic management builds on this definition of strategic planning,------ recognizing that although planning is the prelude of strategic management, it is insufficient if not followed by the deployment and implementation of the plan and the evaluation of the plan in action.

• Strategic management is a systems approach to identifying and making the necessary changes and measuring the organization’s performance as it moves toward its vision.

• It has been defined as a management system that links strategic planning and decision making with the day-to-day business of operational management (Gluck, Kaufman, and Walleck, 1982)

The Strategic Management Process

• The five processes of strategic management are:

– pre-planning

– strategic planning

– Deployment

– Implementation

– measurement and evaluation.

Role of senior managers/leaders• It is the responsibility of senior leadership to strategically manage the

organization:– Strategic management is a continuous process rather than a one-time event. – Therefore, the senior leaders must become strategic thinkers and leaders of the

organization and its culture, changing it as necessary.

• To be most successful, leaders need to be facilitators, coaches, consultants, and consensus-builders.

• Transformational leadership is described by Bernard Bass as, superior leadership performance that occurs when leaders broaden and elevate the interests of their employees, when they generate awareness and acceptance of the purposes and mission of the group, and when they stir their employees to look beyond their own self-interest for the good of the group.

• Acquiring transformational leadership traits requires hard work and dedication, willingness to take some risks, and internalizing the organization’s vision and guiding principles.

Benefits of strategic management?

• When an organization is practicing strategic management, thinking becomes more visionary, which is characterized by:

– Breakthrough thinking about the future; organizational boundaries are more flexible

– A shift in focus from the inputs that are used to run the business to the outputs and outcomes the organization desires to achieve

– A focus on optimizing organizational performance and process quality as keys to delivering quality products and services

– A move toward an organizational culture that adapts easily to change.

• With practice, patience, dedication, and hard work, the organizational learning that takes place through the application of strategic management will bring the organization closer to realizing its goals and vision.

• With each update of the strategic plan, senior leaders will become better able to deploy the plan, implement changes, and measure organizational performance.

What is the first step towards strategic management?

• The first step toward strategic management is to develop a strategic plan for the organization

Strategic Planning

What is Strategic Planning?• Process to establish priorities on what you will accomplish in the

future

• Forces you to make choices on what you will do and what you will not do

• Pulls the entire organization together around a single game plan for execution

• Broad outline on where resources will get allocated

• It is used by community, groups, government departments, organizations and businesses to develop blueprint for action and change

• The process should be community based, inclusive and participatory to allow for maximum stakeholder involvement and input.

Why do Strategic Planning?

• If you fail to plan, then you plan to fail – be proactive about the future

• Strategic planning improves performance

• Counters excessive inward and short-term thinking

• Solves major issues at a macro level

• Communicates to everyone what is most important

Benefits of Strategic Planning• Defines mission, vision & values

• Establishes realistic goals, objectives & strategies

• Ensures effective use of resources

• Provides base to measure progress

• Develops consensus on future direction

• Builds strong teams

• Solves major problems

A Good Strategic Plan should . . . • Address critical performance issues

• Create the right balance between what the organization is capable of doing vs. what the organization would like to do

• Cover a sufficient time period to close the performance gap

• Visionary – convey a desired future end state

• Flexible – allow and accommodate change

• Guide decision making at lower levels – operational, tactical, individual

Fundamental questions:

• Where are we now? (Assessment)

• Where do we need to be? (Gap / Future End State)

• How will we close the gap (Strategic Plan)

• How will we monitor our progress

Planning to Plan (Pre-planning)

• Discuss the planning phase of strategic planning by brainstorming on some pre-requisites needed to undertake the strategic planning process

• Planning to plan requires:– Organizational readiness

• Recognition of need to plan• Readiness to plan

– Organizational commitment• Board commitment• Senior managers’ commitment• Staff commitment

– Organizational Capacity • Human resources

– Staff– Volunteers– Board committees– Special/Standing committees

• Financial resources– Determine resources – Identify budget

• Time– Allocate organizational time– Determine realistic time lines

Strategic Planning ModelA B C D E

• Environmental Scan

Assessment

• Background Information

• Situational Analysis

• SWOT – Strength’s, Weaknesses, Opportunities, Threats

• Situation – Past, Present and Future

• Significant Issues

• Align / Fit with Capabilities

• Mission & Vision

• Values / Guiding Principles

• Major Goals

• Specific Objectives

• Performance Measurement

• Targets / Standards of Performance

• Initiatives and Projects

Baseline Components

• Performance Management

• Review Progress – Balanced Scorecard

• Take Corrective Actions

Down to Specifics Evaluate

Where we are Where we want to be How we will do it How are we doing

• Gaps • Action Plans • Feedback upstream – revise plans

Assessment

Strategic Analysis/assessment

– External assessment (Environmental Scan)• gathering of information that concerns the organization’s environments

– Internal assessmentgathering of information that concerns the organization’s internal operational issues

• analysis and interpretation of this information

• application of this analyzed information in decision making

– Summarize this analysis/assessment with the SWOT model

S W O T

External Assessment: Marketplace, competitor’s, social trends, technology, regulatory environment, economic cycles .

Internal Assessment: Organizational assets, resources, people, culture, systems, partnerships, suppliers, . . .

• Easy to Understand• Apply at any

organizational level

• Needs to be Analytical and Specific

• Be honest about your weaknesses

Good Points Possible Pitfalls

SWOT SWOT

Strengths• What are some internal positive things about your organization?

• What does the community see as your strengths?

•Strength’s – Those things that you do well, the high value or performance points

• Strengths can be tangible: Loyal customers, efficient distribution channels, very high quality products, excellent financial condition

• Strengths can be intangible: Good leadership, strategic insights, customer intelligence, solid reputation, high skilled workforce

• Often considered “Core Competencies” – Best leverage points for growth without draining your resources

Weaknesses• What are some weaknesses in organization?• What does the community see as your weaknesses?

•Weaknesses – Those things that prevent you from doing what you really need to do

• Since weaknesses are internal, they are within your control

• Weaknesses include: Bad leadership, unskilled workforce, insufficient resources, poor product quality, slow distribution and delivery channels, outdated technologies, lack of planning, . . .

Opportunities• What are some opportunities in your community or region?• What are some emerging trends?

•Opportunities – Potential areas for growth and higher performance

• External in nature – marketplace, unhappy customers with competitor’s, better economic conditions, more open trading policies, . . • Internal opportunities should be classified as Strength’s

• Timing may be important for capitalizing on opportunities

Threats

• What are some district, regional or national issues facing the organization?• What are some technology issues that face the organization?

•Threats – Challenges confronting the organization, external in nature

• Threats can take a wide range – bad press coverage, shifts in consumer behavior, substitute products, new regulations, . . .

• May be useful to classify or assign probabilities to threats

• The more accurate you are in identifying threats, the better position you are for dealing with the “sudden ripples” of change

Baseline

Why create a baseline?Baseline

• Puts everything about the organization into a single context for comparability and planning• Descriptive about the company as well as the overall environment• Include information about relationships – customers, suppliers, partners, . . . • Preferred format is the Organizational Profile

Organizational Profile1. Operating Environment

Baseline

• Products and Services – Suppliers, Delivery Channels, Contracts, Arrangements, . . . • Organizational Culture – Barriers, Leadership, Communication, Cohesiveness . . . . • Workforce Productivity – Skill levels, diversity, contractor’s, aging workforce, . . .• Infrastructure – Systems, technology, facilities, . . • Regulatory – Product / Service Regulation, ISO Quality Standards, Safety, Environmental, . . .

Organizational Profile2. Business Relationships

Baseline

• Organizational Structure – Business Units, Functions, Board, Management Layers, . . . • Customer Relationships – Requirements, Satisfaction, Loyalty, Expectations, . . . • Value Chain – Relationship between everyone in the value chain . . . . • Partner Relationships – Alliances, long-term suppliers, customer partnerships, . . .

Organizational Profile3. Key Performance Categories

Baseline

• Customer • Products and Services• Financial• Human Capital• Operational• External (Regulatory Compliance, Social Responsibility, . . . )

Gap AnalysisBaseline

Baseline / Org Profile Challenges / SWOT

Gap = Basis for Long-Term Strategic Plan

Components

Major Components of theStrategic Plan / Down to Action

Components

Mission

Vision

Goals

Objectives

Measures

Why we exist

What we want to be

Indicators and Monitors of success

Desired level of performance and timelines

Planned Actions to Achieve Objectives

O1 O2

AI1 AI2 AI3

M1 M2 M3

T1 T1 T1

Specific outcomes expressed in measurable terms (NOT activities)

Strategic Plan

Action Plans

Evaluate Progress

Targets

Initiatives

What we must achieve to be successful

Mission StatementComponents

• Captures the essence of why the organization exists – Who we are, what we do • Explains the basic needs that you fulfill• Expresses the core values of the organization• Should be brief and to the point• Easy to understand• If possible, try to convey the unique nature of your organization and the role it plays that differentiates it from others

Examples – Good and BadMission Statements

Components

To Make People Happy

To Explore the Universe and Search for Life and to Inspire the Next Generation of Explorers

NASA

Walt Disney

Does a good job of expressing the core values of the organization. Also conveys unique qualities about the organization.

Too vague and and unclear. Need more descriptive information about what makes the organization special.

VisionComponents

• How the organization wants to be perceived in the future – what success looks like • An expression of the desired end state • Challenges everyone to reach for something significant – inspires a compelling future• Provides a long-term focus for the entire organization