Strategic Management Plan

The 11 stages of Strategic Farm Management presented in this course are based on the model developed by Nell and Napier, 2006. There are many other models of strategic management, but this one was developed by the authors as a result of seven years of lecturing strategic management to agricultural students and seems the most appropriate model for the purpose.

The model starts off with strategic planning and long-term goals. Those are then broken down to operational planning and operational goals (short term goals), implementation measurement and controls. The model then ends off with reviewing of the process through strategic control and repositioning. The model is not drawn in a circle, because ending off at the same place where we started, might imply no improvement. It is rather depicted by a spiral, which implies continuous improvement – the circular movement increases in size with every rotation.

Click here to learn more about a strategic business plan.

Kliek hier om meer te leer oor die strategiese besigheidsplan.

Figure 2.2: The strategic Management System (Nell & Napier, 2006)

Stage 1: Mission, Vision, Culture

Strategic planning is an ongoing, dynamic process. Although the first step of the process is determining the mission and vision, the vision can change during the process due to a number of reasons. The management team needs to keep their finger on the pulse and be sensitive to the need to change.

Mission:

Before the farmer/management team can start with any form of planning, they have to determine in which direction they want to move. The mission statement is the beginning of the journey to farming success. It is a broad description that distinguishes the farm from other farming businesses. It is a concise statement of what the farming business is doing, for whom, why and how. The mission statement must be exciting, motivate people actively involved in the farming business and drive the strategic vision.

The following criteria can be used to evaluate the mission statement:

• The mission statement must be clear and understandable to the whole workforce and outsiders
• It must be brief enough for most people to memorise – 100 words or less.
• It must clearly specify what the core business is:
  • In what needs the farming business fulfil?
  • Who are the primary customers/clients?
  • How the farm goes about its business (primary technologies)
  • How products are produced.
  • Why the farming business exists – the overall purpose
• It should identify the forces that drive the strategic vision – where the farming business is headed.
• It should reflect the distinctive competencies of the farming business. What distinguishes the farm from other farms?

Vision:

The vision is the answer to the question: “What does your farming business intend to achieve in the next five years?” The road to farming success is a journey, it implies reaching the vision. The important points when formulating a vision are:

• The ability to solve complicated problems in a conceptual context
• Knowledge and awareness of management approaches that should be used.
• Contingency planning (what if)
• The vision of the total farming system should be holistically linked to the bigger picture.

Developing the strategic vision, the team should determine a point in the future; project the farming business from the current point to that point, mapping the optimal route to achieve farming success.

• When developing the future vision, we need to find answers to the following questions:
• What will the future trends in the farming business be?
• What will the future driving forces in the farming industry be?
• Which technological developments will offer opportunities for competitive advantage?
• Which key success factors are envisaged for the future?
• What market opportunities are envisaged for the farming industry?
• Who will be the future competitors and strategic partners or linkages?
• What will the likely practical strategies be?

Why is the strategic vision such an important instrument?

• It lays down the general future direction for the farming business
• It supplies the broad outcomes of the mission statements and objectives
• It is the driving force for communication, channelling the direction of the business
• It is the foundation of handling more complicated problems or challenges
• It is necessary for the process of strategic planning
• It forces one to think ahead
• It serves as a basis for a sense of coherence and cooperation.

Culture and Values

It is not enough to have a mission and a vision; the culture and values are the oil that keeps everything together. The culture is a set of assumptions the people of the organisation share with each other. A powerful culture will enforce dedication in the workforce to work towards achieving the strategic vision.

The farming business’s policies, practices, traditions, philosophies and ways of doing things combined, create the distinctive culture of the farming business. The strategy is often motivated and dominated by the culture.

A farming business can ‘formalise’ its culture by compiling a value statement, and or set of values. This can form the basis of the ‘way we do business.

Examples of value statements:

• We aim to exceed our client’s expectations
• We are enthusiastic about progress.
• We are a team

Stage 2: External Environment

Investigating the external environment outside the boundaries of the farm, i.e. the community, district and province in which the farm is situated in the second step. The farmer/management team needs to observe every opportunity or thread from the immediate as well as the global environment.

Any farming business functions within a total agricultural, agribusiness or food and fibre system, which consists of a number of subsystems. Decisions are made at any level within the total system, which has an effect on the farming business to a greater or lesser extent. The effect of decisions must be known, and the management team must develop a holistic, integrated frame of mind and act accordingly, within the strategic planning and management process.

The farm is no longer a fragmented system only focussing inwardly. The management team have to continuously keep their finger on the pulse of influences in the macro-environment, including:

• Macro-economy which influences the farm includes business cycles, interest rates, exchange rates, input costs and taxes. To incorporate these variables, the farmer should have a good working knowledge of the economy – How, when why etc.
• The political/legal environment should also be kept in mind. These could include free-trade limitations, labour legislation, the opening of international markets.
• The ecology/climate should also be considered. Protection of natural resources, pressure to reduce the use of chemicals and growth stimulants, water conservation are only some of the environmental sensitivities farmers have to deal with. Further to that climate changes, including lower rainfall and faster evaporation rates influences food production intensely
• Social/cultural and consumers: As social attitudes change, so will the demand for certain products. Examples include the decrease for high cholesterol meat, the social rejection of chemical pesticides – the move towards organic products, the rejection of GMO foods.
• Technological: Latest technologies to assist farmers include e-commerce, site-specific management, biotechnology

Stage 3: Internal Environment

The purpose of this stage is to analyse the strengths, weaknesses, opportunities and threats of the farming business. During this stage, the farmer/management team returns to the farm to draw up a complete profile of the farming business at technical, physical, economic and financial levels, describing the performance, ability and resources at each level. All the internal information is analysed and used in each of the following steps of the journey.

To do a SWOT analysis (strengths, weaknesses, opportunities, threats), you need to methodically move to find answers to the questions below. This will typically entail that the management team has a thinking session to draw up a SWOT for the farm:

Stage 4: Analysis and Choice

During this phase, the farmer/management team will choose the most important Strengths, Weaknesses, Opportunities and Threats from the lists created in step 3.

• The starting point is to identify the activities that the farming business wants to continue with or start anew.
• Knowledge of the value chain (detailed in learning unit 1 of this Learner guide) will assist greatly in this step.
• Identifying those external and internal factors impacting the most on the value chain. Then taking the decision what to do about it, in other words, identify those factors which will steer the farming business towards success.
• The identification of competitive advantage is crucial during this phase, as it will become the focal point that will lead the management team to their vision – SUCCESS!
• Build on core competencies, expertise, and competitive advantages.
• Identify the weaknesses and risks which have the most potential of hurting your business. In the next stage, strategies will be worked out to deal with those identified weaknesses and risks. During this step, ‘what-if’ scenarios can help you identify those weaknesses and risks with the severest impact.

Stage 5: Long term Goals

These goals must be developed in close consideration of the mission and vision of the farm. Long term goals will focus on the key performance areas of the farming business, and may include:

• Financial goals to sustain or grow wealth
• Strategic goals to keep the business competitive
• Personal goals, including wealth, work-life balance etc.
• Succession planning: ensure strong family relations to ensure the next generation of farmers.
• Sustainability goals.

Long term goals must assist the farming business in achieving its strategic vision.

Stage 6: Main Strategies

This is the starting point of execution. The previous phases were thinking phases. When we start to talk about strategies, we must think about action!

When formulating strategies, we have to find answers to the following question:

• How are things going to be done?
• How are objectives going to be achieved?
• How is management going to realise the mission and vision of the farming business?
• How will the farming business achieve its long-term goal/s? – This is the ultimate question to be answered through the main strategy phase.

These functional strategies could include production, marketing, financial, human resources management and operational strategies.

The next two important questions are:

• How can weaknesses be converted into strengths?
• How can threats be converted into opportunities?

Stage 7: Short Term Objectives and Actions

During this phase, the short-term objectives and actions need to be set. Annual, monthly and weekly objectives and actions need to be written down. Short term objectives need to answer: “What must be done, at which standard and when?”

The characteristics of short-term objectives are:

SMART:

Specific: What is the exact scope of the objective? What is included and what is not? What might be thought to be included but is being done by someone else? What must be done with the outputs?

Measurable: What measures will be used to know that the objective has truly been reached? When and how often will the process be measured? What measurement tools can be used to determine success? What format must the output take?

Agreed: A delegated impossibility is still impossible! If there is doubt over whether the objective is achievable, then the first part of the process should be either to test feasibility or to identify what would have to be changed in order to make the rest feasible.

Realistic: What is a realistic task for a functional expert to undertake in a week may not be realistic for a junior joiner in a month. A series of roll-out meetings might be scheduled in two weeks, but clashes with public and personal holidays could mean that a month will be required. The test for a good objective is that it always deals with the reality of how long it will take to do things, rather than how long we would like it to take if we could ignore inconvenient facts.

Time-bound: An objective without a clear specification of its timing priority is likely to be put at the bottom of the list. It will not get done. The simplest way to ensure that an objective will be achieved is to agree on a realistic deadline, even for objectives that are not time-critical for success.

Stage 8: Functional Tactics

Functional tactics entail developing human resources, production, marketing, financial and production development tactics of the farming business. The management team needs to determine whether sufficient resources are available and whether the projected plans formulated in stage 7 will generate the desired results.

If the desired results do not materialise during this phase, the management team needs to return to earlier stages in order to improve on the long term and short-term goals.

It can be said that functional tactics reflect how each action contribute to the implementation of the farming strategy.

Stage 9: Key Implementation Policies

Key implementation policies will be formulated by the management team. These policies assist in the execution and implementation strategies during stages 6 and 7.

Two types of policies need to be developed:

• Policies to empower human resources: In a work environment where it is imperative to delegate tasks, policies need to assist in building controls, promote uniform handling of issues, reduce uncertainty, and provide answers to routine problems. Good delegation always goes hand in hand with SMART objectives, a belief in the abilities of your employees and an appropriate level of motivation to do the task well. To delegate work, well managers must have confidence in themselves and in their employees.
• Financial and operational policies: The financial policy must fit the financial position of the company. Operational policies focus on what needs to be done and can include the technical as well as the ‘people’ policies.

Stage 10: Implementation of Actions

The mentioned strategies and actions will be implemented. This step refers back to the action plan in step 7. It must be ensured that the actions are done effectively and efficiently.

Stage 11: Strategic Control

During this stage, the management team needs to determine how the farming business needs to adjust, i.e. reposition or restructure to continuously improve on strategy and implementation.

Questions typically asked in this section include:

• Is the farming business moving in the right direction?
• Are the key factors in place?
• Are assumptions about the important trends and changes to the external environment accurate and still valid?
• Are critical and necessary actions being taken?
• Must the strategy be adjusted, or should it be rejected?
• What progress has been made?
• Have the short-term objectives and schedules been achieved in good time?
• Are the actual expenses, income and cash flow within the framework of the budgeted figures?
• Is it necessary to make operational or action changes?

Click here to learn more about mission, vision and values.

Click here to learn more about how to set goals.

Resources

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Short Term Objectives