Post on 12-Jan-2016
description
transcript
Danish Agricultural Advisory ServiceNational Centre
The strategy making toolbox
Economic Consultant, MSc in Economics. Torben Ulf Larsen
tul@landscentret.dk, 8740 5170
DAAC
Danish Agricultural Advisory ServiceNational Centre
Agenda
• Presentation – Danish Advisory Service
• Strategy and part strategies
• Dynamic strategy
• Risk management
• Case study – Noble Castle - exercises
Danish Agricultural Advisory ServiceNational Centre
1788
Danish Agricultural Advisory ServiceNational Centre
The National Centre
Præsentation
Torben Ulf Larsen, cand. oecon., teamleader
Danish Agricultural Advisory ServiceNational Centre
Local advisory centres 38
Farmers/members 50,000
National Centre 1
Organising and/or administrative connection Advice and Information flow
Local Family Farmers’ Associations
Local Farmers’ Unions
Danish Agriculture
78 % 17 %
Danish Agricultural Advisory Service
Danish Agricultural Advisory ServiceNational Centre
Danish Agricultural Advisory Service
Research, trials and
other sources
of knowledge
”Globally”
Danish Agricultural Advisory Service, National Centre
Farmers
Local centres
Danish Agricultural Advisory ServiceNational Centre
Danish Agricultural Advisory Service
Danish Agricultural Advisory ServiceNational Centre
Danish Agricultural Advisory Service
• 38 local agricultural advisory centres and 1 national centre
• Turnover: DKK 1.8 billion
• 3½ thousand employees
• Denmarks largest consultancy
Danish Agricultural Advisory ServiceNational Centre
Relations between DAAS and farmers
Farmers are:
OwnersUsersCustomers
Key words:
Best and cheapest advisory servicesImpartialnessNon-profit
Danish Agricultural Advisory ServiceNational Centre
Distribution of income, 2008
Project fundsTax reimbursements
User fees and sales
Danish Agriculture
Total income:DKK 525 mill
17% 19%
61%
3%
Tasks of the National CentreDissemination of Knowledge
105,000 documents
27,000 page references per day
55,000 visitors per week
LandbrugsInfo50 interactive programs
plant protection calculation of animal units and area requirement weather forecast and weather radar via sms
2.3 mill. people visit LandbrugsInfo and Landmand.dk every year
Danish Agricultural Advisory ServiceNational Centre 12
Staff education and age
281
6996
292
6997
330
72108
350
80103
321
63
105
0
50
100
150
200
250
300
350
2004 2005 2006 2007 2008
Academic advisers
Technicians
Secretaries andassistents
Staff, Average age2006 43.9 years2007 44.1 years
Danish Agricultural Advisory ServiceNational Centre
Number of farms in Denmark
-
20.000
40.000
60.000
80.000
100.000
120.000
140.000
160.000
1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2015
Bedrifter
Heltid
Deltid
Landbrugsraadet, sept. 05
Farms, no.
Full time
Part time
Danish Agricultural Advisory ServiceNational Centre
The Danish Agricultural Advisory Service
• Managed by the users and organised by agricultural organisations
• Government aid/subsidies until 2004
• Officially and universally recognised as independent and impartial
• Supplies advisory services to all production branches
• Two-level services
• Independent of the State when rendering advisory services (e.g. environmental regulations)
Danish Agricultural Advisory ServiceNational Centre
Strategy and part strategies
Danish Agricultural Advisory ServiceNational Centre
Danish Agricultural Advisory ServiceNational Centre
Danish Agricultural Advisory ServiceNational Centre
”It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change”
Charles Darwin
Danish Agricultural Advisory ServiceNational Centre
Danish Agricultural Advisory ServiceNational Centre
Strategic, 3-5 year
Tactical, 1-2 years
Operational,Less than 1 year
Development, Capacity and finacing
Exploit existing capacity- and financial basis
Up to date production,Purchase, sale, and payments
Management levels
Danish Agricultural Advisory ServiceNational Centre
What is strategy?
The direction to the goal!
Danish Agricultural Advisory ServiceNational Centre
Human resources
Vision
Actual
Time
Objective
Present situation
Desired situationSurrounding world
Technology Market
Legislation
Manpower
Accept the complexity of reality
Danish Agricultural Advisory ServiceNational Centre Udvikling
The strategy process
Goal
Environment
Farm
Family
Mission
Vision
S
W
O
T
C
H
O
I
C
E
S
I
M
P
L
E
M
E
N
T
A
T
I
O
N
⇒ ⇒ ⇒ ⇒ ⇒
Danish Agricultural Advisory ServiceNational Centre
The strategy process
G
O
A
L
Surroundings
Farm
Family
Mission
Vision
S
W
O
T
C
H
O
I
C
E
S
I
M
P
L
E
M
E
N
T
A
T
I
O
N
⇒ ⇒ ⇒ ⇒ ⇒
Danish Agricultural Advisory ServiceNational Centre Udvikling
The vision – a guiding star – a picture of the future in the long run
A scenario for the future. A continous description of what you want your
business to be in 3 – 5 – 10 years.
Danish Agricultural Advisory ServiceNational Centre
Vision
• Through high standards in food quality, an economic consolidation must be made, this brings the possibility for an up to date development. This must be done on an environmental and harmonic farm, where the working environment is of high importance, among the best in business, and including time for freedom and a close contact with the enduser.
Danish Agricultural Advisory ServiceNational Centre
”Car phones? That will never be good business. Nokia must concentrate on television sets.”Kari Kairamo
CEO of Nokia
Early 1980’s
Danish Agricultural Advisory ServiceNational Centre
PEST
1. Political factors 2. Economic factors
3. Sociocultural factors 4. Technological factors
Danish Agricultural Advisory ServiceNational Centre
Political factors
• EU agricultural policy
• National agricultural policy
• Environmental policy
• Commercial policy
Danish Agricultural Advisory ServiceNational Centre
Economic factors• International economy
• Prices
• Sales
• Subsidies• National economy:
• Unit and capacity costs
• Interest rates and land prices
• Wages
Danish Agricultural Advisory ServiceNational Centre
Sociocultural factors
• Traceability
• Nature experiences
• More employees on plant production farms – size?
• Image
• Sustainability
Danish Agricultural Advisory ServiceNational Centre
Technological factors• Technological possibilities
• Larger, more efficient and automatic machines
• Milking robots• Reduced soil processing• IT• Manure separation
• Processing possibilities• GMO
Danish Agricultural Advisory ServiceNational Centre
Tools: Farm analysisUse everything you know already!Go for the important facts.Don’t waste time and money to go into useless details
Land Buildings Machinery Technical equipment Herd Environment Economy
Use experts’ statements
Present the draft report for the farmer and the involved experts
Get full accept on the final report
Danish Agricultural Advisory ServiceNational Centre
The DiSC- model
Ego:Stronger than others
Innovative
Environment:unfavourable/
hostileEvaluative
Environment :favourable/
friendlyAccepting
Ego:Less strong than others
Adapting
Danish Agricultural Advisory ServiceNational Centre
Human resources analysisone of many tools for assessing human resourcesis the DiSC; here we help the farmer to clarify his attitudes
By answering a large number of questions the farmer gets an idea of his personal profile, sometimes surprising, sometimes disappointing, often being a good reason to think over once more the strategy for the future
D dominating
I integrating
S social
C competent
Danish Agricultural Advisory ServiceNational Centre
The DiSC modelD = dominance
Motive: • Control and management...
Fears:• Loss of control
Wants:• Force
• Challenges
• Direct answers
• No rules
• New activities
• Individual perfomance
Characteristics:• Self-confidence
• Taking risks
• Makings decisions
• Focusing on results
• Demanding
• Limitations:• No respect for others
• impatience
• Lack of quality focus
Danish Agricultural Advisory ServiceNational Centre
The DiSC-modeli = (social) influence
Motive:• social respect
Fear
• social rejection
Want:• A round of applause
• popularity
• Praise
• Group activities
• Positive relations
• No control and regulations
Characteristics:• optimistic
• Inspires confidence
• emotional
• Involved with human beings
• Extroverted
• Charming
Limitations:• Impulsive
• Promise to much
• Lack of completion
Danish Agricultural Advisory ServiceNational Centre
DiSC-modellenS = stability
Motive:
• Stability
Fears: • Changes
Wants:
• genuine appreciation
• Cooperation
• Work with well-known methods
• Safety
Characteristics:• Considerate
• Stability in work
• Willing to cooperate
• Patient
• Loyal
• Taking care of the group
• accepting
Limitations• Own needs are not
important
• Resistance against positive changes
Danish Agricultural Advisory ServiceNational Centre
The DiSC-modelC = competence
Motive: • Quality and precision
Fear: • Failures, criticism,
emotions
Wants:• Win discussions• General view• Praise• Limited risk
Characteristics;• Analytical and factual• Aware of details• Conscientious• Diplomatic• Business-minded• Curiosity• Reliable
Limitations:• Critical• Indecisive• Lacks creativity
Danish Agricultural Advisory ServiceNational Centre
D I S C
DISC Profile
Danish Agricultural Advisory ServiceNational Centre
Danish Agricultural Advisory ServiceNational Centre
Tools: assessment of analysesThe critical SWOT- a practical example
Positive
factors
Negative
factors
Internal
factors
StrengthsStrong economy
Herd management
New machinery
WeaknessesFarmers health
Poor milking parlour
Close to town
External
factors
OpportunitiesEcological production
Diversified production
ThreathsLack of new imployees
Decreasing milk prices
Danish Agricultural Advisory ServiceNational Centre
Demands for a good strategy:
• Consistent
• Feasible
• Competitive advantage
• Need for innovation
Danish Agricultural Advisory ServiceNational Centre
NOW!
Farmer’s
STRATEGY
HRstrategy
Financialstrategy
Commu-nicationstrategy
Environ-mental
strategy
GOALS
Danish Agricultural Advisory ServiceNational Centre
Dynamic strategy
Danish Agricultural Advisory ServiceNational Centre
Areas of Focus During Development
1. The strategy product must be appropriate for current times
2. The strategy product must be appropriate for the farmer’s situation
3. The farmer must be serviced with the requested advisory role
4. A platform for communication with interested parties
Danish Agricultural Advisory ServiceNational Centre
The strategy product must be appropriate for current times
- General strategy versus dynamic strategy
Strategic planning
• 5 year plan
• Focus on operation
• The strategy is prepared by the expert
• Decisions are made on basis of complete information
Emergent strategic development
• Continuous adjustments
• Focus on development
• The strategy is prepared by the man on the floor
• Many decisions are made on basis of limited information
Danish Agricultural Advisory ServiceNational Centre
The farmer’s situation
The farmer’s reality on the farm:- The farmer has a lot of time for considering strategy, but not
at the office
- The farmer is bombarded with strategic input, but does not take 100 percent advantage of them
- The farmer demands to be at the head of the table. Only he knows the situation and complexity of the farm
Danish Agricultural Advisory ServiceNational Centre
5 year plan for the farm
Each branch of production should be internationally competitive on proceeds and
costs. The aim is that the farm is saleable at alltimes. In the strategic development job satisfaction and financial latitude are
important values.Contractor work
Turnover appr. xx DKR
Milk productionGross proceeds appr. xx DKR
The overall productionThe overall production- Key map of the farm- Key map of the farm
Biogas plantTurnover appr. xx DKR
AgricultureGross proceeds appr. xx DKR
750 ha
JB 1 to JB 3
Water appr. 80%
370 ha grass40 ha corn100 ha growing crops80 ha oat160 ha chorophyll
granule
450 milk cows
4 mio. kg milk yearly
2 separation units
40 spaces in an indoorDelaval carousel
3,500,000 KW heat
Production of appr. 2,740,000 KW electricity
Sale of slurry tanksTurnover appr. xx DKR
WindmillsTurnover appr. xx DKR
PigsGross proceeds appr. xx DKR
Yearly production of2,500,000 KW/H
BlueSPF
Purchase at 30 kg
Production of7,000 hogs
2 600 KW windmills
Authorized sewer contractor
Vendor of AgriTank
1 windmills in Germany
Danish Agricultural Advisory ServiceNational Centre
Invite offers
Interest rate
Foreign currency loan
Financing
Overall strategic goal
To produce milk at the lowest possible cost, taking animal welfare into consideration
The price has to be internationally competitive
Improve managementand control
1,100 cows gives a good flow
20% more space
Large-scale productionadvantages
– division into 6 teams
Logistics cows – transport ofheavily pregnant cows
Logistics slurry
Logistics fodder
Approval of expansion
Selection of type of person
Education:Short management training
Support from and chemistrywith management
Co-ownership– 20% of production unit
Management
Access to labour
Less capital tie-up in land
Selection – knowledgeand motivation
Schools
Agencies
Possibilities for burningslurry
At new purchasesland price should not exceed 100,000 DKR
Milk productionMilk production- The strategic map of competences- The strategic map of competences
1
1
1
1
1
Cheaper fodder Improve yield of corn
Increase milking of high-yielding cows
Estimate financing requirements and risc profile
1
1
Danish Agricultural Advisory ServiceNational Centre
Benefits for the farmer
1. Ownership of the strategy
2. A simpel lay-out of his strategy that allows continuous adjustments
3. Keeps focus – maintains ideas
4. Clear goals – strenghtening of the management
5. Focus on realizing the plans of action
Danish Agricultural Advisory ServiceNational Centre
Benefits for the advisor
1. A tool that brings you closer to the client
2. Kick-starts strategic focus
3. A great tool for a ”like it” task
4. Better sparring partner
5. Improves interdisciplinary collaborations with colleagues
Danish Agricultural Advisory ServiceNational Centre
Visual action plansImprove profits on corn
Improve corn yieldYield 10,000 feed units/ha
and max. 1.15 kg dry matter per feed unit
Consulting visit weed control
Visit concerning harvest time- Samples for dertermination af dry matter content
Measurement of total yields of silage and extraction of sample for analysis
Follow-up on yields per field and evaluation of action plan
2nd consulting visitweed control
Statement of yields of each fields by counting number of loads
Yield statement and analysis results for LL and plant consultant
1
5
3
6
2
7
4
Danish Agricultural Advisory ServiceNational Centre
Visual action plansExample of Gantt map
Activity Responsible Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Status Follow upManagement
a 1 Kontakt med bureau Lars 10/1 √ Birte
a 2Stillingsopslag skriv og annoncering Lars 20/1 √ Konsulent
a 3 Samtale med kandidater Lars √ Birtea 4 Ansættelse Lars √ Konsulenta 5 Introduktionsforløb Lars √ Birte
Yield in corn
b 1 Rådgivningsbesøg 1Poul (pl konsulent) 15/5 √
b 2 Rådgivningsbesøg 2 Poul 4/6 b 3 Rådgivningsbesøg før høst Poul b 4 Udbytteopgørelse (antal læs) Lars
b 5 Udbytte opmåling + AnalyserKurt (kvægrådg.) 30/9 Poul
b 6Aflevering af analyseresultater Kurt Poul
b 7 Evaluering af handlingsplan Poul KurtLoan offers
c 1Drøftelse af finansieringsmuligheder Niels Birte
c 2 Indhente lånetilbud Niels 25/7 c 3 Møde med bank Lars Nielsc 4 Hjemtage lån Niels 15/8 Lars
Danish Agricultural Advisory ServiceNational Centre
Report for decision-making The purpose of the report for decision making is to present all relevant information for the decision-maker precise and concise
Danish Agricultural Advisory ServiceNational Centre
How to organize the report
• Start with the most important information – your evaluation of the project
• What is the strategic fit of this project compared to the strategy og the firm?
• Include persons relevant in analyzing the alternatives
• Arrange two meetings with the decision-maker to clarify assumptions and to present the results
Danish Agricultural Advisory ServiceNational Centre
Elements in the report
• Evaluation
• Strategy
• SWOT analysis
• Alternatives
• Project description
• Assumptions – internal and external
• Employees
• Management
• Company image
• Project profitability – INVE Online
• Company budgets
• Financing
• Liquidity constraints
• Break even analysis
• Risk analysis
• Follow up
Danish Agricultural Advisory ServiceNational Centre
Evaluation of the project
• Comment on the essentials
• Communicate your own evaluation of the project
• To be based on the analysis and the calculations in the report.
• If you do not agree with the assumptions used in the report let it ”shine through”
Danish Agricultural Advisory ServiceNational Centre
Assumptions
• Internal assumptions• Yield (Milk yield, grain yield etc.)
• Factors controlled within the farm
• To be seen in relation to the strengths and weaknesses
• External assumptions• Prices
• Qualified employees are to attracted
• Factors decided outside the farm
• To be seen in relation to the opportunities and threats
Danish Agricultural Advisory ServiceNational Centre
Profitability versus budgets
• Profitability • is based on the cash flows and the timing of these
• Typically analyzed partially
• All incremental cash flows regarding the project included
• Interpretation easiest using annuities
• Budgets• Based on accounting rules
• Typically analyzed holistically
• Not showing whether the project is profitable or not
Danish Agricultural Advisory ServiceNational Centre
Personal sale
Danish Agricultural Advisory ServiceNational Centre
What’s in it for the farmer?
• Long term goals – strategy
• Measurepoints to secure everything is going in the right direction
• Plans of action, that leads to the goal
• We provide the field, but the farmer must be the one to play the ball.
• What is going to happen?
Danish Agricultural Advisory ServiceNational Centre
Experiences with strategy work
• Increasing and diversified demand from farmers
• Flexible concepts is necessary depending on the farmer’s needs and the advisors skills and motivation
• Increased cooperation between advisors – has certain demands to the organization
• The advisors are the barrier or the critical success factor
• The advisors demand: easy to use concepts
• Strategy processes generates extra sales of advisory service
Danish Agricultural Advisory ServiceNational Centre
This is how we do it
• One day with advisors and farmers – with an acknowledged need of change
• Eventually half a day with everybody who has contact with clients
• 1 month for creating a strategy
• One day with to make a report
• Subsequently BSC for implementation
• Differences in the concept
• 15 centres – 160 farmers
Danish Agricultural Advisory ServiceNational Centre
The customer is in centre Keep it simple – get through to the conclusions
Values, mission, vision, purpose, priorities
HR-, farm-, PEST-SWOT-, etc. analysisFacts and figures
IdeasDiscussionsConclusionsRevisionAcceptance
Danish Agricultural Advisory ServiceNational Centre
”You can have the car painted in any color you like so long as it is black”
Henry Ford
Early 1920’s
Danish Agricultural Advisory ServiceNational Centre
Risk Management
Danish Agricultural Advisory ServiceNational Centre
What is risc?
• Risc is the factors that can affect the strategic goals negatively
Or in more operational terms
• Risc is the possibility for financial loss – assets, liabilities and profits
Danish Agricultural Advisory ServiceNational Centre
Purposes of risc management
• Overview – fully and interdisciplinary
• Assesment and actively taking a stand
• Methods and tools
• Better sleep
Danish Agricultural Advisory ServiceNational Centre
Stages of risk management
1. Mapping of risc factors on the farm
2. Assesment: Relevance and probability
3. Handling: Lay-out of possibilities for action and related costs
4. Implementation and follow-up
Danish Agricultural Advisory ServiceNational Centre
Mapping- systematic
• Human
• Divorce, illness, death
• Inability to get qualified assistance, generational change
• Market • Prices of sales products, prices of raw materials
• No demand
• Loss of buyers for small pigs
Danish Agricultural Advisory ServiceNational Centre
Mapping – systematic (continued)• Financial
• Price of money (increasing interest rates)
• Lack of liquidity
• Negative bank
• Production• Disease in the herd
• Lack of efficiency in the stable
• Special crops that fail
• Institutional• Changed environmental requirements – sale/depositing of slurry
• Agricultural policy of the EU
Danish Agricultural Advisory ServiceNational Centre
What can we do about risks?
• Accept
• Avoid
• Share, spread, ensure
• Reduce
Danish Agricultural Advisory ServiceNational Centre
Attitude towards risc
• Risk avert / little willingness to take risks
• Risk neutral
• Risk preferment / great willingness to take risks