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Farm Management

Farm Management. Chapter 2 Management and Decision Making. Functions of Management. Planning Implementation Control. The Business Planning Cycle. Planning Process. Integrate Changes. Take Action. Explain Deviation. Get Results. Compare Actual vs. Plan. Measure & Record Results.

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Farm Management

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  1. Farm Management Chapter 2 Management and Decision Making

  2. Functions of Management • Planning • Implementation • Control

  3. The Business Planning Cycle Planning Process Integrate Changes Take Action Explain Deviation Get Results Compare Actual vs. Plan Measure & Record Results

  4. The Business Planning Cycle Planning Process Integrate Changes Take Action Mission Situation Objectives & Goals Strategies & Tactics Explain Deviation Get Results Compare Actual vs. Plan Measure & Record Results

  5. Defining Your Mission What’s your mission? • What business are you in? • What values characterize you and your business? (e.g., local foods, work environment, environmental concerns, trust, integrity, hard work, profit)

  6. Situation Analysis • Industry analysis • Market analysis • Competitive analysis • SWOT analysis

  7. Situation Analysis • Industry analysis • Market analysis • Competitive analysis • SWOT analysis • Who are the industry players? • Input suppliers • Growers • Processors • Wholesalers • Retailers • What are the industry trends?

  8. Situation Analysis • Industry analysis • Market analysis • Competitive analysis • SWOT analysis Who and where are your customers? What do they need? What is their purchasing behavior? How can you reach them?

  9. Situation Analysis • Industry analysis • Market analysis • Competitive analysis • SWOT analysis Who are your competitors? What are they like? What products do they have? How have they grown?

  10. Situation Analysis • Industry analysis • Market analysis • Competitive analysis • SWOT analysis Strengths and Weaknesses are internal to the business Opportunities and Threats are external to the business SWOT should be easy after performing the other analyses

  11. Group Activity Let’s perform an OT analysis What opportunities and threats do you see in the gift pack making business?

  12. Where are you in the process? You have defined your reason for being in business – Mission… You know where you’re starting from – Situation Analysis… Now, define your destination(s) – Objectives & Goals

  13. Objectives & Goals What’s the difference? Objectives: General statement describing intended directions; long-term or indefinite Goals: Specific directions describing measurable targets; short-term with deadline

  14. Objectives & Goals Activity • Develop one objective for your business • Define at least one goal to support your objective

  15. Goals • Goals should be written • Goals should be specific • Goals should be measurable • Goals should have a timetable

  16. Possible Goals • Survive, stay in business • Maximize profits • Maintain or increase standard of living • Increase equity • Maintain stable income • Pass farm to next generation • Increase free time • Increase farm size (“growth”) • Maintain or improve environmental quality

  17. Strategic Farm Management • Strategic management consists of charting the overall long-term course of the business • Tactical management consists of taking short-run actions that keep the business moving along that course until the destination is reached

  18. Strategies & Tactics Strategies describe the overall plan for achieving objectives and goals Tactics specifically detail how to implement strategies

  19. Strategies & Tactics • Goals • To develop 3 different gift basket packages by October 15, 2006 • To begin selling by October 15, 2006 An Example… Objective To expand your product line Let’s focus on Goal 1 What are some possible strategies?

  20. Strategies & Tactics Strategy 1: Do everything yourself • Make baskets • Add basket liner • Add Coffee, macadamia nuts… • Seal the basket

  21. Strategies & Tactics Strategy 2: Outsource everything • Send contractor • A basket is sent to the customer

  22. Strategies & Tactics Strategy 3: Joint venture • A partner firm provides baskets • Another provides guava jellies • Another provides coffee • You provide everything else

  23. Strategies & Tactics Which strategy is right?

  24. Strategies & Tactics Tactics simply correlate tasks, names, and timelines

  25. Figure 2-1Management flow chart based on three functions of management

  26. Control Control is the “feedback” function. To control, the manager must monitor results, record information, compare results to a standard, and take corrective action as needed.

  27. The Planning Cycle Revisited Planning Process Integrate Changes Take Action Mission Situation Objectives & Goals Strategies & Tactics Explain Deviation Get Results Compare Actual vs. Plan Measure & Record Results

  28. Business Planning Skills & Tools • Information Gathering • Record keeping • Research • Information Processing • Enterprise & cash flow budgets • Financial statements and ratios

  29. Implementation Once a plan is developed, it must be implemented, or set in motion. To implement, the manager must acquire the resources needed for the plan and oversee the process. Coordinating, staffing, purchasing, and supervising fit under this function.

  30. Steps in Strategic Management • Define the mission of the business • Formulate the goals for the farm and family • Assess the resources available to the business (internal scanning) • Survey the world surrounding the business (external scanning) • Identify and select appropriate strategies • Implement and refine the selected strategies

  31. Assessing Resources • Physical resources: land, buildings, fences, breeding livestock, machinery and equipment, established perennial crops • Human resources: skills of the operator and other employees, likes and dislikes of individuals • Financial resources: cash, other capital and available credit

  32. Surveying the Business Environment • Called “External scanning” • The major types of crops produced haven’t changed much, but their characteristics are changing • A change may provide an opportunity or a threat

  33. Tactical Decision Making • Identify and define the problem or opportunity • Identify alternative solutions • Collect data and information • Analyze the alternatives and choose one • Implement the decision • Monitor and evaluate results • Accept responsibility for the decision

  34. Characteristics of Decisions • Importance • Frequency • Imminence • Revocability • Number of alternatives

  35. The Decision-Making Environment • Fixed supply of land: Land base is essentially fixed, making decisions about land use, sale, or acquisition critical • Biological processes and weather: Laws of nature place limits on manager’s decisions • Small size: Often one person serves as management and labor • Perfect competition: Producers are price takers

  36. Summary Good management means the difference between earning a profit or suffering a loss. The overall direction is defined through strategic planning. The strategic plan is carried out via a number of tactical decisions. Agricultural managers operate in an environment that differs from that of most other businesses.

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