Homework: Read the case study and answer the question on a PPT presentation. If you think that your work is of quality, please send it to me by email. You may be selected to present in the classroom and get a bonus. I encourage you to finalize the case study even if when encounter difficulty. Reading the case study and doing the effort will help you understand the correction that will be done during the lecture. Case Study (Please carefully read the text): Case study - US Farm Businesses Introduction Any planning activity involves thinking about the future. However, the focus of strategic planning is not on predicting the future, but instead on making better decisions here and now in order to reach a desired future. Because the future cannot be known with certainty, farm business managers must make certain assumptions about what the future will hold. An important part of the strategic planning process is to recognize and explicitly state any key assumptions about what the future may hold. To be successful, the farm business manager must find a fit between what the business environment wants and what the farm provides, as well as between what the farm needs and the environment can provide. Strategic planning requires that in thinking about the future, managers must have information about both the external economic environment in which the farm business operates and the internal characteristics of the farm business. This information provides data for the development and evaluation of alternatives. One method of collecting needed information is by conducting an environmental scan. In conducting an environmental scan, the farm business manager is asked to review, evaluate, and disseminate information from the external and internal environments. The external environmental scan will focus on things outside the farm gate. There are two facets of this outside review to address: 1) the societal environment and 2) the industry environment. (NB: 3) as well as the competition environment but this part is not covered by this case study). Societal Environment The societal environment includes those general forces that do not directly touch on the short-term activities of the organization but that can, and often do, influence long-term decisions. These forces include economic forces, technology drivers, changes in government policy or regulations or political-legal forces, and sociocultural forces. Trends in the economic area can have obvious implications for the farm business. A strengthening of the U.S. dollar relative to other currencies can reduce U.S. export demand. This in turn can lead to lower commodity prices and farm incomes for everyone in the industry. Rising incomes of consumers in other countries is another example. With increased income, these consumers will improve their diets. This in turn can lead to an increase in demand for animal protein sources and likely increased exports of U.S. meat products. Changes in technology can also have a great impact. The evaluation and adoption of production technologies is an aspect of technological change familiar to farm business managers. However, other technological changes such as in information technology can lead to important changes for the farm business. The development of precision agriculture, the use of the Web to gather information or order supplies, and the increased ease with which we can communicate with farmers in other parts of the U.S. or the world are changing the farm business. Trends in the political-legal area have important business implications. Most farmers think that there is too much regulation of activities in order to comply with society's environmental concerns. However, many would like to see a more aggressive approach taken to enforce anti-trust laws in order to slow the consolidation of input suppliers or product buyers. Sociocultural aspects include such things as demographic trends. The demographic bulge in the U.S. population known as the "baby boom" affects many industries. As these people begin to retire but still desire to remain active, they could create a part-time labor pool that can provide seasonal labor for farming Industry Environment In conducting an external environmental scan, the farm business manager also must assess various industry forces. Michael Porter, an authority on competitive strategy, contends that there are five forces that should be accounted for in conducting an industry analysis. "The collective strength of these forces," he contends, "determines the ultimate profit potential in the industry, where profit potential is measured in terms of long-run return on invested capital." New entrants usually bring new capacity and competition for customers and resources. This is a threat to existing businesses in the industry. The threat of entry depends on presence of entry barriers. Entry barriers make it difficult for another business to enter the industry. Examples of these barriers include economics of scale and capital requirements. Because these are large in farming, they prevent new firms from quickly entering the industry. Substitute products are products that appear to be different but can satisfy the same need as another product. Chicken can be a substitute for beef in consumers' diets. When switching costs are low, substitutes can place a price ceiling on products. Market analysts often talk about "wheat capping corn." This occurs because wheat and corn are substitutes in animal feed. If wheat prices are low, corn prices will also be low because, if corn prices rise, millers will quickly shift to wheat in order to keep ration costs low. This will reduce the demand and price of corn. Bargaining power of suppliers affects their ability to raise prices. Suppliers are likely to be powerful if they are few in number, each individual farmer purchase represents only a small amount of the companies sales, there are not good substitutes of the product purchased, and the product or service is unique. Bargaining power of buyers affects the industry through their ability to force down prices, bargain for higher quality or more services, and play competitors against each other. Buyers are likely to have power if a buyer purchases a large part of the sellers product, if alternative suppliers are plentiful because the product in undifferentiated, if the buyers earns low profits and is sensitive to cost differences, and if the purchased product is unimportant to the final quality or price of a buyer's product. Rivalry among existing firms is the amount of direct competition in an industry. Industries that have intense competition are characterized by competitors that are roughly equal in size, slow rates of industry growth, the production of commodities, high fixed costs, and high exit barriers arising from investments in specialized equipment. Since the introduction of this five forces model for industry analysis, others have suggested that "force of other stakeholders" should be included in "Bargaining Power of Suppliers". These stakeholders include federal, state, and local governmental units. These units of government can impose various limits on the actions that businesses can take. In Indiana, the desire for greenspace in and around communities has resulted in various types of land-use regulations. Questions: Question 1: Finalize the STEEP analysis for Farm Businesses in the USA. Question 2: Finalize a summary of the industry environment analysis using Porter's five forces model. Question 3: Based on the societal environment and industry analysis outcomes identify: - the main 4 (only 4) factors that could represent real opportunities for a Farm Business. the main 4 (only 4) factors that could represent serious threats to a Farm Business Question 4: Based on the main factors identified in Question 3, build an EFAS. What is your conclusion based on the results obtained