Creating strategies for successful farm businesses usually involves investing in specific production technology, targeting specific markets, or joining forces with others to gain an advantage.
These advantages can include more efficient crop or livestock production, better use of machinery, and increased market access. But whether you go it alone or choose to enter into an alliance, it’s important to understand the farm’s resources and how they are used.
“An effective resource-based approach to creating strategy depends on understanding the relationships between resources, resource deployment and capabilities, and how this leads to creating sustainable competitive advantages and farm profitability,” says Paul Gervais, a management specialist with Alberta Agriculture.
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Identifying and assessing the resources of a farm or agribusiness provides three major benefits:
- It provides a framework for creating, assessing and revising strategy.
- It identifies resource gaps and possible shortcomings.
- It helps put your resources in perspective of others.
“At first blush, identifying resources appears straightforward,” Gervais said.
“Financial or physical resources have traditionally been seen as assets on a balance sheet. Cash, land, machinery, most of the technology around the farm and other forms of capital are relatively easy to identify. Genetics, patents, trademarks, copyrights, and processes such as feeding schedules or specialized ration formulations are a little harder to evaluate, but values for these can be determined or estimated.”
The most difficult resources to evaluate are those that are hard to assess in terms of monetary value, such as reputation, organizational capability, ability to network, contacts, goodwill, and the ease in which the business works within the industry.
In addition, these types of resources are often transferable, so they can be used in different types of enterprises. Transferable resources are more valuable than fixed, hard assets.
Difficulties in assessing nontransferable resources can pose problems when determining control and contribution levels when pooling resources in a joint venture, Gervais said.
“Identifying these types of resources can help determine how power and profits (or losses) are negotiated among participants.”
While such resources are difficult to identify and evaluate, they can sometimes make the difference between outstanding business success and failure.
Resources that are unique or difficult to copy give the farm business a more sustainable competitive advantage.
This is important, because long-term strategies always fail when based on resources that offer only short-term advantages, or when based on resources that are easily copied by competitors, he said.
Creating strategy based on a sustainable competitive advantage requires identifying unique, durable and transferable resources, while carefully selecting resources for replenishment or upgrading to uphold these advantages over time.
