United States

Department of

Agriculture

Agricultural

Cooperative

Service

ACS Research

Report Number

103

Strategic Planning

Systems of Large

Farmer Cooperatives
Abstract

Strategic Planning Systems

of Large Farmer Cooperatives

James J. Wadsworth

Agricultural Economist

This report describes the methods, procedures, and functional relationships that make up the strategic planning systems of four large farmer cooperatives. Case study analysis of the cooperatives indicates the existence of welldeveloped, comprehensive, and active strategic planning systems. Strategic

planning methods or components stressed by the cooperatives include: mission

or vision statements; situation/environmental assessment; development of

goals and/or objectives and corresponding strategies; implementation programs, projects, or action plans; and strategic planning feedback.

Keywords: Cooperative, strategic planning, organizational structure, strategies,

objectives.

ACS Research Report 103

August 1992
Preface

This report presents case studies of the strategic planning systems of four

large farmer cooperatives. Cooperatives interested in strategic planning can

use these studies to help them implement or improve their own systems. Large

cooperatives can develop or enhance strategic planning systems from exposure to the systems employed by their successful counterparts, and small- and

moderate-size cooperatives can improve or develop strategic planning systems

by learning important strategic planning philosophies and methods practiced by

successful cooperatives.

The case study cooperatives are among the top 100 cooperatives, each

having sales exceeding $400 million and having strong governance and organizational structures. The cooperatives vary in characteristics of their operations

and functions. Both marketing and farm supply cooperatives are represented.

Information about the four cooperatives was collected by personal interviews

and by use of cooperative documents.

To protect the confidentiality of the cooperatives, the subjects are not identified. Instead, the cooperatives are identified as A, B, C, and D. These cooperatives were selected for study because of their size, diverse operations, products and services, and financial and operational soundness, and because each

cooperative has integrated a system of strategic planning into its organizational

structure.

Agricultural Cooperative Service is grateful to the cooperative leaders and

management personnel whose contributions were essential for this research.

i
Contents

Highlights ...

......................................................................................................... III

Cooperative A-Diversified Marketing ............................................................. 1

Business Unit Long-Range Planning ....................................................... 2

Review Sessions ...................................................................................... 5

President’s Planning Retreat.................................................................... 6

Board Planning Retreat ............................................................................ 6

Annual Business Plan .............................................................................. 6

Feedback .................................................................................................. 6

Cooperative B-Regional Farm Supply ........................................................... 6

Market Outlook ......................................................................................... a

Corporate Direction .................................................................................. a

Business Unit Planning ............................................................................ a

Plan Approval and Implementation ....................................................... .12

Planning Feedback................................................................................. 13

Planning Audits ...................................................................................... 13

Cooperative C-Farm Supply and Food Marketing ....................................... 13

Corporate Strategic Plan ........................................................................ 13

Business Group Strategic Planning ....................................................... 15

Business Unit Operating and Marketing Planning ................................. ia

Long-Range Financial Summaries ......................................................... 19

Budget Development.............................................................................. 20

Planning Feedback................................................................................. 20

Planning Cycle ...................................................................................... .20

Cooperative D-Diversified Marketing and Farm Supply .............................. 20

Business Unit Strategic Planning ........................................................... 22

Business Unit Strategic Plan Presentations .......................................... .25

Financial Strategy................................................................................... 25

Strategic Overview Subcommittee Activities .......................................... 25

Strategic Overview Subcommittee Reports-Feedback.. ..................... .25

Summary and Comparison ............................................................................ 26

Conclusions ................................................................................................... .27

ii
Highlights

The cooperative strategic planning systems examined in this report are

comprehensive, results-oriented systems developed over time to fit the organizational and operational structures of the case cooperatives. Management personnel in these cooperatives help carry out strategic planning from the initial

development phase, through implementation, and to the feedback stage.

Among the many characteristics of large-cooperative strategic planning,

these stand out:

l Mission, vision, or definition and scope statements provide direction for

strategic planning.

l The essence of strategic planning is to identify goals and issues, and

develop strategies to achieve those goals and resolve those issues.

l Strategic planning is decentralized, with business units developing plans

for their particular area of responsibility.

l In-depth analysis of the business environment is an essential component

of strategic planning.

l Action plans, projects, or implementation programs are developed to

carry out strategies so time is properly channeled and necessary resources are

properly allocated.

l Feedback improves strategic plans. Major forms of feedback are monitoring financial data and reports on the effectiveness of strategies and the

progress toward goals.

l The board of directors takes more of an advisory, review, and approval

role than it does an active development role in strategic planning.

. . .

ill
Strategic Planning Systems

of Large Farmer Cooperatives

James J. Wadsworth

Agricultural Economist

‘The dynamic business environment in which

cooperatives operate comprises a complex array of

structures, institutions, and influences ranging

from local to global in scope. Cooperatives identify

and respond to the changing needs of farmer-members in an evolving agricultural structure. The

effectiveness of that response, however, is dictated

by cooperatives’ posture, flexibility, and influence

in the marketplace, relative to competitors.“l

In responding to the changing needs of

farmer-members within today’s dynamic business

environment, many farmer cooperatives have integrated strategic planning systems into their organizational structures. An increasing number of cooperative leaders realize they need to make proactive

adjustments in their cooperatives’ operations-

“posture, flexibility, and influence”-for them to

remain competitive and progressive in today’s

marketplace. Such adjustments are the essence of

strategic planning. Business decisions must be

made on the basis of comprehensive strategic planning, rather than in reaction to adverse internal or

external developments.

No universal strategic planning system exists.

Rather, each system encompasses philosophies

unique to the organization. Cooperatives are no

exception. Cooperative leadership should seek to

formulate and implement a system that “fits” the

cooperative’s business philosophy and organizational structure.

’ U.S. Department of Agriculture, Positioning Farmer

Cooperatives for the Future, A Report to Congress,

Agricultural Cooperative Service, October 1987, p. 1.

This publication reports and analyzes the

comprehensive strategic planning systems that four

large farmer cooperatives have developed and

incorporated into their organizational structures.

The phrase “strategic planning” is used to

encompass the development, implementation, and

evaluation of strategies that enable a cooperative to

achieve its goals, including measurement, feedback, and control. Management is intrinsic in this

definition. The case study cooperatives view strategic planning as more than a prescribed set of procedures. They see it as part of management’s dedication to think, make decisions, and take action given

the organization’s strengths, weaknesses, opportunities, and purpose.

The four cooperatives are among the top 100

cooperatives in the United States. Some also are

Fortune 500 corporations with net sales of more

than $400 million. All are highly diversified in various capacities, including marketing farm products,

selling farm supplies, and providing farm services.

All are involved in joint ventures and/or have subsidiary operations, and have sound governance

structures. Each has a large board of directors (anywhere from 10 to 40 members) and upper management organized into departments, divisions, business groups, business units, etc.

COOPERATIVE A-DIVERSIFIED

MARKETING

Cooperative A, though diversified, is oriented

primarily toward marketing. Operations include

manufacturing and marketing of agricultural products, distribution of farm supply inputs, and various member services.

1
Strategic planning, formalized by Cooperative

A in the mid-1970’s, involves the development of

long-range (5-year) plans and an annual business

plan. The latter is a tactical plan for the next year’s

operations that corresponds to the first year of the

5-year plan. Management updates the strategic

long-range plan and develops the annual business

plan each year.

Cooperative A separates its many functions

into major business groups or units. These units are

identified by their products, services, or manufacturing and distribution functions. Each unit is

responsible for developing strategic plans specific

to its function.

Because staff interaction is important, many

employees participate in plan development.

Further, the plan goes to the board of directors for

review and discussion. The board approves the

final plan.

Strategic planning in Cooperative A has five

major stages or components (exhibit A-l and fig. 1).

Stages are undertaken at specific times throughout

the year. The time frame of each stage is shown in

exhibit A-l.

Business Unit Long-Range Planning

Each business unit within the cooperative

develops its own long-range plan from January

Exhibit A-l-Cooperative A’s strategic planning

system time frame

Planning stage Time frame

1. Business unit longrange planning January to June

2. Planning review sessions June to August

3. President’s staff retreat July or August

4. Board planning retreat August or

September

5. Annual business planning September to

December

through June. Three major components to be completed are listed in exhibit A-2.

Vision Statement The cooperative’s vision

statement is the starting point for business unit

planning. The statement is developed through an

interactive process by the chief executive officer

and other senior management. Cooperative A

defines its vision statement as a description of

what the organization is to become. The statement

is clear and concise. It provides guidance to

business units as they each develop individual

long-range plans. Cooperative A’s vision

statements are usually qualitative but also can be

expressed in quantitative terms.

Business Unit Planning Each business unit

follows an organized procedure to prepare a longrange plan. The plan includes an executive

summary, the long-range strategic plan itself, and

long-range financial estimates. The focus is on the

business environment, unit goals, and strategies.

At this stage, personnel spend about 90 percent of

planning time on business strategy and the

remainder on financial analysis.

Executive Summary. The executive summary

is held to one page. It contains the key points of the

strategic plan and identifies significant changes

from previous plans.

Exhibit A-P-Cooperative A’s business unit longrange planning components

1. Vision statement

2. Business unit planning

A. Executive summary

B. Long-range strategic plan

C. Long-range financials

3. Business unit planning summary and action plans

2
Figure l-Cooperative A’s Strategic Planning

I

Business Unit

Long-Range Strategic Planning

Planning Review Sessions

1

President’s Staff Retreat

1

Board Planning Retreat

1

3
Long-Range Strategic Plan. The long-range

strategic plan for each business unit contains a mission statement, an analysis of the competitive environment, critical business issues, and major goals

and strategies.

%

Each business unit develops a mission statey ment to define, in general terms, what the unit is to

accomplish.

To identify the competitive environment, each

business unit completes industry, competitor, and

internal analyses. The industry analysis includes a

description of the general status (structure) of the

industry in which the business unit operates, identifies key industry changes (internal and external),

describes the government or regulatory issues that

may affect the unit, documents significant industrial trends, and identifies any significant trends in

the work force or labor markets.

The competitor analysis profiles the competition, including historical and current performance

(sales, market share, profitability, product quality,

customer service and loyalty, etc.), strengths and

weaknesses, and current and anticipated changes

in strategy. The analysis also examines market-segmentation patterns, research and development

trends, and entry and exit of competitors.

The internal analysis evaluates the business

unit’s competitive position in terms of its own

strengths and weaknesses, market position, critical

issues to address, and the impact of business

changes.

Business units set major goals to be reached

and develop the strategy to be successful. Units (a)

describe goals to be achieved; (b) define a measurement of the goal- for example, numerically

and/or time frame; and (c) identify and describe

progressive benchmarks.

In presenting the selected strategy, the unit

documents the rationale, estimates resource

requirements, and projects the outcome in broad

financial terms from the present actual year

through the next 5 future years (exhibit A-3).

Business units identify the key factors for the

strategy to be successful in meeting goals. These

include: what must be performed, acquired, or

accessed; organization structural changes; and

employee skill or development needs.

Assumptions critical to successful execution of

strategies are documented. Situations that might be

volatile during strategy execution are noted, and a

range of possible circumstances requiring adjustments are listed. Finally, the business units identify

and describe any risks or problems associated with

carrying out strategies.

Long-Range Financial Estimates. Cooperative

A strategy includes development of long-range

financial estimates. These show the financial contribution that business units are expected to make

through strategy implementation. They also estimate the financial resources required to carry out

their strategic plans (exhibit A-4).

Exhibit A-3-Cooperative A’s format to project strategy outcome in broad financial terms

Strategy

description Estimate

Sales units

Sales $

Pretax earnings

Invested capital

Actual

year

year 1

Future years

year 2 year 3 year 4 year 5

4
Financial information derived from this exercise shows the anticipated results of successfully

carrying out the business unit’s strategies. This

information is used also in formulating Cooperative

A’s corporate long-range financial plan.

Business Unit Planning Summary and Action

Plans Business units summarize their plans

clearly and concisely However, the length of

explanation is determined by how large and

complex the unit is. Further, some units have

functions that are operationally related but

organizationally separated, so summaries indicate

important interrelationships.

Action plans to carry out strategies are specific and concrete. A timetable for completion is

developed. Resources needed, human and capital,

are estimated.

Review Sessions

During review sessions, senior management

discusses major issues and strategic changes facing

Cooperative A. And management reviews each

business unit’s plan. The review focuses on the

selected goals and strategies and, taking into

account the effect of issues raised, assesses the ability of the business unit to reach its stated goals.

Unacceptable strategies are challenged. Changes

Exhibit A-4-Cooperative A’S business unit long-range financial estimation summary items

Actual Projection

year Year. year 1

Future years

year 2 year 3 year 4

Operations

Sales units

Sales $

Pretax earnings

Cash Flow

Pretax earnings

Depreciation

Capital spending

Acquisitions/divestitures

Actual working capital changes

Investment changes

Net cash flow

Invested Capital

Base working capital

Investments

Property, plant, and equipment

Present value operating leases

Other

Total invested capital

Return on invested capital

5
are required if the business unit insufficiently

defends its position.

After review, the vice president and director

of corporate planning and business development

synthesize the business unit plans into a corporate

strategic plan.

President’s Planning Retreat

In August, the president and senior management staff hold a planning retreat away from corporate headquarters. Participants discuss the significant issues the cooperative needs to resolve.

They review the drafted long-range strategic plan

and revise it as necessary into a final plan ready for

presentation to the board of directors.

Board Planning Retreat

In September, the board of directors holds its

planning retreat away from corporate headquarters. But prior to the retreat, a copy of management’s final plan is sent to each director. Each business unit summarizes its plan before the board,

highlighting for discussion critical issues, significant changes, and existing and new strategic plans.

Annual Business Plan

Cooperative A’s annual business plan is

defined as its tactical plan for the coming year,

which also is the first year of the corporate strategic plan. It is developed through the September-toDecember period. The plan describes the operating

environment and plans for the coming year and

summarizes the detailed budget previously

reviewed and approved.

Feedback

Cooperative A measures the success of its

strategies through an ongoing analysis of its longrange financial estimates. Financial data analyzed

and/or tracked include performance measures

such as return on sales, return on invested capital,

unit or sales volume, and market share. The annual

business plan comes strongly into play each year in

Cooperative A’s strategic planning in that future

planning depends on how well the cooperative

performs under its tactical business plans.

COOPERATIVE B-REGIONAL

FARM SUPPLY

Cooperative B, a large regional farm supply

cooperative, provides a wide variety of agricultural

supplies and grain marketing services to farmers

through a system of member local cooperatives.

The regional initiated annual planning in 1976

and formally incorporated long-range (3 to 5 years)

planning in 1980. The cooperative’s organizational

structure comprises several operational groups,

each having planning units responsible for carrying out their own specific functions.

Cooperative B does not describe its long-range

planning system as strategic planning. Rather,

strategic planning is defined as an optional component of the planning unit (business unit).* Strategic

planning becomes part of the planning process if

management feels plans in place need to be

changed.

Essentially, Cooperative B identifies planning

as a management tool. More than 40 managers

develop and implement plans for their respective

business units (the division or area they manage).

Business unit managers report to their operational

group vice president.

Five major components comprise Cooperative

B’s planning system (exhibit B-l and fig. 2).

Exhibit B-14ooperative B’s planning system

1. Market outlook and corporate direction

2. Business unit planning

3. Approval and implementation

4. Planning feedback

5. Planning audits

2Though Cooperative B uses the term “planning unit,”

which may have a different connotation than “business

unit,” this publication uses business unit to be consistent in

discussing the four case study cooperatives.

6
Figure 2-Cooperative B’s Planning System

Business Unit Planning

V

Plan Approval and Implementation

Planning Feedback Report

Planning Audit

Feedback

7
Early in the planning cycle, Cooperative B

uses outside consultants and internal resources to

develop marketing scenarios. These scenarios present assumptions about the cooperative’s external

business and market environment, and will be used

for planning.

Corporate Direction

Cooperative B’s plans are developed from

lower management tiers with more direct links to

markets, and proceed to upper tier management.

Some direction comes from the chief executive officer (CEO) in the initial stages. The CEO sets an

agenda, provides corporate direction, answers

questions from management, and discusses possible corporate directional change such as acquisitions or mergers.

Business Unit Planning

Business units begin with individual planning

that follows a guide developed by the corporate

planning division. Cooperative B has several

guides so it is important to note that planning does

not involve a rigid system. Cooperative B strongly

asserts that the major idea is not for business units

to write a plan, but to reach goals and get things

done. Planning time and effort are directed toward

quality and action, not the plan appearance.

Cooperative B’s planning process involves

reviewing the organization’s purpose, primary

functions, and long-range direction; and developing plans of action for the next year. As a tool,

planning is carried out to let the business unit

know where it is going, how it is going to get there,

and what needs to be done.

Cooperative B’s guide includes nine business

unit planning components (exhibit B-2 and fig. 3).

Definition and Scope Each business unit has its

own “definition and scope” to explain why the

business unit exists and to define its principal

Exhibit B-2-Cooperative B’s business unit

planning components

1. Definition and scope

2. Long-range goals

3. Current strategy

4. Situation appraisal (optional)

A. External facts

B. Internal facts

C. Historical data

5. Strategic planning (optional)

A. Strategic issues

8. Alternatives

C. Recommendation

6. Problems and opportunities

7. Specific objectives

8. Projects

9. Progress reports

responsibilities and functions. Definition and scope

implies one concept, not two.

The definition and scope is reviewed by the

business unit each year. The unit manager, with

input from staff, seeks to improve how well the

definition and scope communicates what the business unit does. Under this scenario, definition and

scope evolves as changes occur due to reorganization, adoption of new functions, or introduction of

new technology.

Business units develop a definition and scope

statement to identify their primary functions.

Cooperative B business units sometimes use definition and scope in place of a mission statement.

However, when a business unit conducts strategic

planning, a mission statement is also developed to

describe what the business unit wants its future

business to become.

Long-Range Goals Cooperative B develops longrange goals from the review and development of

the definition and scope (or mission statement),

situation appraisal, and strategic planning. At least

one long-range goal is developed for each principal

8
Figure 3-Cooperative B’s Business Unit Planning

Definition and Scope

Current Strategy

Long-Range Goals

l _bb

Strategic Planning

4

Problems and Opportunities

I

+

Specific Objectives

Progress Reports

9
business unit function. A list of long-range goals,

intended to set the agenda for the business unit

over a 5-year period, results. Each business unit

develops from three to six performance and

operational categories under which long-range

goals can be grouped.

Current Strategy Business units develop current

strategies to reach each long-range goal. Strategies

are assessed to determine if they are working as

expected. If they are not working, reasons are

identified as part of the problem/opportunity stage

of the planning process (the sixth component).

The relationship of current strategy to longrange goals is considered important. Business units

are expected to be progressive and results-oriented,

improving and changing current strategy as necessary. The rate of strategy improvement and/or

change is a primary measure of planning effectiveness in Cooperative B.

SItuafh Appraisal Situation appraisal identifies

operational problems, opportunities, and issues

that need to be resolved through strategic

planning. However, business units are allowed to

skip this step if they believe the strategic planning

isn’t necessary.

In proceeding with a situation appraisal, business units use external facts and internal facts and

historical data to describe their business situation

in terms of the past, present, and future. As the situation appraisal progresses, business units identify

operational and long-range problems and opportunities. Problems and opportunities identified are

dealt with in a later stage of the planning process.

External facts describe situations outside

Cooperative B’s control. They reflect situations that

limit or enhance business unit ability to reach longrange goals. Business units develop new and/or

review existing external facts about external forces

influencing their day-to-day operations and ability

to accomplish long-range goals.

Internal facts describe situations within

Cooperative B that affect business unit ability to

operate day-to-day and attain long-range goals. To

carry out this exercise, business units first develop

a current internal facts list then compare it with the

previous year’s list. The approach is to provoke

fresh thought but still not overlook previously

identified and still relevant facts.

As part of internal fact gathering, business

units identify their own strengths to be exploited

and weaknesses to be corrected.

Among subjects Cooperative B business units

develop into internal fact statements are:

l Personnel skills, productivity, turnover, etc;

l Work-place technology;

l Availability of capital resources;

l Strengths and weaknesses; and

l Operating systems and procedures.

Historical data, updated annually, are useful to

gain a thorough understanding of the business

unit’s situation. Data correspond to services provided, people served, types of activity, events conducted, and financial information. These data are a

basis for making forecasts to identify potential

problems and/or opportunities.

Sffafegk Wannlng Cooperative B views strategic

planning as an optional step in its planning system

if the business unit needs to change its long-range

goals and current strategies. In this sense, strategic

planning for business units means defining

strategic issues, developing alternatives, and

making recommendations that will change longrange goals and current strategies.

Strategic Issues. In undertaking strategic

planning, business units develop strategic issues by

evaluating relationships between their long-range

goals and current strategies, and between their

long-range goals and situation appraisal. They also

evaluate the significance of their identified problems and opportunities. Several questions are

answered in this evaluation.

l Will current strategies accomplish the longrange goals? If not, what is stopping their accomplishment? Is the problem something that can be

changed?

10
l What situation is restricting the ability of

the business unit to accomplish its long-range

goals? Can this situation be corrected or changed?

Will this situation get worse with time?

l What are the major strategic problems

and/or opportunities facing the business unit?

Cooperative B frames strategic issues in a

question format, believing that questions cause

planners to immediately search for answers. In

contrast, a statement format could result in planners either agreeing and giving no further thought,

or disagreeing and concentrating on what is wrong

with the statement rather than thinking of ways to

resolve the issue.

Resolving strategic issues helps determine

long-range goals and new strategic direction leading to more effective operations.

Alternatives. Business units develop alternative solutions to resolve strategic issues. These are

developed over time and are intended to change

current strategy and/or long-range goals. To develop effective alternatives, business units ponder the

strategic issue over a period of months, gather

expert input (usually technical in nature), and seek

appropriate counsel (counsel is gained from staff

within the business unit, employees within

Cooperative B who are affected by or have knowledge of the strategic issue, and members of the

cooperative who would be affected by the issue). In

Cooperative B, it often takes up to 12 months to

develop effective alternatives to a strategic issue

and sometimes another 3 to 5 months to analyze

the alternatives before making a recommendation.

Three to five alternatives are developed for

each strategic issue. In Cooperative B, experience

indicates that only 1 or 2 good alternatives become

apparent initially and that it takes another 4 or 5

months to develop 5 to 10 alternatives. Business

unit managers then reduce the number to three to

five high quality alternatives through consolidation

and/or elimination. These alternatives are presented to the business unit supervisor for approval. In

certain instances, corporate management staff

reviews the alternatives to ensure that each is realistic and fits into Cooperative B’s overall strategic

plan. After approval, business units recommend

one of the alternatives to resolve the strategic issue.

Recommendations. Alternatives for resolving

strategic issues are summarized into recommendations, complete with reasons for accepting or rejecting each alternative. Recommendations must be

properly developed to give corporate management

a clear understanding of what needs to be changed,

what benefits will result, and why the cooperative

will benefit from making the change.

Recommendations contain the following

information (exhibit B-3):

The executive summary, written after parts II

and III are completed, summarizes the complete

recommendation in one page.

The part II summary precisely defines the recommended change in a few pages. Some or all of

part III attachments may be submitted as part of

the recommendation.

Problems and Opportunities Business units

often identify problems and opportunities while

they are carrying out other phases of their planning

Exhibit BSAooperative B’s business unit

recommendation components

I. Executive summary

II. Recommendation

A. Summary

B. Alternatives considered

C. Selection analysis

III. Attachments

A. Business unit long-range plans

B. Situation appraisal background

C. Impacts on Cooperative B, members

D. Financial analysis commentary

E. Risk analysis

F. Implementation plans

11
process. Problems and opportunities may surface

during the development of long-range goals and

current strategies, during the conduct of situation

appraisal, or while exploring strategic issues. In

some cases, what is thought to be a strategic issue

is really just a problem that needs to be addressed.

SpecMc Objectives Specific objectives are shortterm (l-year) objectives. They include target dates

and have a high degree of measurability. These

attributes distinguish them from the more general

long-range goals. Specific objectives are

measurable, so business units know precisely when

they should complete their work. Specific

objectives are a critical component in Cooperative

B’s quest to move from planning to action.

Business units review their long-range goals

and problems and opportunities and compile a list

of specific objectives they can reach within the

coming year.

Prcjecfs Projects are organized to accomplish

specific objectives. Business units have full

flexibility in organizing projects. However,

Cooperative B provides guidelines that business

units follow for developing projects (exhibit B-4).

Progress Reports Business unit managers write

quarterly reports of progress toward specific

objectives to the operational group vice president.

Timing, content, and format of progress reports are

left to the discretion of the group vice president

and business unit managers.

Plan Approval and Implementation

Business unit managers submit plans to their

supervisors for approval, working with them on

any modifications. Their final plan goes to

Cooperative B’s chief executive officer for review

and approval. After the total plan has been

approved, management allocates the resources for

plan implementation.

The board of directors of Cooperative B

becomes more involved in the planning process

when business units undertake strategic planning

that points toward substantial change in operational function. Under this scenario, the board proExhibit B-4-Cooperative B’s project development guidelines for business units

1. Project data summary- l-page project description including results expected, responsibility, key completion dates, and resources required. The resource section includes the following:

A.

B.

C.

D.

E.

Operating expenses-include estimate of the project expenditures for travel, materials, meeting

expenses, consulting fees, etc. (If other planning units contribute to the project, their expenditures are included also.)

Capital-if capital or fixed assets are needed to complete the project, estimate the total amount

of capital required.

Staffpower-after developing the project activity and scheduling task sheets, include estimate of

the total number of staff days and costs necessary to complete the project.

Information-estimate of the total project expenditures for the purchase of studies or information, computer costs, etc.

Project activity and schedule-a list of tasks needed to accomplish the results expected. This

task sheet includes: 1. all key steps of the project activity; 2. the identification of tasks completed

by others; 3. completion dates for each task; and 4. who is responsible for each task.
vides input, questions changes, and ultimately,

either approves or rejects the plans.

Planning Feedback

Cooperative B closely monitors the success

level of planning. The planning director reviews

business unit progress reports and prepares a feedback report that is presented to top management

and the board of directors.

Planning Audits

The planning director of Cooperative B conducts a planning audit of each business unit every

3 or 4 years. Audits include reviewing the entire

process that business units employ in planning.

Focus is on how well business units put plans into

action, how smoothly planning proceeds, and how

efficiently resources are used. The planning director counsels and coaches business unit personnel

when audits indicate inefficient or inadequate

planning practices.

COOPERATIVE C-FARM SUPPLY

AND FOOD MARKETING

Cooperative C, a large farm supply and food

marketing cooperative, has major operations in

manufacturing, processing, and purchasing of farm

production supplies.

This cooperative formalized strategic planning in the mid-1970’s. The chief executive office

(CEO), the CEO’s staff, business group vice presidents, and business unit management and staff are

all actively involved in the long-range strategic

planning system. Cooperative C’s organizational

structure includes a divisional system of major

business groups that is further divided into business units.

Long-range strategic planning is incorporated

into the organizational structure of Cooperative C

through a six-component process (exhibit C-l and

fig. 4).

Corporate Strategic Plan

Cooperative C’s CEO is responsible for developing a corporate strategic plan every odd year.

The plan sets strategic direction of the cooperative

over a 5-year period.

The corporate strategic plan of Cooperative C

provides general guidance and direction for other

planning (i.e., business group strategic planning

and business unit operating and marketing planning). The corporate strategic plan has six components (exhibit C-2).

Although the CEO is responsible for developing the corporate strategic plan, the board of directors plays an important role. For instance, the

board defines the cooperative’s basic purpose and

approves the plan. The statement that summarizes

Cooperative C’s basic purpose is reviewed and discussed annually, but the purpose remains fundamentally the same.

Exhibit C-l-Cooperative C’s planning system

1. Corporate strategic plan

2. Business group strategic planning

3. Business unit operating and marketing planning

4. Long-range financial summaries

5. Budget development

6. Planning feedback

Exhibit C-2-Cooperative c’s corporate strategic

plan components

1. Basic purpose

2. Corporate mission

3. Corporate objectives and targets

4. Corporate strategy

5. Business group charters

6. Corporate investments

13
Figure 4-Cooperative C’s Strategic Planning

Corporate Strategic Plan

Every odd year

Business Group Strategic Plan

Every even year

Business Unit

Operating and Marketing Plan

Every even year

Long-Range Financial Summaries

Every year

t

Budgets

Every year

Feed back

14
The CEO develops the mission statement, corporate objectives and targets, and corporate strategy to provide overall direction for business group

planning.

Each business group develops a charter. The

charter includes the business group’s mission,

strategic objectives, and performance targets. In

essence, the charter sets the base from which the

business group develops its strategic plan.

Possible and contingent corporate investments

are listed in the corporate strategic plan. This list

identifies probable capital investments and establishes when and where they will take place.

Business Group Strategic Planning

Business group strategic planning is completed every even year. This planning provides the

mission and strategies for each business group and

sets direction and targets for the business units

within the business groups. Business group vice

presidents prepare the plans, while the CEO, the

board executive and planning committee, and the

board of directors approve the plans.

Exhibit C-3 lists the components of business

group strategic planning.

Business group strategic plans place heavy

emphasis on the business units within the business

group. Thus, much of the business unit operating

and marketing planning (the next component of

Exhibit C-3-Cooperative C’s business group

strategic planning components

1. Business mission

2. Situation analysis

3. Business strategy

4. Business unit(s) direction (summary form)

A. Mission

B. Strategic effort

C. Objectives and core strategy

D. Targets

Cooperative C’s planning system) is actually done

during the business group strategic planning.

Business group vice presidents appoint task

force groups to assist in developing information for

business strategic plans and to develop the business unit operating and marketing plans.

Business Mission The business mission

statement is the starting point of business group

strategic planning. It establishes the foundation for

developing objectives and strategies. In this

respect, the business mission provides direction to

the business group and to each business unit

within the business group.

Cooperative C defines business missions as

comprehensive statements of purpose that are

broad in scope. Missions are stated in terms consistent with the corporate strategic plan and define

why Cooperative C is in its particular businesses

and what function each business group performs.

Missions reflect the desired positioning, direction,

scope, and general activities of business groups

and establish any limitations placed on business

activities.

Cooperative C business mission statements

often include managerial philosophy, desired

image, economic goals, production or delivery

method, markets served, technology, service/products offered, and/or sources of competitive advantage.

SIfuation Analysis Situation analysis is a critical

component of Cooperative C’s planning system.

Information generated during this phase forms

much of the basis for the planning that follows.

Situation analysis permits the development of

business strategies, business unit targets, and the

business unit operating and marketing plans. This

analysis identifies significant forces that have an

impact on the formulation and implementation of

business group strategies, and appraises the

present and future internal and external

environment of business groups.

Planning task forces identify significant

changes between the present situation analysis

previous situation analyses. These changes are

and

15
summarized and listed in the business group

strategic plans and business unit operating and

marketing plans.

The situation analyses define the relative position of each business group and associated business units both within the cooperative and the

external environment. The analyses address the

past, present, and future. For the past, entry into a

particular business and past performance are

examined. Information is presented relative to how

and why Cooperative C got into the business, sales

and margin history, how customer segments

evolved, technological advances that have affected

the business, development of competition, and past

strategies and their degree of success. For the present, the analysis includes business group information on who the customers are, their needs, attitudes, and degree of satisfaction; the current

competitive position; distribution capabilities; sales

and profitability; source of supply; and environmental issues and factors. For the future, business

groups estimate the most likely trends and developments that will affect them and their business

units. Future internal and external environmental

issues are documented and realistic assumptions

are developed.

Business groups also analyze the competitive

environment within which they operate during the situation analysis. This includes examining the strengths,

weaknesses, and opportunities of, and threats to, their

operations and those of their competitors.

Business Strategy Each business group develops

a business strategy that describes-in general

terms-how the business group will fulfill its

mission. If a well defined and working business

strategy is already being implemented, then that

strategy is simply reviewed.

Business Unit Dlfecfion The business unit

direction component of business group strategic

planning, listed in exhibit C-3, includes a mission,

strategic effort, objectives, core strategy, and targets.

Mission. The business unit mission statement

defines why Cooperative C has the business unit

and what role it is expected to perform. The statement reflects the desired positioning, direction,

scope, and general activities. It can contain economic goals, services and products offered, market

segments served, desired image, distribution channels, managerial philosophy, primary customer

needs, and the basis for gaining a competitive

advantage in the marketplace.

If business unit missions had been previously

developed, they are reviewed to ensure consistency

with the business group mission.

Strategic Effort. Strategic effort provides the

directional thrust for management and investment

within business units. Strategic efforts are categorized as (a) penetrate and grow, (b) protect and

defend, (c) generate cash, and (d) recover

resources. A product life cycle curve is used to

chart the progress that business units make with a

specific product or product line (fig. 5). It consists

of four phases -introduction, growth, maturity,

and decline. Each of these phases has characteristics relative to sales volume, demand, competition,

profit level, growth, etc. By identifying where in

the product life cycle curve a business unit’s activities fall (the situation analysis helps accomplish

this), the task forces determine what strategic effort

is required of business units.

The four business strategic effort categories

are distinctive by definition: (1) Penetrate and grow

refers to the business unit making a long-term commitment of resources where risks are assumed and

planning is done for future payback. This strategic

effort usually represents increasing market share

and often requires the addition of new products

and/or new market segments. (2) Protect and

defend includes maintaining or increasing current

profitability and developing a strong competitive

position. This strategy requires cost control, highcapacity use, maintenance of market share, and

investments to maintain market position-that is,

when competition is strong. (3) Generate cash

focuses on gradual cash intake from past investments for use elsewhere. This effort is characterized by a controlled reduction in market share in

markets that are mature or declining, as profits are

maximized. (4) Recover resources effort is directed

16
Figure 5-Cooperative C’s Product Life Cycle Curve

Phases

Unit

volume

demand

Strategic

effort

I

Introduction

/

I I I I I I

Growth

I I I I I

Maturity

J I 1 1 1 I I I I I

Decline

I I I I

______ _____ ____________________________ Time ___________________ _---_-______ ___________

Penetrate and grow Protect and defend Generate Recover

cash resources

17
toward recovering resources as optimally as possible during a carefully controlled exit from an existing business.

Objectives and Core Strategy. Objectives provide business units with direction and define the

position to be achieved. They are developed consistent with the corporate and business strategic plans

and the business unit strategic effort. Objectives are

defined in qualitative, not quantitative, terms since

objectives are quantified into targets later in the

strategic planning process. Each business unit

within a business group has a definite objective.

Business units also develop a core strategy. A

core strategy is a single general statement that

summarizes-in terms consistent with the strategic

effort-the strategic intent for the business unit. It

is the basic strategy from which the remaining

business unit planning flows.

Targets. Business units develop 5-year targets.

They are stated in quantitative, measurable terms

consistent with the business unit strategic effort,

objective, and core strategy. They are specific quantitative goals that define the results to be attained

at a definite time and are used to measure how

well a business unit accomplishes its objectives.

Targets define performance and are measured in

terms of market share, sales volume, cash flow,

gross margin, return on assets, net margin, or various other measures.

Business Unit Operating

and Marketing Planning

At this stage in Cooperative C’s planning, a

good deal of business unit marketing and operating work has already taken place. Research and

development work completed for the business

group strategic planning provides the base for

business units to proceed with the remaining portions of their operating and marketing plans.

Essentially, what remains is developing strategies

to reach business unit targets-and therefore objectives, creating implementation programs to put

strategies to work, and developing contingency

plans that enable business unit managers to

respond to unexpected developments (exhibit C-4).

This planning takes place every even year to coincide with business group strategic planning.

Operating and Markethg Strategies After

Cooperative C has determined where it wants its

business units to be in the marketplace through the

development of objectives and targets, where

business units are in the marketplace, and where

the cooperative would like them to be, strategies

are developed.

The business unit task forces develop the marketing and operating strategies by reviewing business units’ strategic efforts and corporate and business group strategies. This ensures that business

unit operating and marketing strategies are developed in line with corporate and business group

strategy as well as the business unit’s strategic

effort.

implementation Programs Implementation

programs are courses of action that detail, in

measurable terms, precisely how business unit

objectives and targets will be met, conditional upon

available resources. Implementation programs

specify how strategies will be implemented, the

personnel responsible for implementing and

completing the program, and the date by which the

program is to be completed.

Human Resource Requirements Business unit

task forces analyze the human resources needed to

carry out implementation programs. Some

Exhibit @l-Cooperative C’s business unit operating and marketing planning components

1. Operating and marketing strategies

2. Implementation programs

3. Human resource requirements

4. Volume projections

5. Contingency plans

18
programs require new positions, experience, and

skills. If additional human resources are required,

task forces must identify the precise changes

necessary. Additional human resources required

for a particular implementation program of a

business unit are submitted to the personnel

director for review.

Volume P@eCti~fl~ Business units project the

volume of products associated with their business

for 5 years. When possible, volume projections are

made in units; otherwise they are made in dollars

(exhibit C-5).

Contingency P&IS Contingency plans outline

specific actions to be taken when a situation occurs

that is inconsistent with the assumptions upon

which actual plans were developed and

implemented. They document possible events or

factors that would critically affect the use of

established strategies and programs, and they

include warning signals that indicate when

contingency plans should be implemented.

Long-Range Financial Summaries

Business units develop long-range financial

summaries each year that correspond to long-range

strategic plans. Targets specified in the cooperative’s business group strategic plans-which are

adjusted regularly for changes within the relative

industry-provide the source of direction for these

summaries. Operation personnel and controllers

usually prepare these summaries. The business

group vice president, CEO, and the board of directors approve the financial summaries.

Four components are included in long-range

financial summaries (exhibit C-6). Together, these

components provide the costs and expected returns

that will evolve through implementation of the corExhibit CX-Cooperative c’s business unit volume projections

Product

category units

Actual

current-year Budget

year 1

Plan

year 2 year 3 year 4

19
Exhibit C-6-Cooperative C’s long-range financial

summary components

1. Five-year financial targets

2. Unit volume projections

3. Operating statements

4. Balance sheets

porate strategic plan, the business group strategic

plans, and the business unit operating and marketing plans over the 5-year planning period.

Budget Development

Budget development is the final stage of

Cooperative C’s strategic planning system. All

business units develop annual budgets. The same

staff that developed the long-range financial summaries usually prepares the budgets. Business

group vice presidents, the CEO, and finally the

board of directors approve the budgets.

Budgets cover the next year, or the first year

of long-range plans, thus providing the path for

business units to follow. Components are shown in

exhibit C-7.

Planning Feedback

Feedback from strategic planning in

Cooperative C results mostly from the monitoring

and follow-up of long-range financial summaries

and budgets. Results from operations and plan

implementation programs provide the means for

monitoring plans. This feedback is instrumental for

Cooperative c’s future planning.

Planning Cycle

Cooperative c’s strategic planning system,

involving its five parts, evolves during a planning

cycle that incorporates an every-other-year time

frame for some parts and an every-year time frame

for others. It includes the planning component, frequency of plan development, the time frame within

Exhibit G74ooperative C’s planning unit budgeting process components

1. Operating year statement

2. Sales volume and expenses

3. Balance sheet

4. Fluctuation analysis

which plans are completed, the time period that

plans cover, and the personnel involved in developing the key planning components (exhibit C-8).

COOPERATIVE D-DIVERSIFIED

MARKETING AND FARM SUPPLY

Cooperative D is a diversified marketing and

purchasing cooperative. Its strategic planning was

formalized in the early 1970’s and has evolved into

the present system. Strategic plans cover a 5-year

period and are updated annually. They correspond

to the present marketing year and 4 subsequent

years.

Cooperative D’s organizational business structure includes divisions and groups, and subsidiaries, each having business units. Cooperative

D has a corporate planning department, essentially

one person, to facilitate strategic planning. The corporate planner, who has other job responsibilities

in the cooperative, guides the strategic planning

process, organizing the process, providing economic analysis, assisting business units in their strategic planning, and consolidating business unit

strategic plans into the corporate strategic plan.

Cooperative D’s board of directors is indirectly involved in strategic planning through discussion with top management. The board provides

general strategic direction. The board sees strategic

plan summaries but not all of the detailed strategic

plans.

Cooperative D uses a multiple committee system for strategic planning review, enhancement,

and regulation. Top executives and the controller

serve as the strategic planning review committee,

reviewing, enhancing, critiquing, and approving

20
Exhibit CX-Cooperative c’s strategic planning cycle

Planning component

Cycle

attribute

Business unit Long-range

Corporate Business group operating and financial

strategic plan strategic plans marketing plans summaries Budgets

Frequency every

odd year

every

even year

every

even year

every

year

every

year

Time frame August Sept to Nov Dee to Jan Feb to May May

Period covered 5 years 5 years 5 years 5 years 1 year

Personnel involved:

Plan

development CEO and Business group

board of vice president

directors and assigned

task forces staff

Plan

approval Board of

directors

CEO, board Business group Business group Business

executive vice president vice president, group vice

and planning CEO, and president,

committee, and board of CEO, and

board of directors directors board of

directors

Assigned

task forces

staff

Business unit

and controller

controller

Business

unit and

21
plans. Four-member overview subcommittees are

assigned to specific business groups, with three of

the members coming from areas outside the business unit to which they are assigned. These subcommittees regulate group and business unit

strategic plans by monitoring and evaluating the

effectiveness of developed objectives and strategy

Strategic planning in Cooperative D involves

a six-step process (exhibit D-l and fig. 6).

Business Unit Strategic Planning

A guide for updating strategic plans is given

to business units early in Cooperative D’s planning

cycle. The guide, distributed in December or

January, includes corporate definitions, descriptions, and explanations of significant strategic

planning components (exhibit D-2). Business units

generally follow the guidelines but have the flexiExhibit D-l-Cooperative D’s strategic planning

process

1.

2.

3.

4.

5.

6.

Preparation of preliminary business unit

strategic plans.

Presentation of consolidated preliminary

plans to the Strategic Planning Review

Committee for critique and suggestions for

revision.

Submission of final business unit plans to

the Corporate Planning Department for consolidation into the corporate strategic plan.

Submission of final updated plans to strategic overview subcommittees.

Presentation of the cooperative’s financial

strategy to Strategic Planning Review

Committee.

Presentation of reports from each strategic

overview subcommittee to the Strategic

Review Committee.

Exhibit D-S-Cooperative D’s strategic planning

components

1. Mission statement

2. Industry conditions and outlook

A. Current conditions

B. Assumptions and projected conditions

3. Capital investment requirements

A. Desirable capital expenditures

B. Essential capital expenditures

C. Annual depreciation

4. Cooperative human resource conditions

A. Strengths and weaknesses

B. Organizational structure

1. Lines of authority

2. Lines of responsibility

C. Personnel requirements

1. Additional personnel needed

2. Replacement personnel anticipated

5. Competitive position

A. Major product market share trends

B. Major competitors

1. Whom

2. Strengths and weaknesses

C. Major markets and customers served

6. Objectives and strategies

7. Financial performance goals

A. Average for past 3 years

B. Projections for next 5 years

8. Action plans for strategy implementation

A. Steps to be taken

B. Human resources assigned

C. Completion dates

D. Results achieved

22
Figure 6-Cooperative D’s Strategic Planning

Business Unit Strategic Planning

Business Unit Strategic Plan

Presentations

Business Unit Strategic Plan

Finalization

Financial Strategy Development

Strategic Planning Reports

1

I

Feedback

23
bility to update and develop their individual plans

as they wish. However, this report discusses the

components contained in Cooperative D’s strategic

planning model.

To keep business unit strategic planning consistent, Cooperative D’s corporate planner provides

planning forms to business units. Forms are available

to document capital investment requirements; analyze competitive position; list objectives and strategies; complete past, budgetary, and projected financial performance goals; and develop action plans.

Mission Mission statements specify the overall

purpose of the business units. Each business unit

has a mission statement. Business units use their

current mission statement or modify it contingent

on changes in their operational functions and/or

purpose.

Industry Conditions and Outlook Industry

conditions and outlook summarizes the current

situation and projected conditions for the

industries in which the business units are involved.

Capita/ lnwestment Requirements Business

units document capital investments that are, or will

be, required over the planning horizon. Units

provide specific data for three major areas: (1)

essential capital expenditures, (2) desirable capital

expenditures, and (3) annual depreciation. A

narrative description of the required capital

investments accompanies financial estimates in this

portion of the plan.

Essential capital expenditures are funds sufficient to maintain facilities and equipment in minimal operating condition. Desirable capital expenditures would maintain facilities and equipment in

good condition and fund the additions necessary to

reach 5-year planning objectives.

Human Resources Business units identify

personnel strengths and weaknesses for each

functional area within their unit. This exercise

provides an overall assessment of the personnel

situation and identifies areas for improvement. An

organizational chart in this analysis shows lines of

authority for business unit operations.

Business units summarize anticipated additional or replacement personnel needed for the 5-

year period, explaining the reasons for changes.

COmpetitlve Position Business units assess their

competitive position in the marketplace, including:

(a) market share of major products, (b) major

competitors and their strengths and weaknesses,

and (c) major markets and customers served.

The business unit’s market share for each

major product is determined for the past 3 years so

trends can be observed. Cooperative D’s corporate

planner helps business units identify their major

competitors’ strengths and weaknesses.

In defining major markets and customers,

business units determine who is purchasing a significant portion of the unit’s total sales for a product and who, if that business were lost, could have

a significant impact on unit operations.

Objectives and Strategies Objectives are concise

goals business units would like to accomplish.

Objectives are presented in measurable terms with

an indication of expected results. A strategy is

developed for each objective. Both objectives and

strategies carry interim and completion dates so

progress can be monitored.

Financial Performance Goals Business units

develop financial performance goals for each year

of the 5-year planning period. These goals are

based on the most likely expectations of financial

performance. For comparison and future reference,

average financial performance measures are

developed for the past 3 years of operations.

Action Plans Business unit management

develops action plans to implement strategies for

each objective. Plans list steps to be taken,

management personnel responsible for

implementing the steps, staff personnel assigned to

the steps, intended completion date, and, after

24
implementation, the date of the completed action

plan and the results achieved.

Business Unit Strategic Plan Presentations

Business units present their strategic plans to

the review committee usually in March. At this

time, the committee critiques the plans, including

offering suggestions for improvement. The business unit then incorporates review committee comments and produces its final plan within 2 weeks.

The plan then goes to the corporate planner who

condenses all business unit plans into the corporate

strategic plan.

In this consolidation process, the corporate

planner summarizes each business unit’s financial

performance goals, objectives, and strategies.

Financial Strategy

Cooperative D’s financial division produces a

corporate financial strategy from the completed

corporate strategic plan, business group plans, and

business unit strategic plans. This strategy is presented to the strategic planning review committee

usually in May. Financial performance criteria in

the strategy show the overall financial direction

Cooperative D will follow.

Strategic Overview Subcommittee Activities

Final business unit strategic plans go to strategic overview subcommittees. As indicated previously, each business unit reports to a strategic

overview subcommittee. The subcommittees provide regulatory functions-reviewing, monitoring,

and evaluating-through the rest of the year, usually May through November.

Subcommittees use regulatory guidelines

developed by the corporate planner. These guidelines help facilitate subcommittee activities and

provide a common format.

Strategic Overview Subcommittee

Reports-Feedback

Strategic overview subcommittees report on

the progress business units make toward their

objectives and strategies to the strategic planning

review committee. Subcommittees develop

progress reports containing five sections: (1) transmittal, (2) executive summary, (3) objective and

strategy review, (4) recommendations, and (5) supporting data.

The transmittal section documents the names

of subcommittee members and identifies the business unit reviewed. The executive summary section

describes the approach the subcommittee used to

review business unit achievements relative to

objectives and strategies, the quality of the objectives and strategies, and financial performance.

Objective and strategy review includes an

interpretation from the subcommittee on the status

and rating of each objective and corresponding

strategy. The status indicates progress made in

implementing strategies according to plan dates

and reaching associated objectives. Status guidelines include: (1) completed, (2) ahead, (3) on

schedule, (4) behind, and (5) no progress.

The subcommittee gives an “effectiveness”

rating on objectives and associated strategies. The

rating system is somewhat subjective; subcommittees must make an interpretive judgment on results

achieved. However, in cases where objectives have

definitive measures, ratings become more objective.

Ratings commonly are stated as: (1) excellent, (2)

good, (3) fair, (4) poor, and (5) not rated.

Subcommittee recommendations for improving existing objectives and strategies or for developing new objectives and strategies make up the

fourth section of the report. The fifth section

includes any supporting information and/or data

the subcommittee feels are important to the strategic direction of the business unit.

The strategic overview subcommittees develop their reports over a period of months as strategies are implemented to reach business unit objectives. These reports are an essential element of

strategic planning feedback in Cooperative D.

Subcommittee reports are presented to the strategic
planning review committee and the appropriate

business unit manager in December.

SUMMARY AND COMPARISON

The four agricultural cooperatives have integrated comprehensive strategic planning systems

into their organizational structures. These systems

were not just applied from a guide book, but were

developed and modified as the cooperatives

changed and grew over the years. What evolved

are complex, efficient, results-oriented systems.

All four cooperatives use a 5-year planning

horizon, although their planning cycles are not

identical. Cooperatives A, B, and D go through

their complete strategic planning system every

year while Cooperative C uses an every-other-year

alternating routine for some of its planning components and an annual routine for others.

However, it is important to note that all four cooperatives are continually involved in some facet of

strategic planning.

The cooperatives take a bottom-up approach

to strategic planning by using line business management and personnel in their strategic thinking

and planning systems. However, top-down direction also comes from corporate developed planning guides. Cooperatives A, B, and C also provide further corporate direction-Cooperative A

with overall corporate vision, Cooperative B with

directional communication from its CEO, and

Cooperative C with the development of a

Corporate Strategic Plan.

Although they use different terminology, all

four cooperatives view assessing the business

environment as a critical component of strategic

planning. Assessments are made on an internal

and external basis, taking into consideration the

cooperative’s operations and performance, and its

position relative to the marketplace and competition.

Cooperatives A, C, and D emphasize financial

data-estimates, projections, and performance

measures-in their strategic plans. While

Cooperative B often uses data in its detailed strategic plans, doing so is at the discretion of business

unit management.

All of the cooperatives use action or implementation plans/programs to carry out and monitor developed strategies.

The boards of directors of the four cooperatives take part in strategic planning in essentially

the same manner-in more of an advisory and

approval role. Cooperative A has a board planning

retreat where the long-range strategic plan is presented to the board and major strategic issues are

examined and discussed. Cooperative B’s board is

kept abreast of plans through presentations from

business unit vice presidents on approved plans

and from the planning director’s report on specific

objective progress. The board of Cooperative B gets

more involved only when strategic planning that

points to directional change is included in plans. In

Cooperative C, the board is mainly involved in

planning as it relates to the corporate strategic

plan; it assists in some development, as well as

approval, and it also reviews business strategic

plans. In Cooperative D, the board reviews strategic plans, but only in summary form.

Cooperatives A and C include retreats in their

strategic planning-Cooperative A, a president’s

retreat and board planning retreat, and

Cooperative C, a retreat-type meeting (for plan presentation to the board executive and planning committee). Cooperatives B and D do not appear to set

up any formal corporate retreat strictly for planning purposes. However, business unit managers

in Cooperative B are free to organize retreats for

their respective units if they wish.

Cooperatives A and C get planning feedback

from an ongoing financial analysis of strategy performance. On the other hand, Cooperative B uses a

report feedback system to evaluate its specific

objectives and a planning audit to correct for inadequate or inefficient planning, and Cooperative D

uses strategic overview subcommittees to develop

reports corresponding to the progress that business

units make relative to objectives and strategies.

The methodology followed for strategic planning in the four cited cooperatives is basically similar-developing a mission statement, assessing the

business environment, developing goals and/or

objectives, designing strategies to meet objectives,

carrying out implementation programs, and gain26
ing feedback. The cooperatives’ differences in terminology and methodological order of planning

components seem to have evolved largely dependent on the personalities and business philosophies

of their management personnel. Cooperative C’s

system should be noted as being somewhat atypical. Cooperative C’s distinctive method of strategic

planning, whereby it identifies a strategic effort

from a product life cycle curve for business units to

plan and operate from, relates to the primary business characteristic of the cooperative-selling farm

inputs.

CONCLUSIONS

Methods of strategic planning by large farmer

cooperatives have undergone important changes

over the past lo-15 years. In the past, many cooperatives had rather large complex planning departments made up of personnel whose primary

responsibilities were tied to planning. This was not

found to be the case in this research. Current systems show that planning responsibilities are delegated to different levels of management in which

the managers have many other responsibilities as

well. This is important evidence that strategic planning is interwoven into management.

It is clear that the four cooperatives spend a

great deal of time and effort on strategic planning.

The strategic planning concepts, methods, and

thinking implemented by these cooperatives provide an organized means for developing and

achieving objectives.

While smaller cooperatives may lack the

resources to undertake an extensive planning process, it is clear that many of the principles and

practices of strategic planning are relevant at that

level as well. For example, although many smaller

scale cooperatives may not be organized into business groups or units or have the resources to

undertake planning on a divisional basis, they can

use the strategic planning methodologies of business units by applying them to their complete organizations. Methods for analyzing the environment

and market position, tracking strategies through

financial analysis, and feedback and strategy examination are strategic planning concepts smaller

cooperatives could use. In some instances, the

board of directors in small cooperatives would likely need to take a more active role in the actual

development and negotiating phases of strategic

planning, rather than just review and approve.

While strategic planning is an important management concept that is gaining in use, the agricultural

business environment imposes limitations. Many

agricultural cooperatives operate on relatively low

margins that limit resources. So cooperatives must

be efficient in all modes of their operations, including strategic planning. Therefore, the challenge is

to develop strategic planning systems that are not

only comprehensive and action-oriented, but that

have characteristics that allow them to be efficiently implemented into distinctive organizational and

operational structures.

27
U.S. Department of Agriculture

Agricultural Cooperative Service

P.O. Box 96576

Washington, D.C. 20090-6576

Agricultural Cooperative Service (ACS) provides research, management, and

educational assistance to cooperatives to strengthen the economic position of

farmers and other rural residents. It works directly with cooperative leaders and

Federal and State agencies to improve organization, leadership, and operation

of cooperatives and to give guidance to further development.

The agency (1 ) helps farmers and other rural residents develop cooperatives to

obtain supplies and services at lower cost and to get better prices for products

they sell; (2) advises rural residents on developing existing resources through

cooperative action to enhance rural living; (3) helps cooperatives improve

services and operating efficiency; (4) informs members, directors, employees,

and the public on how cooperatives work and benefit their members and their

communities; and (5) encourages international cooperative programs.

ACS publishes research and educational materials and issues Farmer

Cooperatives magazine. All programs and activities are conducted on a

nondiscriminatory basis, without regard to race, creed, color, sex, age, marital

status, handicap, or national origin.