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 Results of solution of post-doctoral grant financed by the Grant Agency of the Czech Republic (402/02/2PD059)

Project title: Elaboration of methodology for analyzing agricultural and food-industry analysis.

Project guarantee:Assoc. Prof. Pavel Žufan, Ph.D.

Project objectives:

  • Study of available literature and identification of general methodic approaches to industry analysis.
  • Elabortion of methodology for agricultural and food industry (considering specifics of these industries).
  • Approval and possible adjustment of the proposed methodology on an example of the brewing industry or also other industries.

Project contributions:

  • Proposal of the most suitable components of a complex methodology of analysis of agricultural and food industries (as the main objective of this project it is summarized below).
  • Comments on applicability of particular components of the methodology (see the list of publications).
  • Contribution to extension of teaching materials used in the sujbects guaranteed by the project guarantee (Operations management and Strategic management).
  • Qualification growth of the guarantee and his further professional growth (successful habilitation at the end of the first year of solution of the project, and publication of a number of scientific papers).

Any proposals and comments are wellcome - can be directed to these contacts:

Doc. Ing. Pavel Žufan, Ph. D.
Department of Management FBE MENDELU
Zemědělská 1, 613 00 Brno
Czech Republic

Selected publications written within solution of the project

  1. ŽUFAN, P. - TOMŠÍK, P. External environment analysis and approaches of students.
    In KLEIN, H. E. WACRA 02 -- Interactive Innovative Teaching and Training. Needham, USA: WACRA, 2002, s. 425-428. ISBN 1-877868-20-5
  2. ŽUFAN, P. Key driving forces in the Czech brewing industry.
    Agricultural economics, July 2002, Vol. 48, No. 7, p. 311-314. ISSN 0139-570X
  3. ŽUFAN, P. - ERBES, J. Approaches to analysis of competitive position of retail businesses in the Czech Republic.
    In Podniky v podmínkách procesu globalizace a integrace. Katowice: Górnoślaska wyźsza szkola handlowa, 2003, s. 269-276. ISBN 83-88402-39-0
  4. ŽUFAN, P. - TOMŠÍK, P. Simulation of business environment and students' experience.
    In KLEIN, H. E. WACRA 03 -- Interactive innovative teaching and training. Needham, USA: WACRA, 2003, s. 47-51. ISBN 1-877868-22-1
  5. ŽUFAN, P. Czech wine-production industry and recent movement forces.
    Agricultural economics, 2004, Vol. 50, No. 9, p. 400-404. ISSN 0139-570X
  6. CHLÁDKOVÁ, H. -- POŠVÁŘ, Z. -- ŽUFAN, P. Consumer habits in the Czech wine market.
    Agricultural economics, 2004, Vol. 50, No. 7, p. 323-330, ISSN 0139-570X
  7. ŽUFAN, P. -- ČERNÍKOVÁ, R. Industry analysis: application and teaching approaches.
    In KLEIN, H. E. WACRA 04 -- New times for learners and teachers. Needham, USA: WACRA, 2004, 6 s. (v tisku)

Main results of solution - recommended components of the methodology for analyzing agricultural and food industries

The project guarantee got to the conclusion to propose the following components of industry analysis - it is, though, necessary to emphasize, that the particular components do not represent a result of the work of the guarantee, and are overtaken from literature (as specified in the grant proposal). Contribution of the guarantee therefore dwells in the grouping and ranking the helping tools so that they best correspond with the situation in the specified industries.

  1. Analysis of basic characteristics of an industry
    Detailed description e.g. in MINTZBERG, H. et al. The Strategy Process - Concepts, Contexts, Cases.
    Upper Saddle River: Pearson Education, 2003, 489 p. ISBN 0-13-122790-4

    Aim of this tool is to describe the typical features of an industry environment and the context in which organisations operate. Emphasis is put rather to the overall situation of the industry, than to particular cases of companies or their groups. Basic characteristics include:
    • market size,
    • geographic scope of competition,
    • market growth and stage of life-cycle,
    • number of competitors and their relative size,
    • number and size of customers,
    • level of vertical integration,
    • entry barriers,
    • exit barriers,
    • technological changes,
    • product innovations,
    • capital requirements,
    • product differentiation,
    • economic position of the industry.
    These 13 characteristics provide a very good introductory information specifically in connection with decisions on further considerations of an entry into a new industry. Their fundamental contribution is a description of the main features of the situation within an industry, which can then be further elaborated utilizing other methods.
    Main reason for using this tool can be seen in an introduction into the situation - if such an analysis is elaborated for the subjects not directly operating within the industry (e.g. for the financial institution, where an organisation asks for capital).
  2. Industry structure analysis
    Detailed description e.g. in SEDLÁČKOVÁ, H. Strategická analýza.
    Praha: C. H. Beck, 2000, 101 s. ISBN 80-7179-422-8

    Industry structure analysis enables recognition of the main profile of an industry, and determination of the type of competition is to be faced there. This information can serve as a bases for the following tool.
  3. Analysis of competitive forces
    Detailed description e.g. in PORTER, M. E. Konkurenční strategie.
    Praha: Victoria Publishing, 1994, 403 s. ISBN 80-85605-11-2

    Aim of this part - called by its author also Porter's model of movement forces of competition within an industry - is to describe the main subjects influencing the situation within an industry, and also character of their influence. Main subjects include:
    • intensity of rivalry among the current competitiors,
    • threat of new entrants,
    • threat of substitutes,
    • bargaining power of buyers,
    • bargaining power of suppliers.
    Benefits of this analysis are based on emphasizing the key forces influencing character of competition within an industry, and on a detailed description of their possible influences. Even though this description can not represent a complete list of all possible influences, concentration on the most important ones does not prevent us from extending the list by further influences applicable in a particular situation of a specific industry or a specific organisation. Therefore also this analysis can be considered very useful, even though it is often criticised due to its staticity (similarly as some other tools in this list), and a small emphasis of the development of influence of particualr forces in time. Here we can oppose, that the concept of this approach does not prevent a dynamic viewpoint and it is always the responsibility of the analytic(s) to examine also the development of analyzed forces in time.
    From the viewpoint of food industry and its specifics, the attention should be directed namely to the intensive rivalry of current competitors, bargaining power of buyers (namely retail chains), substitutional interconnections of some industries, insignificant position of producers of complemens (or their non existence), and to the relatively lower bargaining power of suppliers. Industry specifics is also represented by the regulation of the industries projecting namely to the hygienic and safety regulations. Specifics of agricultural industries can be seen namely in regulation forces (subsidies), and also bargaining power of buyers, whereas the threat of new entrants does not seem to be significant.
  4. Strategic groups analysis
    Detailed description e.g. in PORTER, M. E. Konkurenční strategie.
    Praha: Victoria Publishing, 1994, 403 s. ISBN 80-85605-11-2

    The importance of this analysis comes from the manner in which this theoretical concept was developed. The primary impetus for its creation was the realization that the key forces of the external environment and industry do not have the same impact on all organisations in the industry. Therefore, it is interesting to verify the impact of diversity in the situations of different organisations and find out how each organisation differs and what also affects the consequences of key factors development over time. Selection of the key aspects of similarities / differences between organisations then enables to form a strategic group map that shows situation in the sector in more detail, and identifies similar groups of organisations that compete more intensively with each other (unlike organisations in other strategic groups whose situation is so different that they actually are not their direct competitors). Typical examples of industries where it makes sense to perform this analysis can be found in the food industry (e.g. the above-mentioned sectors in which the methodology was applied - brewing, wine porduction). In contrast, in the primary agricultural sector, the analysis usually does not make sense.
  5. Analysis of key driving forces of change
    Detailed description e.g. in THOMPSON, A. A. - STRICKLAND, A. J. strategy formulation and Implementation - Tasks of the General Manager.
    New York: Irwin, 1989, 366 p. ISBN 0-256-06901-8

    Analysis of key driving forces of change can supplement the above mentioned analysis (they can be concluded and summarized by this analysis) by emphasizing the influences, which represent currently most important factors of change specific for an industry. The key driving forces of change include:
    • changes of long-term industry growth rate,
    • technological innovations,
    • spread of technical know-how,
    • changes in costs and effectiveness,
    • product innovations,
    • marketing innovations,
    • changes in customers and how they use the product,
    • changes of societal priorities and life style,
    • demand for differentiatted product,
    • entry/exit of big players,
    • regulation influences and chages of government policy,
    • uncertainty and business risk.
    Analysis of key driving forces of change within an industry can serve as a suitable supplement of the analysis of driving forces of competition because it emphasizes the dynamism of particular factors development absence of which is often criticized namely in the analysis of competition. Therefore this analysis can be rather beneficial, even though it often appears duplicite with the previous analyses.
    From the viewpoint of practical application in agriculture and food industry it can be emphasized the necessity to monitor the societal priorities development and lifestyle, which subsequently project into the growth rate of particular industries, and their profit potential. Product and marketing innovation are also very significant - enablitn differentiation in the fields, where products themselves are very similar and not differentiated. Regulation influences are also important, although from the viewpoint of this analysis and its emphasis of change driving factors their importance is not that importnat - owing to the length of the legislative processes the organisations should be able to monitor the prepared changes and adjust their strategies with a sufficient advance.
  6. Industry attractiveness evaluation
    Detailed description e.g. in HIGGINS, J. M. - VINCZE, J. W. Strategic management: Text and cases.
    New York: The Dryden Press, 1989, 1180 s.

    Industry attractiveness evaluation represents a logical result of the previous analyses. It can have many different forms. From the general viewpoint it seems to be rather transparent to utilize the quantified evaluation in the form of the Industry attractiveness evaluation matrix outputs of which can further serve for the helping tools for strategy formulation. Evaluation process starts with defining the attractiveness criteria, which can come from the following fields:
    • Market factors (e.g. market size, size of key segments, annual growth rate, market diversity, price sensitivity, business cycles, bargaining power of buyers).
    • Competition factors (e.g. types of competitors, level of concentration, changes in market shares, technologic development, level of integration).
    • Financial and economic facotrs (e.g. profit margin, financial leveragy factors, entry and exit barriers, capacity utilization).
    • Socio-politic factors (e.g. social attitudes and trends, laws and regulation, influence of stakeholders, human factors).
    • Technologic factors (e.g. maturity and stability, complexity, differentiation, patents and intellectual ownership, needed technologies).
    These criteria are subsequently evaluated from the viewpoint of their relative importance for industry attractiveness in general, and (mainly) from the viewpoint of attractiveness of a particular industry regarding these factors.
  7. Any proposals and comments are wellcome - can be directed to these contacts:

    Assoc. Prof. Pavel Žufan, Ph.D.
    Department of Management FBE MENDELU
    Zemědělská 1, 613 00 Brno
    Czech Republic