Growing Magazine - December, 2012
Using SWOT to Keep Your Operation Competitive
Knowing its strengths, weaknesses, opportunities and threats
Performing a strengths, weaknesses, opportunities and threats (SWOT) analysis is probably one of the first steps business owners should take when developing a business plan, says Blake Bennett, associate professor and extension economist at Texas A&M in Dallas.
Current regulations and regulatory changes-for example, those regarding pesticide use-can be threats to growers. However, growers who perform SWOT analyses can often turn these threats into opportunities. This photo shows test plot-grown broccoli that will be used to determine pesticide residue levels.
Photo by Scott Bauer, courtesy of USDA-ARS.
"For growers it's vital, particularly in today's environment when we're going global. SWOT helps you look at the world and how it changes. It can help you decide what to do, why to do it and when."
SWOT is an important part of strategic planning, now called staying competitive, says Jim Beierlein, Ph.D., professor of agricultural economics at Penn State. It's a systematic scan of the environment that allows growers to take advantage of opportunities in the marketplace and reduce the damage caused by threats.
"A lot of agribusiness firms already have a strong foreign exposure, and it's growing," Beierlein says. "The U.S. has a sustainable competitive advantage, but it can disappear pretty quickly. Brazil, Russia, India and China are on the move. You have to be constantly looking over your shoulder, considering your SWOT analysis. You don't want to get caught flat-footed."
SWOT is useful for growers of any size, Bennett says. Small growers face especially high threats, since their production is concentrated in one area, where it will be especially affected by factors such as adverse weather, while larger growers may have their operations spread out.
SWOT can also help growers spot trends, Beierlein says.
"It gives you the ability to step back and not just look at the market, but also find out what forces are at play and where you fit in that situation. For example, we're moving toward a healthier market. It's clear that organic is not a fad. It's the fastest-growing segment in the industry. People are eating more fruits and vegetables, and if they aren't, they feel guilty."
Another trend, "buy local," is affected by other forces, including perception. "If organic food is grown 10 feet inside Pennsylvania, people think it's obviously a superior product," he says.
An operation's strengths and weaknesses are determined by its internal environment and consist of factors that growers can control. Strengths give a company an advantage over its competitors. Weaknesses place it at a disadvantage. Growers may not be the best judges of their operation's strengths and weaknesses, Bennett warns.
"Sometimes you may want to get outside input about your company's strengths and weaknesses," he says. "We tend to do a poor job evaluating ourselves. Some things we think may be shortcomings may be positive, and some things we may think of as positive might not be."
Questions growers should ask about their operation's strengths and weaknesses include:
- Will my educational background, experience and expertise help in operating a farm?
- Do my family members and employees have experience and expertise that could help?
- Does my family support me in this business?
- Are my employees loyal and is their morale high?
- Do I have additional resources (accountants, attorneys, consultants) to advise me?
- Why do my customers buy from me?
- Does the operation have a strong brand name and a good reputation?
- Have I spotted an unfulfilled customer need?
- Am I operating in a cost-effective and efficient manner?
- Is my equipment well-maintained and up-to-date?
- How much capital is available to me?
- Do I understand record-keeping and accounting practices as they apply to my operation?
- Am I up-to-date on current legal and regulatory issues?
- Can I make money from this?
Keeping up with technological changes can turn an opportunity into an operation's strength. Here entomologist Bill Kemp (standing) and computer specialist Tom Kalaris are using the Grasshopper Hazard Forecast computer program, which combines satellite GPS technology with GIS software.
Photo by Jack Dykinga, courtesy of USDA-ARS.
An operation's opportunities and threats are determined by its external environment and consist of factors that growers cannot control. Opportunities are chances for growers to improve their operation's performance and/or profit. Threats could cause problems for the operation. Growers can get information about opportunities and threats around the globe from TV and radio news, the Internet, magazine and newspaper articles and other producers, Bennett says. "Farm bureaus also disseminate a lot of information about opportunities and threats. A wealth of information can come from farm bureaus."
Once growers have performed a SWOT analysis, they can use the information in a number of ways. They can turn threats into opportunities, change their operation's weaknesses into strengths, use its strengths to overcome threats, and combine its strengths and opportunities to create a powerhouse.
For example, Bennett says, having a limited market, as most small growers do, is a weakness. A SWOT analysis could show that the grower has an unrealized strength, such as a family member or employee who deals well with people, or that the farm is on a heavily traveled road. In that case, opening a farmstand and/or you-pick section could open up entirely new markets.
Pests and diseases are clear threats to growers. Those who have performed a SWOT analysis are better prepared when an outbreak takes place. This is a colorized SEM (scanning electron micrograph) of pathogenic E. coli on a lettuce leaf.
Photo courtesy of USDA-ARS.
Beierlein used SWOT to help some local growers with roadside stands and CSAs compete with the local supermarket.
Bennett also has an example of turning a threat into an opportunity.
"We had an outbreak of E. coli on lettuce a couple of years ago," he says. "If I'm a lettuce grower, what am I going to do?" Growers can't control an outbreak on a neighbor's farm, but if they've performed a thorough SWOT analysis, they've considered the possibility and planned for it.
One contingency plan for a grower is to prepare an advertising campaign to show consumers that the grower is a local one they can trust. Another is for growers to band together and plan a campaign to reassure consumers that they're doing everything possible to keep them safe.
The availability of less expensive, imported agricultural products is another threat. Growers can use their strength as American producers in "buy American" marketing in the U.S., a wider version of "buy local."
Questions growers should ask about their operation's opportunities and threats include:
- Have unforeseen competitors entered the marketplace?
- Are there new products that compete with mine?
- Has there been a shift in consumer tastes, either toward or away from my products?
- Are there any technological changes that could affect my business?
- What sorts of bureaucratic hurdles, from local regulations to export licenses, do I have to deal with?
- Have there been any legislative or regulatory changes that could affect my business?
- Have there been any economic changes anywhere in the world that could affect my business?
- What is going on in the rest of the world?
- Has there been a change in the cost of materials I need for my product?
- Do I have a contingency plan in case of a threat?
Adapting early to technological changes can be an opportunity, but only if the operation has strengths such as expertise, professional resources and capital. This photo shows technicians Jess Childre (left) and Kathy Gray monitoring telemetry equipment used in a peanut crop.
Photo courtesy of USDA-ARS.
When selling in global markets, American agribusiness can use the strength of its existing foreign exposure as an opportunity to sell to countries with an emerging middle class, such as China. "Last year, 350 million people in China were ready to move to the middle class," Beierlein says. "They aren't going to eat just bowls of rice anymore."
Information is always changing, and growers' SWOT analysis has to change with it, Bennett says.
"Growers should be thinking about it all the time. As you move throughout the year, as you see new opportunities and threats, jot them down. You should amend your SWOT at least once a year."
The author is a freelance writer based in Altadena, Calif.