Strategic Planning and Management of Food and Agribusiness Chains: The ChainPlan Method (Framework).

AutorNeves, Marcos Fava

1 Introduction

The growing global demand for food resulting from factors such as population growth, the economic development of populous nations, income distribution, and urbanization has persisted over the last ten years. Important changes have taken place in the agribusiness sector to drive efficiency in the various global food networks. On the other hand, the dramatic rise in the global demand for biofuels continues to increase the pressure on grain and sugar production, agricultural land use, and other agribusiness functions. Consequently, many agribusiness chains are not prepared for this continued growth. To face these changes in the international business environment and increase opportunities for food and biofuels agribusiness chains, careful systematic strategic planning is essential (Neves, 2005).

Neves (2008) developed a preliminary method for strategic planning and management of food and agribusiness chains based on demands for projects starting in the early 2000s. From 2008 to 2018 (10 years), several food and agribusiness chains in different countries applied this method. These applications provided distinct contributions to the preliminary method, creating the need to improve and update the method. This article describes the improved food and agribusiness chains strategic planning and management method (ChainPlan), based on several empirical applications, the most recent literature on agribusiness chains, and practical contributions provided by the private sector.

There is an absence in the current literature of a common theoretical framework in regard to value chains. This makes it impossible for generalizations to be made based on the different analyses and, thus, does not allow for comparisons between models (Clay & Feeney, 2019). The ChainPlan method seeks to help fill this gap by generating a replicable model that can be used to compare the most diverse value chains, allowing for a better understanding of the indicators needed to measure and evaluate competitiveness and performance in agribusiness chains.

The article continues in the second section with the literature review that contributed to ChainPlan, the third section outlines the methodology used to build the ChainPlan method, and the fourth section presents the ChainPlan sequence of steps used to build a strategic plan and, finally, the managerial implications.

2 Literature Review

2.1 Agribusiness systems, chains, clusters, and networks

In the agribusiness context, numerous theories from the literature contribute to the analysis of food chains: Agribusiness Systems, Clusters, Networks, Supply Chains, Inter-organizational Relationships and Netchains, Transaction Cost Economics, Institutions, Collective Actions, and others. Davis and Goldberg (1957) started the studies in agribusiness, developing the concept (business that involves agriculture) and the theory of the Commodity System Approach (CSA). In the eighties, Morvan (1985) and others advanced Davis and Goldberg's (1957) concepts and developed the theory of Filiere Agroalimentaire.

An Agribusiness System is a macro analysis of a food product flow from suppliers (of inputs such as seeds, chemicals, and others), farmers, agro-industry, and distribution towards final consumers, comprising the following key elements for its descriptive analysis: agents, relationships between them, sectors, supporting organizations, and the institutional environment (Batalha, 2009; Zylbersztajn & Neves, 2000).

While the network comprises vertical, lateral, and horizontal relationships between independent entities, the production system emphasizes vertical relationships. Menard (2002, p. 4) explains that "a network is a hybrid form of governance, and what is called an agribusiness system is a special case of a network." However, Beers, Omta, and Trienekens (2001, p. 2) state that "networks are seen as the total number of agents within an industry and/or between related industries, which can potentially work jointly to add value to customers." therefore, the theoretical model of the company's network does not consider pure self-interest as the determinant of behavior; network theory emphasizes the normative and social structures in which exchanges are embedded (Watson, Worm, Palmatier, & Ganesan, 2015).

The analysis of a network in which a focal firm operates is important in rapidly changing business environments that demand flexible, associative networks of functionally specialized firms, fused by cooperative relationships that provide access to unique knowledge and resources (Wang, Gu, & Dong, 2013).

Network theory provides an excellent framework to understand how changes in one part of the channel ecosystem affect other parts, such as the propagation of inter-firm behaviors from one channel relationship to an adjacent one (Watson et al., 2015).

Lazzarini, Chaddad, and Cook (2001) integrate network and system concepts in an approach called netchains. The integration of these concepts enables organizational interdependencies within the network, different mechanisms of coordination (management plans, standardization of process, and adjustments) and sources of value (operation and production optimization, transaction cost reduction, diversity, and co-specialization of knowledge). Within a company network, the way the industry relates to its producers and distribution channels gives rise to the concept of a strictly coordinated agribusiness subsystem that was proposed by Zylbersztajn and Farina (1999). A subsystem must offer a product that meets the final consumer's expectations. Thus, it is essential to manage the transactions between the links of the subsystem. In addition, producers can develop horizontal alliances to increase their bargaining power and explore gains from collective action, which in a subsystem become an important aspect of coordination (Zylbersztajn & Farina, 1999).

The way organizations gain and use their power and balance asymmetrical dependence determines channel structures and performance (Antia, Zheng, & Frazier, 2013). As social exchange theory suggests, power refers to the ability to influence channel partners to take actions they would not take otherwise (Draganska, Klapper, & Villas-Boas, 2010). Power does not necessarily induce conflict; it is the nature and sources of power that can aggravate the negative effects of conflict on channel performance by increasing perceived unfairness (Samaha, Palmatier, & Dant, 2011).

In essence, the idea of company networks involves a level of analyses centered on one company that forms its network of distributors, suppliers, and others. Agribusiness systems and chains refer to the groups of companies that act in certain business flows. A coffee company builds its own network, and all these networks together make the coffee agribusiness system or coffee chain. The ChainPlan method described here focuses on the chain (or system) level for a certain region's poultry chain, coffee chain, orange juice chain, etc.

2.2 Transaction cost economics and contracts

Transaction cost economics (TCE) and contract theory literature contribute to the construction of the ChainPlan method. Coase (1937) states that a company is a nexus of contracts. Williamson (1985) also claims a company has a governance (management) mechanism that ranges from arm's length transaction markets (pricing systems) to full vertical integration. When market failures create excessive costs, companies will choose vertical integration over market transactions to source or sell (Rindfleisch & Heide, 1997). With vertical integration, the organization owns various elements in the value chain. Different theoretical perspectives indicate distinct advantages of this strategy, but typically, the benefit hinges on lowering the costs associated with channel exchanges (Watson et al., 2015). According to TCE, a vertically integrated firm may reduce costs incurred by bottlenecks in production and increase efficiencies, particularly in the presence of a market failure (Arya & Mittendorf, 2011).

Hill (1990) states that by considering economic transactions in a wider context it is possible to observe that the invisible hand of the market favors cooperative actors whose behaviors are biased toward cooperation rather than opportunism. Heide, Rokkan, and Wathne (2007) proposed to examine the effects of monitoring on inter-firm relationships, and whether opportunism increases or decreases when using monitoring as a mechanism of control. Likewise, the punishment of one member in a distribution network can reduce opportunism by intermediaries that observe that punishment through both a deterrent effect and a trust-building process (Wang et al., 2013).

TCE recognizes uncertainty as exogenous disturbances affecting transactions (Zylbersztajn, 1996). According to Farina, Azevedo, and Saes (1997), uncertainty creates unforeseen circumstances that contracts between parties cannot cover.

For Lusch and Brown (1996) and McNeil (1974), contracts are mechanisms that regulate transactions and are used to reduce risks and uncertainties in exchange processes. Within this view, contractual arrangements can solve some coordination problems but can also create others.

In agribusiness systems, coordination between input suppliers, producers, and industry is part of a vertical coordination of production, which can be improved with the design of contractual arrangements that minimize transaction and production costs between agents from inputs to the final consumer. Similarly, if there are joint action gains between agents of the same link, there may be better horizontal coordination of production, allowing the formation of associations and cooperatives to develop these actions.

For Zylbersztajn and Farina (1999), incentive mechanisms are instruments that combine the self-interest of members with the goals of the organization: by pursuing their own goals no matter what they are, the member ends up helping the...

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