A special and multi-disciplinary task was created by PCC Board of directors to develop an intensive SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of each part of the PCC value chain. The analysis was developed during the last six months and it includes a PESTLE (Political, Environmental, Social, Technological, Legal and Economic analysis) analysis as well as internal and external factors for the SOWT analysis itself. The task force has issued a report; the following points are the most important topics on it:
a. PCC is in a good position to improve, boost sales and become a leader and reference in the potato chips industry, but improvements are necessary.
b. The medium and long-term scenario are strongly favourable for PCC:
i. Recovery time after the actual recession will boost potato chip sales; the forecast says that between 2010 and 2012 we will not have a significant variation in chip consumption, but after 2012 we could expect an increase of 4% the first year, 5% the second, 6% the third, 7% the four, and then a stabilization of 7% per year after 2017;
ii. The potato chip consumption is higher during summer and spring; so, if the average temperature in the planet rises such as some activist groups say, it will boost potato chip sales by 1.5% per year;
iii. The increase in the use of crops for bio-fuels will do more expensive other kind of chips; as conclusion, the potato chips market will be booster by around 7% more due to the development of these policies.
iv. The two last points have the associated risk of when people will discover/accept that Global Warming is a fraud. Reserved reports forecast that starting in 2020 we will see changes back in policies related with CO2 emission, but due to decline of oil production, bio-fuels policies will not significantly change.
v. PCC market share is 23% and it was stable for the last five years.
vi. PCC top, middle and first line level managers have 9, 5.5 and 2.8 years of experience respectively in their position. The market average for this kind of industry is 11, 6 and 5.8 years.
vii. Financial reserves, continuity, leadership, manager succession, geographic location, quality, competitively, reputation, qualifications, certifications do not represent neither strength nor weakness for PCC.
c. The mid-term scenario is key for PCC development
i. Is expected that a new a big player enter to the market in the next five years;
ii. One competence company is developing new products in a faster way that PCC is developing; according to the TSX reports, this company invests in R&D 47% more than PCC;
iii. Operative efficiency
i. for farm is 78.5%, similar to industry average;
ii. for transportation is 86%, lower than the industry average; and
iii. for the factory is 72%, lower than the industry average.
iv. Energy efficiency
i. for farm is 34.5%, lower than the industry average;
ii. for transportation is 32%, similar to the industry average; and
iii. for the factory is 68%, lower than the industry average.
v. Labour efficiency
i. for farm is 87%, similar to lower than the industry average;
ii. for transportation is 32%, similar to the industry average; and
iii. for the factory is 68%, lower than the industry average.
vi. The allowance expenses for PCC are higher that the average in the industry;
vii. Energy cost will rise due to the increase in commodity prices;
viii. PCC inventories for final products are 40% higher than the industry average; and
ix. Financial reserves, cash flow, leadership, quality, competitively, reputation, qualifications, certifications do not represent neither strength nor weakness for PCC.
d. The short-term scenario
i. The market will be very stable;
ii. Suppliers fees will remain stable;
iii. Labour costs will decrease smoothly;
iv. Technology cost will decrease, but we can not expect significant improvements in the technology; and
v. Financial reserves, cash flow, leadership, quality, competitively, reputation, qualifications, certifications do not represent neither strength nor weakness for PCC.
The report concludes that PCC is face on a tremendous opportunity in the development of the market, but actions should be taken at all level.
The Task Force has drafted the strategic, tactical and operational plans that PCC executives should take; this plans are based on six main goals. Because some of these goals imply important risks, the Task Force has instructed their achievement, follow up, deadlines, and control process. The Board of directors has approved the plan and the PCC executives must develop it. The vision issued by the Board states that PCC should be the leader in the market; leader in efficiency, sales, R&D, expansion rate, leadership, environmental and social commitment and profitability.
The high level idea delineated by the Board is that PCC has 3 years to improve and to be more efficient in each part of the value chain. The Board call that the "preparation" period. During this recession and post-recession period PCC should take the advantage of lower costs and prices to prepare a huge expansion. As the report does mention, many policies have also helped developing this strategy (see point b). After this period, PCC will apply all their capacity reached to boost its expansion. During this period PCC will acquire and/or build new plants. This is the “expansion” period. The goals described by the Task Force are:
1. For the preparation period, the sales should increase at least by 1.5% per year. For the expansion period the sales should increase at least by 14% per year during the first 3 years; then the 25% per year. The factory capacity should expand in the same proportion but with year in advance as deadline for sales. This expansion will be combining a strategic decision between acquiring and building factories, transportation companies, land, and so on.
2. PCC should improve the efficiency in an average of 6%; the sector efficiency goals are:
a. Operative efficiency: 7 % higher than the average in the market, by 2014.
b. Energy efficiency: 4% higher than the average in the market, by 2012; 6% higher than the average in the market, by 2014; PCC will build bio-fuel power plants fuelled by waste organic residue (tax advantages will promote that).
c. Labour efficiency: 5% higher than the average in the market, by 2013; 9% higher than the average in the market, by 2015.
3. PCC should increase the investment in R&D by 1% of the sales in the preparation period and 2% in the expansion period.
4. Top, middle and first-line level managers should receive a minimum training of 40, 60 and 80 PHDs (Professional Development hour) respectively in an annual base.
5. PCC should increase the investment in social programs by 0.001% of the sales in the preparation period and 1% in the expansion period.
6. PCC should honour shareholders with a reasonable profitability during the expansion period. Reasonable means not lower than the maximum between the average in the industry or the average of the top-three competence companies.
a. Operative efficiency: PCC will buy land for a better control of the natural resources, improving quality and efficiency; this will be a full integration of the first part in the value chain to the PCC business. Some operations will be given in outsourcing, such as retail distribution transportation (not to plant site); inventory will be reduced working with just-in-time policies; final product warehouse will be avoided, it will be replace for box trucks of the outsourcing company; the factory equipment is old (wash, peel, slice, fry, flavour, package), it will be updated and automated.
b. Energy efficiency: technological update will lead the improvement in the factory efficiency; other sources of improvement are tracking with related action to improve of each sector of the factory, and outsourcing of some resources. A bio-fuel power plant will be build beside the factory, fuelled by potato waste; the power plant will provide electricity and heating (water and space).
c. Labour efficiency: Higher training and outsourcing will provide higher labour efficiency.
During the preparation period, PCC will remain in similar conditions, just preparing for the next step. Some not at all profitable sector will be given up (distribution and warehouse), other will be acquired (land for potato grow) improving the PCC integration.
During the expansion period, PCC will develop different strategies. PCC will
PCC will develop two different business-level strategies:
- Increasing human capital:
§ Face on the new goals and challenges, human capital is a key development for the PCC sustainable development. New technologies, ideas and processes will be emerge; so, there is a gap between what managers (mainly in middle and first-line level) lead today and they should lead in the future.
§ Higher efficiency in management sector will be observed over the time; better and quick decision should be taken based on this instruction.
§ RRHH will develop a strategic alliance with academies specialized in management and leadership to provide the training. These academies and RRHH will provide the feedback assessing the process.
§ The training for lower level will be natural to the higher efficiency requirements at any level in the PCC operation.
§ RRHH will lead the training process; PCC expects that each manager could lead similar initiatives and improvements among their subordinates.
§ Part of the training will be to teach to managers how to develop a more effective leadership behaviour.
§ RRHH will organize the schedule training according to the priorities and critical path that it will be developed according to the strategic, tactical and operational plans.
§ RRHH will measure, monitor and control the efficiency of these programs.
§ RRHH will develop an assessment of the different courses given by different academies to assess them and select those that give better results to PCC.
- for vertical operational improvement:
§ measuring: the managers should integrate the different value chains, installing tracking system in agricultural machinery and transportation trucks; update the automation and control system in the factory (increasing measurement, control, quality control, etc)
§ overtaking gaps: integrate in the corporative enterprise system each link of the PCC value chain;
§ develop a department who deal with the day-a-day follow up of the whole value chain. PCC will work more oriented with just-in-time approach; so, PCC will need early deviation detection.
§ once the managers know the points for improvements, they should analyse the option for doing it (technically, economically). Find alternatives, pick the best.
§ Select the contract type (e.g.: design-bill-build, design-build, project management)
§ Select the people in the company who will manage, inspect, audit, etc the projects;
§ Pre-select/Select the company (e.g.: bidding process, RFP, RPQ); and
§ Select the way to pay (e.g.: association, internal financial, external financial)
§ Create for each link in the value chain the relationship with the integrated chain, assigning responsibilities and obligations for each sector as well as the integrated chain.
§ Create benchmarks, goals and targets to constantly improve the efficiency of each sector.
§ Organize the development of the projects installing the new technology and/or new procedures.
§ Organize the integration of people, resources and information between links in the value chain;
§ Organize who will deal with the supervision of the links in the value chain as well the whole value chain.
§ Organize the flow of information,
§ Follow up the development of the projects according to their milestones, deadlines, budgets, qualities, goals and targets.
§ Follow up the correct integration between the links of the value chain.
§ Control the correct people training, documentation, expenditures
§ Re-planning and/or re-organize when it is necessary.
PCC will have hard time dealing with the new strategy giving by the Task Force and approved by the Board of Directors. The role of the managers will be essential for the success of the ambitious plan. High skill levels will be required at any manager level. As summary:
Vision: PCC will have significant changes in some processes; to align the top managers to the new PCC vision will be essential to show the way to lower levels and to reach success in the process. Their vision will be set in long-term parameters. PCC will live uncertainty moments in its evolution; so, the temper, skills, behaviour of the top-manager will be essential for this process. This means that the Decision-Making, Conceptual and Human Relations Skills are essential for the top managers.
It will be essential for the top level to communicate with precision, encourage and motivate lower levels. The top managers should translate the mission in concrete directions to middle-levels; the clarity and transparency of that will be essential. These characteristics require high levels in Conceptual, Decision-Making and Human Relations Skills.
Technical skills will be not essential for top-managers, more that the common tools for this position.
Finally, most of the goals have specific time response, and high level Time Management skills will be essential.
Human Relations, Time Management and Decision Making skills will be essential for this manager level. They receive general direction and they should translate this guide to lower levels, planning, leading, organizing and controlling.
Conceptual skills will be very important for this manager level; PCC will have many changes and to take decision will be a day base action. Decision today for what will build and operative in years require abilities to think in the abstract.
Technical skills are important at this level because these managers should understand how the process is evolving and provide feedback to higher levels.
This level of manager should do focus in actions in mid-term periods.
Decision-Making, Human Relations, Time Management skills will be essential for this manager level. They receive input from middle level and they should translate in simple actions to supervisors and personnel.
They should do focus in short-term actions, for this reason Conceptual Skills are important but not essential.
Technical skills are essential at this level because these managers should understand how the process is evolving and provide feedback to higher levels.
All level, but for different outcomes, should have enough skills for the Twenty-First Century era. They should think broader in any issue (e.g.: trade, technology, challenges, and environment)