156
STRATEGIC MANAGEMENT OF AGRIBUSINESS ECONOMICS IN
THE CONTEXT OF MICROECONOMICS
A. Introduction:
Agribusiness economics is a complex agricultural activity. In the modern era,
agribusiness economic activities do not only include the farming process, but agribusiness
economic activities include all forms of activities related to the agricultural process from
upstream to downstream processes. According to Rahim1 agribusiness economy does not only
rely on the farming sector for farmers (food producing) and fishing and cultivation for
fishermen (food gathering and food prociding), agribusiness economic activities also include
agroindustry, marketing, and related supporting services, or in other words, the agribusiness
system has turned into an agribusiness management system with the application of
management functions or activities in each agribusiness subsystem from upstream to
downstream and its supporting sectors. Therefore, the above explanation can be concluded
that agribusiness economics is a very complex and wide-ranging activity.
The existence of agribusiness economy in Indonesia has enormous potential. Indonesia
is one of the countries that has a fertile land construction, even Indosia is dubbed as an
agrarian country because of its good agricultural products. Geographically Indonesia is also
located in an area with a tropical climate, this is also very helpful in developing agribusiness
activities. In addition, Indonesia also has a very large water area and is rich in marine
products so that Indonesia is also known as a maritime country. With these favorable natural
conditions, it is necessary for the people of Indonesia to continue to develop agribusiness
economic activities.
The huge economic potential of agribusiness is not accompanied by prospective
developments. The reality that occurs today, many farmers are starting to switch to other
professions due to the current erratic crop yields, even many farmers who have to experience
crop failure due to erratic weather. In addition, the management of agribusiness activities that
are still traditional is also a factor causing the decline of the agribusiness economy. This
condition will certainly be a big problem if it continues to be left because it is also related to
the availability of food needs of the Indonesian people. According to Efriyani2 it is estimated
that in 2030 the Indonesian population will reach 278 million people, this is certainly a
complex challenge in meeting food needs. Efforts to meet food needs include increasing
157
production and diversification. These two things are included in agribusiness activities. Thus,
agribusiness needs to be developed to support the development process and the realization of
food security. In human life, food is a basic need that must be fulfilled.
In the study of microeconomic theory, to improve agribusiness economic activities, it is
necessary to design the right strategy, one of which is through the application of strategic
management in a more effective agribusiness economy. David3 explains that strategic
management is the art and knowledge to formulate, implement and evaluate cross-functional
decisions that enable organizations to achieve their dreams. In addition, the benefits of
strategic management in agribusiness economics can help farmers continue to innovate to
adapt to the changing world. The changes that occur because through strategic management
we can identify the shortcomings and comparative advantages of a business with its
competitors.
B. Research Methods:
The research approach used in the preparation of this research is qualitative research,
which is a research procedure that produces descriptive data in the form of observed written
understanding.4 Because the research used fully emphasizes the collection of library data, this
type of research is called library research. In this research, there are two types of data sources,
namely:
1. Primary data sources, namely: Fred R. David, "Strategic Management", Michael A. Hitt
& R. Duane Ireland & Robert E. Hoslisson, "Strategic Management: Competitiveness and
Globalization", and Abd. Rahim and Diah Retno Dwi Mastuti, "Agribusiness
Management System".
2. Secondary data sources are data sources in the form of scientific works: books,
magazines, articles, opinions, papers, and sites that are relevant to this study, of course, as
support for the arguments that will be presented by the author.
Data collection steps are carried out through library research. In library research,
documentation techniques are used to find data about the things studied through published
written sources related to agribusiness strategy management in the context of
microeconomics.
The method used in analyzing data is done in two ways, namely: a) content analysis
method. Suharsimi Arikunto defines that the content analysis method (data analysis) is to
analyze the contents of the book which will produce a conclusion about the tendency of the
158
contents of the book and so on; b) descriptive method. Sanapiah Faisal defines the descriptive
method as "trying to describe or interpret what exists, either existing conditions or
relationships, growing opinions, ongoing processes and has developed". Meanwhile,
according to Ibnu Hajar, the descriptive method is "to provide a clear and accurate description
of the material or phenomenon under investigation". This method is used to describe and at
the same time analyze the current learning values.5 So, in this study, researchers used the
content analysis method to analyze the results of the study. To check the validity of the data
in this study, the researchers used theoretical triangulation.
C. Results and Discussion
1. Strategy Management
a. Definition of Strategy Management:
The word "management" comes from French. The language later adopted this word
from English as ménagement, which means the art of carrying out and organizing.6 In terms of
terms, Ricky W. Griffin defines management as a process of planning, organizing,
coordinating, and controlling resources to achieve goals effectively and efficiently. Effective
means that goals can be achieved in accordance with planning, while efficient means that the
tasks at hand are carried out correctly, organized, and according to schedule.
The word strategy is often used for military terms, but this term is not only used in the
military context, business also uses this term strategy. In a business context, strategy is a
unified, broad, and integrated plan that links the company's strategic advantages with
environmental challenges and that is designed to ensure that the company's main objectives
can be achieved through proper execution by the company.8 On the other hand, Porter9
defines strategy as "the creation of a unique and valuable position obtained by undertaking a
series of activities."
Meanwhile, according to Stoner, Freeman, and Gilbert, strategy is more directed at
managing the activities and operations of a particular business and seeks to determine the
approach that a business should use towards its market and implement this approach by
utilizing existing resources and under certain market conditions.10 Ansoff defines strategy as a
set of decision making rules for guidance of organizational behavior. If it is associated with
marketing, then strategy is defined as making decisions about the use of marketing factors that
159
can be controlled to achieve the objectives that can be achieved has been determined. The
main purpose is for the company to objectively see internal and external conditions, so that
the company can anticipate changes in the external environment. In this case, the functions of
management, consumers, distributors, and competitors can be clearly distinguished. So,
strategic planning is important to gain a competitive advantage and have products that match
consumer desires with optimal support from existing resources.
Michael A. Hitt & R. Duane Ireland & Robert E. Hoslisson12 define strategic
management as a process to help organizations identify what they want to achieve, and how
they should achieve valuable results. The role of strategic management is more widely
recognized today than ever before in a global economy that allows the free movement of
goods and services between countries, companies are constantly challenged to be more
competitive. Many of these companies that have increased their level of competition offer
products to consumers at a higher value, and this often results in above-average profits.
While Barney,13 explains, strategic management can be understood as the process of
selecting and implementing strategies. Meanwhile, strategy is a pattern of resource allocation
that allows organizations to maintain their performance. David14 also argues that strategic
management is the art and knowledge to formulate, implement and evaluate cross-functional
decisions that enable organizations to achieve their objectives. In addition, Hunger and
Wheelen15 define, strategic management is a series of managerial decisions and actions that
determine the performance of the company in the long term.
Thus, from the above definition, it can be seen that strategic management is a process to
assist organizations in formulating, implementing and evaluating managerial decisions and
actions makes the organization able to achieve its goals effectively.
b. Characteristics of Strategic Management:
According to Jatmiko, departing from the fact that strategic management covers the
management of the organization as a whole, strategic management tends to be a subject that
can be viewed from a variety of different perspectives, namely:
1) Strategic management improves organizational effectiveness. In every organization there
are two highly successful requirements, viz: efficiency and effectiveness. Strategic
management is primarily focused on creating effectiveness in relation to the fit between
the organization and its relevant environment. Creating an efficient organization is
relatively easier by devising and establishing methods, procedures, and systems to solve
160
day-to-day problems.
2) Strategic management is directed towards the long term. Strategic management addresses
organizational issues that have a future dimension, not the present or the past. Many
factors or variables influence long-term strategic planning or management, including:
market factors, human factors, and performance factors.
3) Strategic management is concerned with the decisions of top management or senior
managers. Although all employees are involved in implementing strategic decisions, most
strategic decisions come from senior management or top managers. However, top
managers may consult for input from employees before making strategic decisions.
4) Strategic management exists at every level of the organization. Strategy can be analyzed
at three levels of the organization: corporate-level strategy, business-level strategy, and
functional-level strategy.
5) Strategic management promotes a broad knowledge of the organization. The nature of
strategic decisions, which usually involve changing habits and behaviors, requires a
broader view or spectrum of cross-functional activities within an organization.
Meanwhile, the main components of strategic management in Suwarno's perspective17 are:
(1) analysis of the business environment necessary to detect opportunities and threats (2)
analysis of the company's profile to identify the company's strengths and weaknesses (3) the
business strategy required to achieve the company's objectives with due regard to (4) the
company's vision and mission. The relationship between the business environment and the
company profile gives an indication of what is possible. From here the company's position in
the market can be known. Meanwhile, the relationship between business environment
analysis, company profile, and the company's vision and mission points to what is desired by
the company's owners and management. Methodologically, business strategy consists of three
interrelated and uninterrupted processes, namely the formulation process (formulation), the
implementation process (execution), and the strategy monitoring (control) process.
c. Benefits of Strategic Management:
Pearce and Robinson state the benefits of Strategic Management are as follows:
1) Strategy formulation activities strengthen the company's ability to prevent problems from
arising.
2) Group-based strategic decisions will most likely be taken from the best available
161
alternative.
3) Employee involvement in strategy formulation increases their understanding of the
relationship between productivity and the rewards of each strategic plan, which in turn
increases their motivation.
4) Gaps and overlapping activities between individuals and groups will be reduced as
participation in strategy formulation clarifies role differences.
Hubeis and Najib19 state the benefits of Strategic Management are as follows:
1) Financially, strategic management will drive increases in production, sales and profits as
companies are encouraged to have high performance.
2) Strategic Management also provides non-financial benefits such as increasing awareness
of threats that come from outside the company's environment, allowing companies to
understand competitors' strategies,
It minimizes resistance to change within the organization, enables a clear link between
rewards and performance, and enables the company to see change as an opportunity.
According to Greenley in Fred R. David20 strategic management offers the following
benefits:
1) Enables recognizing, prioritizing, and taking advantage of opportunities
2) Provides an objective view of management issues
3) Provides a framework for improving coordination and control of activities
4) Minimize the influence of adverse conditions and changes
5) Enable key decisions that better support the stated goals
6) Enables more effective allocation of time and resources to recognize opportunities
7) Allows for fewer resources and less time to be devoted to correcting mistakes or ad hoc
decisions.
8) Create a framework for internal communication among staff
9) Helps integrate individual behavior into the total effort
10) Provides a basis for explanation of individual responsibility
11) Provides encouragement for forward thinking
12) Provide a cooperative, integrated, and enthusiastic approach to addressing issues and
opportunities.
162
13) Encourage an attitude that accepts change
14) Provides a quick level of discipline and formality to the management of a business
Meanwhile, Suwarsono21 explains that the function of strategic management according
to is as a means of communicating the company's goals and the path it intends to take to
achieve these goals to owners, executives, employees and other interested parties. Thus, these
various parties, especially those with direct interests, can better understand business
opportunities and challenges that the company is facing. They will have sufficient sensitivity
to the business environment and at the same time have sufficient readiness in case the
company decides to make internal changes.
Thus, conceptually the agribusiness system can be interpreted as all activities, starting
from the procurement and distribution of production facilities (inputs) to the marketing of
products produced by farming and agro-industry, which are interrelated with each other. Thus
the agribusiness system is a system consisting of various subsystems, namely: Upstream
Agribusiness / Agroindustry Subsystem, Cultivation / Farming Subsystem, Downstream
Agribusiness / Agroindustry Subsystem includes Processing and Marketing (Commerce) of
agricultural and processed products, Subsystem of agribusiness support services
(institutional). Based on the view of agribusiness as a system, it can be clearly seen that these
subsystems cannot stand alone, but are interrelated with one another. The upstream
agribusiness subsystem requires feedback from the farming subsystem in order to produce
production facilities in accordance with the needs of agricultural cultivation. Conversely, the
successful operation of the farming subsystem depends on the means of production produced
by the downstream agribusiness subsystem. Furthermore, the downstream agribusiness
production process depends on the supply of primary commodities produced by the farming
subsystem. The supporting services subsystem, as already stated, depends on the success of
the other three subsystems. If the farming subsystem or downstream agribusiness fails, while
some of its capital is borrowed, financial institutions and insurance will also suffer losses.24
The characteristics of agribusiness are that it is a complex and vertically structured
industry, each component is separately independent but in a broad sense interdependent to
form a commodity system. Good decision-making therefore requires an understanding of the
overall structure of the industry and must be able to understand the central points of the
various relevant parts of the various parts of the structural system.25
Based on the above, "agribusiness" can be broadly viewed as an agriculture-based
"business". Structurally, this business venture consists of three interdependent sectors, namely
163
(i) the input sector, which is handled by various upstream industries that supply input
materials to the agricultural sector, (ii) the production (farm) sector, which is handled by
various types of farming businesses that produce bio-economic products, and (iii) the output
sector, which is handled by various downstream industries that convert farming products into
preserved/processed consumer products and which are used to produce products for
consumption channel these products through the marketing system to consumers.26
Thus "agribusiness" encompasses all sectors involved in procuring farm inputs;
engaging in bio-economic production processes; handling the processing of farm outputs;
distributing, and selling these processed products to consumers. In relation to commodities in
a region, most economic activities can be undertaken by farmers and rural dwellers with
varying economies of scale.
d. Agribusiness Strategy Management:
In developing an agribusiness business, a mature management is also needed, because
agribusiness activities are not only limited to agricultural cultivation, but all forms of
activities related to agriculture itself, starting from the procurement process of materials and
equipment related to agriculture, the harvest process, and the distribution of the harvest. So to
organize these complex activities requires a good management as well.
From the explanation above, agribusiness management is a process of planning,
organizing, coordinating, to achieve goals effectively and efficiently in the development of
agriculture-based businesses starting from the process of procuring materials, managing, to
the process of distributing crops. Planning in agribusiness development is a process that
involves efforts made to anticipate future trends and determine the right strategies and tactics
to realize the targets and goals of the pesantren. Organizing is a process that involves how the
strategies and tactics that have been formulated in planning are designed in an appropriate and
resilient organizational structure, conducive organizational system and environment, and can
ensure that all parties in the organization can work effectively and efficiently to achieve
organizational goals. Implementation is the process of implementing the program so that it
can be carried out by all parties in the organization and the process of motivating so that all
parties can carry out their responsibilities with full awareness and high productivity.
Supervision is a process carried out to ensure that the entire series of activities that have been
planned, organized, and implemented can run in accordance with the expected targets despite
various changes in the business world environment faced. Evaluation emphasizes efforts to
164
assess the process of implementing the plan, regarding whether there are any problems
whether or not there are deviations, and whether or not the goals set based on the plans that
have been made are achieved.
2. Agribusiness Strategy Management Tasks and Processes:
Strategic management tasks Peter Drucker states the main task of strategic management
is to think through the mission of a business:
that is, asking the question, "What is our business?" this question leads to setting objectives,
developing strategies, and making decisions now for future results. this must be done clearly
by a part of the organization that can see the business as a whole; that can allocate human
resources and money to key results.
According to Pearce and Robinson, strategic management consists of nine important
tasks, among others:
a. Formulate the company's mission, including a broad statement of the company's purpose,
philosophy, and goals.
b. Conduct an analysis that reflects the company's internal conditions and capabilities.
c. Assess the company's external environment, including competitive factors and other
general contextual factors.
d. Analyze the options a company has by matching its resources with the external
environment.
e. Identify the most profitable options by evaluating each option based on the company's
mission.
f. Select a set of long-term goals and key strategies that will result in those most profitable
options.
g. Develop annual objectives and short-term strategies that are in line with the long-term
objectives and key strategies that have been determined.
h. Implementing the chosen strategy through the allocation of budgeted resources, where
adjustments between work tasks, people, structure, technology, and reward systems are
emphasized.
i. Evaluate the success of strategic processes to inform future decision-making.
As indicated by these nine tasks, strategic management includes planning, directing,
organizing, and controlling decisions and actions related to corporate strategy. Strategy for
managers is a large-scale, future-oriented plan to interact with competitive conditions to
165
achieve company goals. Strategy is the company's game plan. Although it does not detail all
future utilization (human, financial, and material), the plan provides a framework for
managerial decisions. Strategy reflects the firm's knowledge of how, when and where it will
compete, with whom it should compete and for what purpose it should compete.
While the process of the strategic management process from the perspective of Fred R.
David consists of several stages, namely as follows:
a. Strategy formulation. This stage involves developing a business mission statement,
recognizing the company's external opportunities and threats, establishing internal
strengths and weaknesses, setting long-term objectives, generating alternative strategies,
and selecting a particular strategy to implement. Strategy formulation issues include
formulating what new businesses to enter, what businesses to discontinue, how to allocate
resources, whether to expand operations or diversify, whether to enter international
markets, whether to merge or form joint ventures, and how to avoid takeovers of
competing companies.
b. Strategy implementation. This stage requires the company to set annual objectives, equip
it with policies, motivate employees, and allocate resources so that the formulated
strategy can be implemented; strategy implementation includes developing a culture that
supports the strategy, creating an effective organizational structure, changing the
direction of marketing efforts, preparing budgets, developing and utilizing information
systems, and linking employee compensation to organizational performance.
c. Strategy evaluation. This is the final stage in strategic management. Managers need to
know when a particular strategy is not working well; strategy evaluation mainly means
trying to obtain this information. All strategies can be modified in the future because
external and internal factors are always changing. The three fundamental activities for
evaluating strategies are: 1) reviewing the internal and external factors on which the
current strategy is based; 2) measuring performance; and 3) taking corrective action.
In addition, according to J. David Hunger & Thomas L. Wheelen,30 the strategic
management process includes four basic elements, namely:
a. Environmental observation. Environmental observation is divided into two, namely
external analysis and internal analysis. The external environment consists of variables
that are outside the organization and are not specifically within the short-term control of
top management. Meanwhile, the internal environment consists of several variables that
exist within the organization but are usually within the short-term control of top
166
management.
b. Strategy formulation. Strategy formulation is the development of long-term plans for the
effective management of environmental opportunities and threats, seen from the strengths
and weaknesses of the company. Strategy formulation includes determining the
company's mission, determining achievable goals, developing strategies, and setting
policy guidelines.
c. Strategy Implementation. Strategy implementation is the process by which management
puts strategies and policies into action through the development of programs, budgets,
and procedures...
d. Evaluation and control. Evaluation and control is the process through which company
activities and performance results are monitored and actual performance is compared
with desired performance.
According to Pearce and Robinson, strategic issues have the following dimensions:
a. Strategic Issues Require Top Management Decisions Since strategic decisions cover
various areas of a company's operations, they require top management involvement.
b. Strategic Issues Require Large Amounts of Company Resources
c. Strategic Issues Often Affect the Long-Term Prosperity of the Company. Strategic
decisions usually commit the company to a long term, generally five years.
d. Future-Oriented Strategic Issues. Strategic decisions are made based on what managers
predict, not what they know.
e. Strategic Issues Usually Have Multifunctional or Multibusiness Consequences. Strategic
decisions have complex implications for almost all areas of the company.
f. Strategic Issues Require Consideration of the Company's External Environment. All
business enterprises operate in an open system.
D. Conclusions:
Strategic management is a process to assist organizations in formulating, implementing
and evaluating managerial decisions and actions that make the organization able to achieve
goals effectively. Methodologically, strategic management consists of three interrelated and
uninterrupted processes, namely the formulation process (formulation), the implementation
process (execution), and the strategy monitoring process (control). The benefits of strategic
167
management in general are as a means of communicating company goals and the path that
will be taken to achieve these goals. Thus, various parties, especially those with direct
interests, can better understand the business opportunities and challenges faced. They will
have sufficient sensitivity to the business environment and at the same time have sufficient
readiness if the company decides to make internal changes.
Agribusiness is an activity that includes all sectors involved in the procurement of farm
inputs; involved in the bio-economic production process; handling the processing of farm
products; distribution, and sale of these processing products to consumers. Agribusiness
strategy is a process of planning, organizing, coordinating, to achieve goals effectively and
efficiently in the development of agriculture-based businesses ranging from the process of
procuring materials, managing, to the process of distributing crops. The basic elements of the
strategic management process include environmental observation, strategy formulation,
strategy implementation, and evaluation and control.
The existence of agribusiness economy in Indonesia has enormous potential. Indonesia
is one of the countries that has a fertile land construction, even Indosia is dubbed as an
agrarian country because of its good agricultural products. Geographically Indonesia is also
located in an area with a tropical climate, this is also very helpful in developing agribusiness
activities. In addition, Indonesia also has a very large water area and is rich in marine
products so that Indonesia is also known as a maritime country. With these favorable natural
conditions, it is necessary for the people of Indonesia to continue to develop agribusiness
economic activities.
The huge economic potential of agribusiness is not accompanied by prospective
developments. The reality that occurs today, many farmers are starting to switch to other
professions due to the current erratic crop yields, even many farmers who have to experience
crop failure due to erratic weather. In addition, the management of agribusiness activities that
are still traditional is also a factor causing the decline of the agribusiness economy. This
condition will certainly be a big problem if it continues to be left because it is also related to
the availability of food needs of the Indonesian people. According to Efriyani2 it is estimated
that in 2030 the Indonesian population will reach 278 million people, this is certainly a
complex challenge in meeting food needs. Efforts to meet food needs include increasing
production and diversification. These two things are included in agribusiness activities. Thus,
agribusiness needs to be developed to support the development process and the realization of
food security. In human life, food is a basic need that must be fulfilled.
In the study of microeconomic theory, to improve agribusiness economic activities, it is
168
necessary to design the right strategy, one of which is through the application of strategic
management in a more effective agribusiness economy. David3 explains that strategic
management is the art and knowledge to formulate, implement and evaluate cross-functional
decisions that enable organizations to achieve their dreams. In addition, the benefits of
strategic management in agribusiness economics can help farmers continue to innovate to
adapt to the changing world. The changes that occur because through strategic management
we can identify the shortcomings and comparative advantages of a business with its
competitors.
E. Research Methods:
The research approach used in the preparation of this research is qualitative research,
which is a research procedure that produces descriptive data in the form of observed written
understanding.4 Because the research used fully emphasizes the collection of library data, this
type of research is called library research. In this research, there are two types of data sources,
namely:
1. Primary data sources, namely: Fred R. David, "Strategic Management", Michael A. Hitt
& R. Duane Ireland & Robert E. Hoslisson, "Strategic Management: Competitiveness and
Globalization", and Abd. Rahim and Diah Retno Dwi Mastuti, "Agribusiness
Management System".
2. Secondary data sources are data sources in the form of scientific works: books,
magazines, articles, opinions, papers, and sites that are relevant to this study, of course, as
support for the arguments that will be presented by the author.
Data collection steps are carried out through library research. In library research,
documentation techniques are used to find data about the things studied through published
written sources related to agribusiness strategy management in the context of
microeconomics.
The method used in analyzing data is done in two ways, namely: a) content analysis
method. Suharsimi Arikunto defines that the content analysis method (data analysis) is to
analyze the contents of the book which will produce a conclusion about the tendency of the
contents of the book and so on; b) descriptive method. Sanapiah Faisal defines the descriptive
method as "trying to describe or interpret what exists, either existing conditions or
relationships, growing opinions, ongoing processes and has developed". Meanwhile,
according to Ibnu Hajar, the descriptive method is "to provide a clear and accurate description
169
of the material or phenomenon under investigation". This method is used to describe and at
the same time analyze the current learning values.5 So, in this study, researchers used the
content analysis method to analyze the results of the study. To check the validity of the data
in this study, the researchers used theoretical triangulation.
F. Results and Discussion
1. Strategy Management
a. Definition of Strategy Management:
The word "management" comes from French. The language later adopted this word
from English as ménagement, which means the art of carrying out and organizing.6 In terms of
terms, Ricky W. Griffin defines management as a process of planning, organizing,
coordinating, and controlling resources to achieve goals effectively and efficiently. Effective
means that goals can be achieved in accordance with planning, while efficient means that the
tasks at hand are carried out correctly, organized, and according to schedule.
The word strategy is often used for military terms, but this term is not only used in the
military context, business also uses this term strategy. In a business context, strategy is a
unified, broad, and integrated plan that links the company's strategic advantages with
environmental challenges and that is designed to ensure that the company's main objectives
can be achieved through proper execution by the company.8 On the other hand, Porter9
defines strategy as "the creation of a unique and valuable position obtained by undertaking a
series of activities."
Meanwhile, according to Stoner, Freeman, and Gilbert, strategy is more directed at
managing the activities and operations of a particular business and seeks to determine the
approach that a business should use towards its market and implement this approach by
utilizing existing resources and under certain market conditions.10 Ansoff defines strategy as a
set of decision making rules for guidance of organizational behavior. If it is associated with
marketing, then strategy is defined as making decisions about the use of marketing factors that
can be controlled to achieve the objectives that can be achieved has been determined. The
main purpose is for the company to objectively see internal and external conditions, so that
the company can anticipate changes in the external environment. In this case, the functions of
management, consumers, distributors, and competitors can be clearly distinguished. So,
170
strategic planning is important to gain a competitive advantage and have products that match
consumer desires with optimal support from existing resources.
Michael A. Hitt & R. Duane Ireland & Robert E. Hoslisson12 define strategic
management as a process to help organizations identify what they want to achieve, and how
they should achieve valuable results. The role of strategic management is more widely
recognized today than ever before in a global economy that allows the free movement of
goods and services between countries, companies are constantly challenged to be more
competitive. Many of these companies that have increased their level of competition offer
products to consumers at a higher value, and this often results in above-average profits.
While Barney,13 explains, strategic management can be understood as the process of
selecting and implementing strategies. Meanwhile, strategy is a pattern of resource allocation
that allows organizations to maintain their performance. David14 also argues that strategic
management is the art and knowledge to formulate, implement and evaluate cross-functional
decisions that enable organizations to achieve their objectives. In addition, Hunger and
Wheelen15 define, strategic management is a series of managerial decisions and actions that
determine the performance of the company in the long term.
Thus, from the above definition, it can be seen that strategic management is a process to
assist organizations in formulating, implementing and evaluating managerial decisions and
actions makes the organization able to achieve its goals effectively.
b. Characteristics of Strategic Management:
According to Jatmiko, departing from the fact that strategic management covers the
management of the organization as a whole, strategic management tends to be a subject that
can be viewed from a variety of different perspectives, namely:
1) Strategic management improves organizational effectiveness. In every organization there
are two highly successful requirements, viz: efficiency and effectiveness. Strategic
management is primarily focused on creating effectiveness in relation to the fit between
the organization and its relevant environment. Creating an efficient organization is
relatively easier by devising and establishing methods, procedures, and systems to solve
day-to-day problems.
2) Strategic management is directed towards the long term. Strategic management addresses
organizational issues that have a future dimension, not the present or the past. Many
factors or variables influence long-term strategic planning or management, including:
171
market factors, human factors, and performance factors.
3) Strategic management is concerned with the decisions of top management or senior
managers. Although all employees are involved in implementing strategic decisions, most
strategic decisions come from senior management or top managers. However, top
managers may consult for input from employees before making strategic decisions.
4) Strategic management exists at every level of the organization. Strategy can be analyzed
at three levels of the organization: corporate-level strategy, business-level strategy, and
functional-level strategy.
5) Strategic management promotes a broad knowledge of the organization. The nature of
strategic decisions, which usually involve changing habits and behaviors, requires a
broader view or spectrum of cross-functional activities within an organization.
Meanwhile, the main components of strategic management in Suwarno's perspective17 are:
(1) analysis of the business environment necessary to detect opportunities and threats (2)
analysis of the company's profile to identify the company's strengths and weaknesses (3) the
business strategy required to achieve the company's objectives with due regard to (4) the
company's vision and mission. The relationship between the business environment and the
company profile gives an indication of what is possible. From here the company's position in
the market can be known. Meanwhile, the relationship between business environment
analysis, company profile, and the company's vision and mission points to what is desired by
the company's owners and management. Methodologically, business strategy consists of three
interrelated and uninterrupted processes, namely the formulation process (formulation), the
implementation process (execution), and the strategy monitoring (control) process.
c. Benefits of Strategic Management:
Pearce and Robinson state the benefits of Strategic Management are as follows:
1) Strategy formulation activities strengthen the company's ability to prevent problems from
arising.
2) Group-based strategic decisions will most likely be taken from the best available
alternative.
3) Employee involvement in strategy formulation increases their understanding of the
relationship between productivity and the rewards of each strategic plan, which in turn
increases their motivation.
172
4) Gaps and overlapping activities between individuals and groups will be reduced as
participation in strategy formulation clarifies role differences.
Hubeis and Najib19 state the benefits of Strategic Management are as follows:
3) Financially, strategic management will drive increases in production, sales and profits as
companies are encouraged to have high performance.
4) Strategic Management also provides non-financial benefits such as increasing awareness
of threats that come from outside the company's environment, allowing companies to
understand competitors' strategies,
It minimizes resistance to change within the organization, enables a clear link between
rewards and performance, and enables the company to see change as an opportunity.
According to Greenley in Fred R. David20 strategic management offers the following
benefits:
1) Enables recognizing, prioritizing, and taking advantage of opportunities
2) Provides an objective view of management issues
3) Provides a framework for improving coordination and control of activities
4) Minimize the influence of adverse conditions and changes
5) Enable key decisions that better support the stated goals
6) Enables more effective allocation of time and resources to recognize opportunities
7) Allows for fewer resources and less time to be devoted to correcting mistakes or ad hoc
decisions.
8) Create a framework for internal communication among staff
9) Helps integrate individual behavior into the total effort
10) Provides a basis for explanation of individual responsibility
11) Provides encouragement for forward thinking
12) Provide a cooperative, integrated, and enthusiastic approach to addressing issues and
opportunities.
13) Encourage an attitude that accepts change
14) Provides a quick level of discipline and formality to the management of a business
Meanwhile, Suwarsono21 explains that the function of strategic management according
to is as a means of communicating the company's goals and the path it intends to take to
173
achieve these goals to owners, executives, employees and other interested parties. Thus, these
various parties, especially those with direct interests, can better understand business
opportunities and challenges that the company is facing. They will have sufficient sensitivity
to the business environment and at the same time have sufficient readiness in case the
company decides to make internal changes.
Thus, conceptually the agribusiness system can be interpreted as all activities, starting
from the procurement and distribution of production facilities (inputs) to the marketing of
products produced by farming and agro-industry, which are interrelated with each other. Thus
the agribusiness system is a system consisting of various subsystems, namely: Upstream
Agribusiness / Agroindustry Subsystem, Cultivation / Farming Subsystem, Downstream
Agribusiness / Agroindustry Subsystem includes Processing and Marketing (Commerce) of
agricultural and processed products, Subsystem of agribusiness support services
(institutional). Based on the view of agribusiness as a system, it can be clearly seen that these
subsystems cannot stand alone, but are interrelated with one another. The upstream
agribusiness subsystem requires feedback from the farming subsystem in order to produce
production facilities in accordance with the needs of agricultural cultivation. Conversely, the
successful operation of the farming subsystem depends on the means of production produced
by the downstream agribusiness subsystem. Furthermore, the downstream agribusiness
production process depends on the supply of primary commodities produced by the farming
subsystem. The supporting services subsystem, as already stated, depends on the success of
the other three subsystems. If the farming subsystem or downstream agribusiness fails, while
some of its capital is borrowed, financial institutions and insurance will also suffer losses.24
The characteristics of agribusiness are that it is a complex and vertically structured
industry, each component is separately independent but in a broad sense interdependent to
form a commodity system. Good decision-making therefore requires an understanding of the
overall structure of the industry and must be able to understand the central points of the
various relevant parts of the various parts of the structural system.25
Based on the above, "agribusiness" can be broadly viewed as an agriculture-based
"business". Structurally, this business venture consists of three interdependent sectors, namely
(i) the input sector, which is handled by various upstream industries that supply input
materials to the agricultural sector, (ii) the production (farm) sector, which is handled by
various types of farming businesses that produce bio-economic products, and (iii) the output
sector, which is handled by various downstream industries that convert farming products into
174
preserved/processed consumer products and which are used to produce products for
consumption channel these products through the marketing system to consumers.26
Thus "agribusiness" encompasses all sectors involved in procuring farm inputs;
engaging in bio-economic production processes; handling the processing of farm outputs;
distributing, and selling these processed products to consumers. In relation to commodities in
a region, most economic activities can be undertaken by farmers and rural dwellers with
varying economies of scale.
d. Agribusiness Strategy Management:
In developing an agribusiness business, a mature management is also needed, because
agribusiness activities are not only limited to agricultural cultivation, but all forms of
activities related to agriculture itself, starting from the procurement process of materials and
equipment related to agriculture, the harvest process, and the distribution of the harvest. So to
organize these complex activities requires a good management as well.
From the explanation above, agribusiness management is a process of planning,
organizing, coordinating, to achieve goals effectively and efficiently in the development of
agriculture-based businesses starting from the process of procuring materials, managing, to
the process of distributing crops. Planning in agribusiness development is a process that
involves efforts made to anticipate future trends and determine the right strategies and tactics
to realize the targets and goals of the pesantren. Organizing is a process that involves how the
strategies and tactics that have been formulated in planning are designed in an appropriate and
resilient organizational structure, conducive organizational system and environment, and can
ensure that all parties in the organization can work effectively and efficiently to achieve
organizational goals. Implementation is the process of implementing the program so that it
can be carried out by all parties in the organization and the process of motivating so that all
parties can carry out their responsibilities with full awareness and high productivity.
Supervision is a process carried out to ensure that the entire series of activities that have been
planned, organized, and implemented can run in accordance with the expected targets despite
various changes in the business world environment faced. Evaluation emphasizes efforts to
assess the process of implementing the plan, regarding whether there are any problems
whether or not there are deviations, and whether or not the goals set based on the plans that
have been made are achieved.
175
2. Agribusiness Strategy Management Tasks and Processes:
Strategic management tasks Peter Drucker states the main task of strategic management
is to think through the mission of a business:
that is, asking the question, "What is our business?" this question leads to setting objectives,
developing strategies, and making decisions now for future results. this must be done clearly
by a part of the organization that can see the business as a whole; that can allocate human
resources and money to key results.
According to Pearce and Robinson, strategic management consists of nine important
tasks, among others:
a. Formulate the company's mission, including a broad statement of the company's purpose,
philosophy, and goals.
b. Conduct an analysis that reflects the company's internal conditions and capabilities.
c. Assess the company's external environment, including competitive factors and other
general contextual factors.
d. Analyze the options a company has by matching its resources with the external
environment.
e. Identify the most profitable options by evaluating each option based on the company's
mission.
f. Select a set of long-term goals and key strategies that will result in those most profitable
options.
g. Develop annual objectives and short-term strategies that are in line with the long-term
objectives and key strategies that have been determined.
h. Implementing the chosen strategy through the allocation of budgeted resources, where
adjustments between work tasks, people, structure, technology, and reward systems are
emphasized.
i. Evaluate the success of strategic processes to inform future decision-making.
As indicated by these nine tasks, strategic management includes planning, directing,
organizing, and controlling decisions and actions related to corporate strategy. Strategy for
managers is a large-scale, future-oriented plan to interact with competitive conditions to
achieve company goals. Strategy is the company's game plan. Although it does not detail all
future utilization (human, financial, and material), the plan provides a framework for
managerial decisions. Strategy reflects the firm's knowledge of how, when and where it will
compete, with whom it should compete and for what purpose it should compete.
176
While the process of the strategic management process from the perspective of Fred R.
David consists of several stages, namely as follows:
a. Strategy formulation. This stage involves developing a business mission statement,
recognizing the company's external opportunities and threats, establishing internal
strengths and weaknesses, setting long-term objectives, generating alternative strategies,
and selecting a particular strategy to implement. Strategy formulation issues include
formulating what new businesses to enter, what businesses to discontinue, how to allocate
resources, whether to expand operations or diversify, whether to enter international
markets, whether to merge or form joint ventures, and how to avoid takeovers of
competing companies.
b. Strategy implementation. This stage requires the company to set annual objectives, equip
it with policies, motivate employees, and allocate resources so that the formulated
strategy can be implemented; strategy implementation includes developing a culture that
supports the strategy, creating an effective organizational structure, changing the
direction of marketing efforts, preparing budgets, developing and utilizing information
systems, and linking employee compensation to organizational performance.
c. Strategy evaluation. This is the final stage in strategic management. Managers need to
know when a particular strategy is not working well; strategy evaluation mainly means
trying to obtain this information. All strategies can be modified in the future because
external and internal factors are always changing. The three fundamental activities for
evaluating strategies are: 1) reviewing the internal and external factors on which the
current strategy is based; 2) measuring performance; and 3) taking corrective action.
In addition, according to J. David Hunger & Thomas L. Wheelen,30 the strategic
management process includes four basic elements, namely:
a. Environmental observation. Environmental observation is divided into two, namely
external analysis and internal analysis. The external environment consists of variables
that are outside the organization and are not specifically within the short-term control of
top management. Meanwhile, the internal environment consists of several variables that
exist within the organization but are usually within the short-term control of top
management.
b. Strategy formulation. Strategy formulation is the development of long-term plans for the
effective management of environmental opportunities and threats, seen from the strengths
and weaknesses of the company. Strategy formulation includes determining the
177
company's mission, determining achievable goals, developing strategies, and setting
policy guidelines.
c. Strategy Implementation. Strategy implementation is the process by which management
puts strategies and policies into action through the development of programs, budgets,
and procedures...
d. Evaluation and control. Evaluation and control is the process through which company
activities and performance results are monitored and actual performance is compared
with desired performance.
According to Pearce and Robinson, strategic issues have the following dimensions:
a. Strategic Issues Require Top Management Decisions Since strategic decisions cover
various areas of a company's operations, they require top management involvement.
b. Strategic Issues Require Large Amounts of Company Resources
c. Strategic Issues Often Affect the Long-Term Prosperity of the Company. Strategic
decisions usually commit the company to a long term, generally five years.
d. Future-Oriented Strategic Issues. Strategic decisions are made based on what managers
predict, not what they know.
e. Strategic Issues Usually Have Multifunctional or Multibusiness Consequences. Strategic
decisions have complex implications for almost all areas of the company.
f. Strategic Issues Require Consideration of the Company's External Environment. All
business enterprises operate in an open system.
G. Conclusions:
Strategic management is a process to assist organizations in formulating, implementing
and evaluating managerial decisions and actions that make the organization able to achieve
goals effectively. Methodologically, strategic management consists of three interrelated and
uninterrupted processes, namely the formulation process (formulation), the implementation
process (execution), and the strategy monitoring process (control). The benefits of strategic
management in general are as a means of communicating company goals and the path that
will be taken to achieve these goals. Thus, various parties, especially those with direct
interests, can better understand the business opportunities and challenges faced. They will
have sufficient sensitivity to the business environment and at the same time have sufficient
178
readiness if the company decides to make internal changes.
Agribusiness is an activity that includes all sectors involved in the procurement of farm
inputs; involved in the bio-economic production process; handling the processing of farm
products; distribution, and sale of these processing products to consumers. Agribusiness
strategy is a process of planning, organizing, coordinating, to achieve goals effectively and
efficiently in the development of agriculture-based businesses ranging from the process of
procuring materials, managing, to the process of distributing crops. The basic elements of the
strategic management process include environmental observation, strategy formulation,
strategy implementation, and evaluation and control.
The existence of agribusiness economy in Indonesia has enormous potential. Indonesia
is one of the countries that has a fertile land construction, even Indosia is dubbed as an
agrarian country because of its good agricultural products. Geographically Indonesia is also
located in an area with a tropical climate, this is also very helpful in developing agribusiness
activities. In addition, Indonesia also has a very large water area and is rich in marine
products so that Indonesia is also known as a maritime country. With these favorable natural
conditions, it is necessary for the people of Indonesia to continue to develop agribusiness
economic activities.
The huge economic potential of agribusiness is not accompanied by prospective
developments. The reality that occurs today, many farmers are starting to switch to other
professions due to the current erratic crop yields, even many farmers who have to experience
crop failure due to erratic weather. In addition, the management of agribusiness activities that
are still traditional is also a factor causing the decline of the agribusiness economy. This
condition will certainly be a big problem if it continues to be left because it is also related to
the availability of food needs of the Indonesian people. According to Efriyani2 it is estimated
that in 2030 the Indonesian population will reach 278 million people, this is certainly a
complex challenge in meeting food needs. Efforts to meet food needs include increasing
production and diversification. These two things are included in agribusiness activities. Thus,
agribusiness needs to be developed to support the development process and the realization of
food security. In human life, food is a basic need that must be fulfilled.
In the study of microeconomic theory, to improve agribusiness economic activities, it is
necessary to design the right strategy, one of which is through the application of strategic
management in a more effective agribusiness economy. David3 explains that strategic
management is the art and knowledge to formulate, implement and evaluate cross-functional
decisions that enable organizations to achieve their dreams. In addition, the benefits of
179
strategic management in agribusiness economics can help farmers continue to innovate to
adapt to the changing world. The changes that occur because through strategic management
we can identify the shortcomings and comparative advantages of a business with its
competitors.
H. Research Methods:
The research approach used in the preparation of this research is qualitative research,
which is a research procedure that produces descriptive data in the form of observed written
understanding.4 Because the research used fully emphasizes the collection of library data, this
type of research is called library research. In this research, there are two types of data sources,
namely:
1. Primary data sources, namely: Fred R. David, "Strategic Management", Michael A. Hitt
& R. Duane Ireland & Robert E. Hoslisson, "Strategic Management: Competitiveness and
Globalization", and Abd. Rahim and Diah Retno Dwi Mastuti, "Agribusiness
Management System".
2. Secondary data sources are data sources in the form of scientific works: books,
magazines, articles, opinions, papers, and sites that are relevant to this study, of course, as
support for the arguments that will be presented by the author.
Data collection steps are carried out through library research. In library research,
documentation techniques are used to find data about the things studied through published
written sources related to agribusiness strategy management in the context of
microeconomics.
The method used in analyzing data is done in two ways, namely: a) content analysis
method. Suharsimi Arikunto defines that the content analysis method (data analysis) is to
analyze the contents of the book which will produce a conclusion about the tendency of the
contents of the book and so on; b) descriptive method. Sanapiah Faisal defines the descriptive
method as "trying to describe or interpret what exists, either existing conditions or
relationships, growing opinions, ongoing processes and has developed". Meanwhile,
according to Ibnu Hajar, the descriptive method is "to provide a clear and accurate description
of the material or phenomenon under investigation". This method is used to describe and at
the same time analyze the current learning values.5 So, in this study, researchers used the
content analysis method to analyze the results of the study. To check the validity of the data
in this study, the researchers used theoretical triangulation.
180
I. Results and Discussion
1. Strategy Management
a. Definition of Strategy Management:
The word "management" comes from French. The language later adopted this word
from English as ménagement, which means the art of carrying out and organizing.6 In terms of
terms, Ricky W. Griffin defines management as a process of planning, organizing,
coordinating, and controlling resources to achieve goals effectively and efficiently. Effective
means that goals can be achieved in accordance with planning, while efficient means that the
tasks at hand are carried out correctly, organized, and according to schedule.
The word strategy is often used for military terms, but this term is not only used in the
military context, business also uses this term strategy. In a business context, strategy is a
unified, broad, and integrated plan that links the company's strategic advantages with
environmental challenges and that is designed to ensure that the company's main objectives
can be achieved through proper execution by the company.8 On the other hand, Porter9
defines strategy as "the creation of a unique and valuable position obtained by undertaking a
series of activities."
Meanwhile, according to Stoner, Freeman, and Gilbert, strategy is more directed at
managing the activities and operations of a particular business and seeks to determine the
approach that a business should use towards its market and implement this approach by
utilizing existing resources and under certain market conditions.10 Ansoff defines strategy as a
set of decision making rules for guidance of organizational behavior. If it is associated with
marketing, then strategy is defined as making decisions about the use of marketing factors that
can be controlled to achieve the objectives that can be achieved has been determined. The
main purpose is for the company to objectively see internal and external conditions, so that
the company can anticipate changes in the external environment. In this case, the functions of
management, consumers, distributors, and competitors can be clearly distinguished. So,
strategic planning is important to gain a competitive advantage and have products that match
consumer desires with optimal support from existing resources.
Michael A. Hitt & R. Duane Ireland & Robert E. Hoslisson12 define strategic
management as a process to help organizations identify what they want to achieve, and how
they should achieve valuable results. The role of strategic management is more widely
181
recognized today than ever before in a global economy that allows the free movement of
goods and services between countries, companies are constantly challenged to be more
competitive. Many of these companies that have increased their level of competition offer
products to consumers at a higher value, and this often results in above-average profits.
While Barney,13 explains, strategic management can be understood as the process of
selecting and implementing strategies. Meanwhile, strategy is a pattern of resource allocation
that allows organizations to maintain their performance. David14 also argues that strategic
management is the art and knowledge to formulate, implement and evaluate cross-functional
decisions that enable organizations to achieve their objectives. In addition, Hunger and
Wheelen15 define, strategic management is a series of managerial decisions and actions that
determine the performance of the company in the long term.
Thus, from the above definition, it can be seen that strategic management is a process to
assist organizations in formulating, implementing and evaluating managerial decisions and
actions makes the organization able to achieve its goals effectively.
b. Characteristics of Strategic Management:
According to Jatmiko, departing from the fact that strategic management covers the
management of the organization as a whole, strategic management tends to be a subject that
can be viewed from a variety of different perspectives, namely:
1) Strategic management improves organizational effectiveness. In every organization there
are two highly successful requirements, viz: efficiency and effectiveness. Strategic
management is primarily focused on creating effectiveness in relation to the fit between
the organization and its relevant environment. Creating an efficient organization is
relatively easier by devising and establishing methods, procedures, and systems to solve
day-to-day problems.
2) Strategic management is directed towards the long term. Strategic management addresses
organizational issues that have a future dimension, not the present or the past. Many
factors or variables influence long-term strategic planning or management, including:
market factors, human factors, and performance factors.
3) Strategic management is concerned with the decisions of top management or senior
managers. Although all employees are involved in implementing strategic decisions, most
strategic decisions come from senior management or top managers. However, top
managers may consult for input from employees before making strategic decisions.
182
4) Strategic management exists at every level of the organization. Strategy can be analyzed
at three levels of the organization: corporate-level strategy, business-level strategy, and
functional-level strategy.
5) Strategic management promotes a broad knowledge of the organization. The nature of
strategic decisions, which usually involve changing habits and behaviors, requires a
broader view or spectrum of cross-functional activities within an organization.
Meanwhile, the main components of strategic management in Suwarno's perspective17 are:
(1) analysis of the business environment necessary to detect opportunities and threats (2)
analysis of the company's profile to identify the company's strengths and weaknesses (3) the
business strategy required to achieve the company's objectives with due regard to (4) the
company's vision and mission. The relationship between the business environment and the
company profile gives an indication of what is possible. From here the company's position in
the market can be known. Meanwhile, the relationship between business environment
analysis, company profile, and the company's vision and mission points to what is desired by
the company's owners and management. Methodologically, business strategy consists of three
interrelated and uninterrupted processes, namely the formulation process (formulation), the
implementation process (execution), and the strategy monitoring (control) process.
c. Benefits of Strategic Management:
Pearce and Robinson state the benefits of Strategic Management are as follows:
1) Strategy formulation activities strengthen the company's ability to prevent problems from
arising.
2) Group-based strategic decisions will most likely be taken from the best available
alternative.
3) Employee involvement in strategy formulation increases their understanding of the
relationship between productivity and the rewards of each strategic plan, which in turn
increases their motivation.
4) Gaps and overlapping activities between individuals and groups will be reduced as
participation in strategy formulation clarifies role differences.
Hubeis and Najib19 state the benefits of Strategic Management are as follows:
5) Financially, strategic management will drive increases in production, sales and profits as
183
companies are encouraged to have high performance.
6) Strategic Management also provides non-financial benefits such as increasing awareness
of threats that come from outside the company's environment, allowing companies to
understand competitors' strategies,
It minimizes resistance to change within the organization, enables a clear link between
rewards and performance, and enables the company to see change as an opportunity.
According to Greenley in Fred R. David20 strategic management offers the following
benefits:
1) Enables recognizing, prioritizing, and taking advantage of opportunities
2) Provides an objective view of management issues
3) Provides a framework for improving coordination and control of activities
4) Minimize the influence of adverse conditions and changes
5) Enable key decisions that better support the stated goals
6) Enables more effective allocation of time and resources to recognize opportunities
7) Allows for fewer resources and less time to be devoted to correcting mistakes or ad hoc
decisions.
8) Create a framework for internal communication among staff
9) Helps integrate individual behavior into the total effort
10) Provides a basis for explanation of individual responsibility
11) Provides encouragement for forward thinking
12) Provide a cooperative, integrated, and enthusiastic approach to addressing issues and
opportunities.
13) Encourage an attitude that accepts change
14) Provides a quick level of discipline and formality to the management of a business
Meanwhile, Suwarsono21 explains that the function of strategic management according
to is as a means of communicating the company's goals and the path it intends to take to
achieve these goals to owners, executives, employees and other interested parties. Thus, these
various parties, especially those with direct interests, can better understand business
opportunities and challenges that the company is facing. They will have sufficient sensitivity
to the business environment and at the same time have sufficient readiness in case the
184
company decides to make internal changes.
Thus, conceptually the agribusiness system can be interpreted as all activities, starting
from the procurement and distribution of production facilities (inputs) to the marketing of
products produced by farming and agro-industry, which are interrelated with each other. Thus
the agribusiness system is a system consisting of various subsystems, namely: Upstream
Agribusiness / Agroindustry Subsystem, Cultivation / Farming Subsystem, Downstream
Agribusiness / Agroindustry Subsystem includes Processing and Marketing (Commerce) of
agricultural and processed products, Subsystem of agribusiness support services
(institutional). Based on the view of agribusiness as a system, it can be clearly seen that these
subsystems cannot stand alone, but are interrelated with one another. The upstream
agribusiness subsystem requires feedback from the farming subsystem in order to produce
production facilities in accordance with the needs of agricultural cultivation. Conversely, the
successful operation of the farming subsystem depends on the means of production produced
by the downstream agribusiness subsystem. Furthermore, the downstream agribusiness
production process depends on the supply of primary commodities produced by the farming
subsystem. The supporting services subsystem, as already stated, depends on the success of
the other three subsystems. If the farming subsystem or downstream agribusiness fails, while
some of its capital is borrowed, financial institutions and insurance will also suffer losses.24
The characteristics of agribusiness are that it is a complex and vertically structured
industry, each component is separately independent but in a broad sense interdependent to
form a commodity system. Good decision-making therefore requires an understanding of the
overall structure of the industry and must be able to understand the central points of the
various relevant parts of the various parts of the structural system.25
Based on the above, "agribusiness" can be broadly viewed as an agriculture-based
"business". Structurally, this business venture consists of three interdependent sectors, namely
(i) the input sector, which is handled by various upstream industries that supply input
materials to the agricultural sector, (ii) the production (farm) sector, which is handled by
various types of farming businesses that produce bio-economic products, and (iii) the output
sector, which is handled by various downstream industries that convert farming products into
preserved/processed consumer products and which are used to produce products for
consumption channel these products through the marketing system to consumers.26
Thus "agribusiness" encompasses all sectors involved in procuring farm inputs;
engaging in bio-economic production processes; handling the processing of farm outputs;
185
distributing, and selling these processed products to consumers. In relation to commodities in
a region, most economic activities can be undertaken by farmers and rural dwellers with
varying economies of scale.
d. Agribusiness Strategy Management:
In developing an agribusiness business, a mature management is also needed, because
agribusiness activities are not only limited to agricultural cultivation, but all forms of
activities related to agriculture itself, starting from the procurement process of materials and
equipment related to agriculture, the harvest process, and the distribution of the harvest. So to
organize these complex activities requires a good management as well.
From the explanation above, agribusiness management is a process of planning,
organizing, coordinating, to achieve goals effectively and efficiently in the development of
agriculture-based businesses starting from the process of procuring materials, managing, to
the process of distributing crops. Planning in agribusiness development is a process that
involves efforts made to anticipate future trends and determine the right strategies and tactics
to realize the targets and goals of the pesantren. Organizing is a process that involves how the
strategies and tactics that have been formulated in planning are designed in an appropriate and
resilient organizational structure, conducive organizational system and environment, and can
ensure that all parties in the organization can work effectively and efficiently to achieve
organizational goals. Implementation is the process of implementing the program so that it
can be carried out by all parties in the organization and the process of motivating so that all
parties can carry out their responsibilities with full awareness and high productivity.
Supervision is a process carried out to ensure that the entire series of activities that have been
planned, organized, and implemented can run in accordance with the expected targets despite
various changes in the business world environment faced. Evaluation emphasizes efforts to
assess the process of implementing the plan, regarding whether there are any problems
whether or not there are deviations, and whether or not the goals set based on the plans that
have been made are achieved.
2. Agribusiness Strategy Management Tasks and Processes:
Strategic management tasks Peter Drucker states the main task of strategic management
is to think through the mission of a business:
that is, asking the question, "What is our business?" this question leads to setting objectives,
186
developing strategies, and making decisions now for future results. this must be done clearly
by a part of the organization that can see the business as a whole; that can allocate human
resources and money to key results.
According to Pearce and Robinson, strategic management consists of nine important
tasks, among others:
a. Formulate the company's mission, including a broad statement of the company's purpose,
philosophy, and goals.
b. Conduct an analysis that reflects the company's internal conditions and capabilities.
c. Assess the company's external environment, including competitive factors and other
general contextual factors.
d. Analyze the options a company has by matching its resources with the external
environment.
e. Identify the most profitable options by evaluating each option based on the company's
mission.
f. Select a set of long-term goals and key strategies that will result in those most profitable
options.
g. Develop annual objectives and short-term strategies that are in line with the long-term
objectives and key strategies that have been determined.
h. Implementing the chosen strategy through the allocation of budgeted resources, where
adjustments between work tasks, people, structure, technology, and reward systems are
emphasized.
i. Evaluate the success of strategic processes to inform future decision-making.
As indicated by these nine tasks, strategic management includes planning, directing,
organizing, and controlling decisions and actions related to corporate strategy. Strategy for
managers is a large-scale, future-oriented plan to interact with competitive conditions to
achieve company goals. Strategy is the company's game plan. Although it does not detail all
future utilization (human, financial, and material), the plan provides a framework for
managerial decisions. Strategy reflects the firm's knowledge of how, when and where it will
compete, with whom it should compete and for what purpose it should compete.
While the process of the strategic management process from the perspective of Fred R.
David consists of several stages, namely as follows:
a. Strategy formulation. This stage involves developing a business mission statement,
recognizing the company's external opportunities and threats, establishing internal
187
strengths and weaknesses, setting long-term objectives, generating alternative strategies,
and selecting a particular strategy to implement. Strategy formulation issues include
formulating what new businesses to enter, what businesses to discontinue, how to allocate
resources, whether to expand operations or diversify, whether to enter international
markets, whether to merge or form joint ventures, and how to avoid takeovers of
competing companies.
b. Strategy implementation. This stage requires the company to set annual objectives, equip
it with policies, motivate employees, and allocate resources so that the formulated
strategy can be implemented; strategy implementation includes developing a culture that
supports the strategy, creating an effective organizational structure, changing the
direction of marketing efforts, preparing budgets, developing and utilizing information
systems, and linking employee compensation to organizational performance.
c. Strategy evaluation. This is the final stage in strategic management. Managers need to
know when a particular strategy is not working well; strategy evaluation mainly means
trying to obtain this information. All strategies can be modified in the future because
external and internal factors are always changing. The three fundamental activities for
evaluating strategies are: 1) reviewing the internal and external factors on which the
current strategy is based; 2) measuring performance; and 3) taking corrective action.
In addition, according to J. David Hunger & Thomas L. Wheelen,30 the strategic
management process includes four basic elements, namely:
a. Environmental observation. Environmental observation is divided into two, namely
external analysis and internal analysis. The external environment consists of variables
that are outside the organization and are not specifically within the short-term control of
top management. Meanwhile, the internal environment consists of several variables that
exist within the organization but are usually within the short-term control of top
management.
b. Strategy formulation. Strategy formulation is the development of long-term plans for the
effective management of environmental opportunities and threats, seen from the strengths
and weaknesses of the company. Strategy formulation includes determining the
company's mission, determining achievable goals, developing strategies, and setting
policy guidelines.
c. Strategy Implementation. Strategy implementation is the process by which management
puts strategies and policies into action through the development of programs, budgets,
188
and procedures...
d. Evaluation and control. Evaluation and control is the process through which company
activities and performance results are monitored and actual performance is compared
with desired performance.
According to Pearce and Robinson, strategic issues have the following dimensions:
g. Strategic Issues Require Top Management Decisions Since strategic decisions cover
various areas of a company's operations, they require top management involvement.
h. Strategic Issues Require Large Amounts of Company Resources
i. Strategic Issues Often Affect the Long-Term Prosperity of the Company. Strategic
decisions usually commit the company to a long term, generally five years.
j. Future-Oriented Strategic Issues. Strategic decisions are made based on what managers
predict, not what they know.
k. Strategic Issues Usually Have Multifunctional or Multibusiness Consequences. Strategic
decisions have complex implications for almost all areas of the company.
l. Strategic Issues Require Consideration of the Company's External Environment. All
business enterprises operate in an open system.
J. Conclusions:
Strategic management is a process to assist organizations in formulating, implementing
and evaluating managerial decisions and actions that make the organization able to achieve
goals effectively. Methodologically, strategic management consists of three interrelated and
uninterrupted processes, namely the formulation process (formulation), the implementation
process (execution), and the strategy monitoring process (control). The benefits of strategic
management in general are as a means of communicating company goals and the path that
will be taken to achieve these goals. Thus, various parties, especially those with direct
interests, can better understand the business opportunities and challenges faced. They will
have sufficient sensitivity to the business environment and at the same time have sufficient
readiness if the company decides to make internal changes.
Agribusiness is an activity that includes all sectors involved in the procurement of farm
inputs; involved in the bio-economic production process; handling the processing of farm
products; distribution, and sale of these processing products to consumers. Agribusiness
189
strategy is a process of planning, organizing, coordinating, to achieve goals effectively and
efficiently in the development of agriculture-based businesses ranging from the process of
procuring materials, managing, to the process of distributing crops. The basic elements of the
strategic management process include environmental observation, strategy formulation,
strategy implementation, and evaluation and control.
The existence of agribusiness economy in Indonesia has enormous potential. Indonesia
is one of the countries that has a fertile land construction, even Indosia is dubbed as an
agrarian country because of its good agricultural products. Geographically Indonesia is also
located in an area with a tropical climate, this is also very helpful in developing agribusiness
activities. In addition, Indonesia also has a very large water area and is rich in marine
products so that Indonesia is also known as a maritime country. With these favorable natural
conditions, it is necessary for the people of Indonesia to continue to develop agribusiness
economic activities.
The huge economic potential of agribusiness is not accompanied by prospective
developments. The reality that occurs today, many farmers are starting to switch to other
professions due to the current erratic crop yields, even many farmers who have to experience
crop failure due to erratic weather. In addition, the management of agribusiness activities that
are still traditional is also a factor causing the decline of the agribusiness economy. This
condition will certainly be a big problem if it continues to be left because it is also related to
the availability of food needs of the Indonesian people. According to Efriyani2 it is estimated
that in 2030 the Indonesian population will reach 278 million people, this is certainly a
complex challenge in meeting food needs. Efforts to meet food needs include increasing
production and diversification. These two things are included in agribusiness activities. Thus,
agribusiness needs to be developed to support the development process and the realization of
food security. In human life, food is a basic need that must be fulfilled.
In the study of microeconomic theory, to improve agribusiness economic activities, it is
necessary to design the right strategy, one of which is through the application of strategic
management in a more effective agribusiness economy. David3 explains that strategic
management is the art and knowledge to formulate, implement and evaluate cross-functional
decisions that enable organizations to achieve their dreams. In addition, the benefits of
strategic management in agribusiness economics can help farmers continue to innovate to
adapt to the changing world. The changes that occur because through strategic management
we can identify the shortcomings and comparative advantages of a business with its
competitors.
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K. Research Methods:
The research approach used in the preparation of this research is qualitative research,
which is a research procedure that produces descriptive data in the form of observed written
understanding.4 Because the research used fully emphasizes the collection of library data, this
type of research is called library research. In this research, there are two types of data sources,
namely:
1. Primary data sources, namely: Fred R. David, "Strategic Management", Michael A. Hitt
& R. Duane Ireland & Robert E. Hoslisson, "Strategic Management: Competitiveness and
Globalization", and Abd. Rahim and Diah Retno Dwi Mastuti, "Agribusiness
Management System".
2. Secondary data sources are data sources in the form of scientific works: books,
magazines, articles, opinions, papers, and sites that are relevant to this study, of course, as
support for the arguments that will be presented by the author.
Data collection steps are carried out through library research. In library research,
documentation techniques are used to find data about the things studied through published
written sources related to agribusiness strategy management in the context of
microeconomics.
The method used in analyzing data is done in two ways, namely: a) content analysis
method. Suharsimi Arikunto defines that the content analysis method (data analysis) is to
analyze the contents of the book which will produce a conclusion about the tendency of the
contents of the book and so on; b) descriptive method. Sanapiah Faisal defines the descriptive
method as "trying to describe or interpret what exists, either existing conditions or
relationships, growing opinions, ongoing processes and has developed". Meanwhile,
according to Ibnu Hajar, the descriptive method is "to provide a clear and accurate description
of the material or phenomenon under investigation". This method is used to describe and at
the same time analyze the current learning values.5 So, in this study, researchers used the
content analysis method to analyze the results of the study. To check the validity of the data
in this study, the researchers used theoretical triangulation.
L. Results and Discussion
1. Strategy Management
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a. Definition of Strategy Management:
The word "management" comes from French. The language later adopted this word
from English as ménagement, which means the art of carrying out and organizing.6 In terms of
terms, Ricky W. Griffin defines management as a process of planning, organizing,
coordinating, and controlling resources to achieve goals effectively and efficiently. Effective
means that goals can be achieved in accordance with planning, while efficient means that the
tasks at hand are carried out correctly, organized, and according to schedule.
The word strategy is often used for military terms, but this term is not only used in the
military context, business also uses this term strategy. In a business context, strategy is a
unified, broad, and integrated plan that links the company's strategic advantages with
environmental challenges and that is designed to ensure that the company's main objectives
can be achieved through proper execution by the company.8 On the other hand, Porter9
defines strategy as "the creation of a unique and valuable position obtained by undertaking a
series of activities."
Meanwhile, according to Stoner, Freeman, and Gilbert, strategy is more directed at
managing the activities and operations of a particular business and seeks to determine the
approach that a business should use towards its market and implement this approach by
utilizing existing resources and under certain market conditions.10 Ansoff defines strategy as a
set of decision making rules for guidance of organizational behavior. If it is associated with
marketing, then strategy is defined as making decisions about the use of marketing factors that
can be controlled to achieve the objectives that can be achieved has been determined. The
main purpose is for the company to objectively see internal and external conditions, so that
the company can anticipate changes in the external environment. In this case, the functions of
management, consumers, distributors, and competitors can be clearly distinguished. So,
strategic planning is important to gain a competitive advantage and have products that match
consumer desires with optimal support from existing resources.
Michael A. Hitt & R. Duane Ireland & Robert E. Hoslisson12 define strategic
management as a process to help organizations identify what they want to achieve, and how
they should achieve valuable results. The role of strategic management is more widely
recognized today than ever before in a global economy that allows the free movement of
goods and services between countries, companies are constantly challenged to be more
competitive. Many of these companies that have increased their level of competition offer
products to consumers at a higher value, and this often results in above-average profits.
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While Barney,13 explains, strategic management can be understood as the process of
selecting and implementing strategies. Meanwhile, strategy is a pattern of resource allocation
that allows organizations to maintain their performance. David14 also argues that strategic
management is the art and knowledge to formulate, implement and evaluate cross-functional
decisions that enable organizations to achieve their objectives. In addition, Hunger and
Wheelen15 define, strategic management is a series of managerial decisions and actions that
determine the performance of the company in the long term.
Thus, from the above definition, it can be seen that strategic management is a process to
assist organizations in formulating, implementing and evaluating managerial decisions and
actions makes the organization able to achieve its goals effectively.
b. Characteristics of Strategic Management:
According to Jatmiko, departing from the fact that strategic management covers the
management of the organization as a whole, strategic management tends to be a subject that
can be viewed from a variety of different perspectives, namely:
1) Strategic management improves organizational effectiveness. In every organization there
are two highly successful requirements, viz: efficiency and effectiveness. Strategic
management is primarily focused on creating effectiveness in relation to the fit between
the organization and its relevant environment. Creating an efficient organization is
relatively easier by devising and establishing methods, procedures, and systems to solve
day-to-day problems.
2) Strategic management is directed towards the long term. Strategic management addresses
organizational issues that have a future dimension, not the present or the past. Many
factors or variables influence long-term strategic planning or management, including:
market factors, human factors, and performance factors.
3) Strategic management is concerned with the decisions of top management or senior
managers. Although all employees are involved in implementing strategic decisions, most
strategic decisions come from senior management or top managers. However, top
managers may consult for input from employees before making strategic decisions.
4) Strategic management exists at every level of the organization. Strategy can be analyzed
at three levels of the organization: corporate-level strategy, business-level strategy, and
functional-level strategy.
5) Strategic management promotes a broad knowledge of the organization. The nature of
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strategic decisions, which usually involve changing habits and behaviors, requires a
broader view or spectrum of cross-functional activities within an organization.
Meanwhile, the main components of strategic management in Suwarno's perspective17 are:
(1) analysis of the business environment necessary to detect opportunities and threats (2)
analysis of the company's profile to identify the company's strengths and weaknesses (3) the
business strategy required to achieve the company's objectives with due regard to (4) the
company's vision and mission. The relationship between the business environment and the
company profile gives an indication of what is possible. From here the company's position in
the market can be known. Meanwhile, the relationship between business environment
analysis, company profile, and the company's vision and mission points to what is desired by
the company's owners and management. Methodologically, business strategy consists of three
interrelated and uninterrupted processes, namely the formulation process (formulation), the
implementation process (execution), and the strategy monitoring (control) process.
c. Benefits of Strategic Management:
Pearce and Robinson state the benefits of Strategic Management are as follows:
1) Strategy formulation activities strengthen the company's ability to prevent problems from
arising.
2) Group-based strategic decisions will most likely be taken from the best available
alternative.
3) Employee involvement in strategy formulation increases their understanding of the
relationship between productivity and the rewards of each strategic plan, which in turn
increases their motivation.
4) Gaps and overlapping activities between individuals and groups will be reduced as
participation in strategy formulation clarifies role differences.
Hubeis and Najib19 state the benefits of Strategic Management are as follows:
7) Financially, strategic management will drive increases in production, sales and profits as
companies are encouraged to have high performance.
8) Strategic Management also provides non-financial benefits such as increasing awareness
of threats that come from outside the company's environment, allowing companies to
understand competitors' strategies,
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It minimizes resistance to change within the organization, enables a clear link between
rewards and performance, and enables the company to see change as an opportunity.
According to Greenley in Fred R. David20 strategic management offers the following
benefits:
1) Enables recognizing, prioritizing, and taking advantage of opportunities
2) Provides an objective view of management issues
3) Provides a framework for improving coordination and control of activities
4) Minimize the influence of adverse conditions and changes
5) Enable key decisions that better support the stated goals
6) Enables more effective allocation of time and resources to recognize opportunities
7) Allows for fewer resources and less time to be devoted to correcting mistakes or ad hoc
decisions.
8) Create a framework for internal communication among staff
9) Helps integrate individual behavior into the total effort
10) Provides a basis for explanation of individual responsibility
11) Provides encouragement for forward thinking
12) Provide a cooperative, integrated, and enthusiastic approach to addressing issues and
opportunities.
13) Encourage an attitude that accepts change
14) Provides a quick level of discipline and formality to the management of a business
Meanwhile, Suwarsono21 explains that the function of strategic management according
to is as a means of communicating the company's goals and the path it intends to take to
achieve these goals to owners, executives, employees and other interested parties. Thus, these
various parties, especially those with direct interests, can better understand business
opportunities and challenges that the company is facing. They will have sufficient sensitivity
to the business environment and at the same time have sufficient readiness in case the
company decides to make internal changes.
Thus, conceptually the agribusiness system can be interpreted as all activities, starting
from the procurement and distribution of production facilities (inputs) to the marketing of
products produced by farming and agro-industry, which are interrelated with each other. Thus
195
the agribusiness system is a system consisting of various subsystems, namely: Upstream
Agribusiness / Agroindustry Subsystem, Cultivation / Farming Subsystem, Downstream
Agribusiness / Agroindustry Subsystem includes Processing and Marketing (Commerce) of
agricultural and processed products, Subsystem of agribusiness support services
(institutional). Based on the view of agribusiness as a system, it can be clearly seen that these
subsystems cannot stand alone, but are interrelated with one another. The upstream
agribusiness subsystem requires feedback from the farming subsystem in order to produce
production facilities in accordance with the needs of agricultural cultivation. Conversely, the
successful operation of the farming subsystem depends on the means of production produced
by the downstream agribusiness subsystem. Furthermore, the downstream agribusiness
production process depends on the supply of primary commodities produced by the farming
subsystem. The supporting services subsystem, as already stated, depends on the success of
the other three subsystems. If the farming subsystem or downstream agribusiness fails, while
some of its capital is borrowed, financial institutions and insurance will also suffer losses.24
The characteristics of agribusiness are that it is a complex and vertically structured
industry, each component is separately independent but in a broad sense interdependent to
form a commodity system. Good decision-making therefore requires an understanding of the
overall structure of the industry and must be able to understand the central points of the
various relevant parts of the various parts of the structural system.25
Based on the above, "agribusiness" can be broadly viewed as an agriculture-based
"business". Structurally, this business venture consists of three interdependent sectors, namely
(i) the input sector, which is handled by various upstream industries that supply input
materials to the agricultural sector, (ii) the production (farm) sector, which is handled by
various types of farming businesses that produce bio-economic products, and (iii) the output
sector, which is handled by various downstream industries that convert farming products into
preserved/processed consumer products and which are used to produce products for
consumption channel these products through the marketing system to consumers.26
Thus "agribusiness" encompasses all sectors involved in procuring farm inputs;
engaging in bio-economic production processes; handling the processing of farm outputs;
distributing, and selling these processed products to consumers. In relation to commodities in
a region, most economic activities can be undertaken by farmers and rural dwellers with
varying economies of scale.
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d. Agribusiness Strategy Management:
In developing an agribusiness business, a mature management is also needed, because
agribusiness activities are not only limited to agricultural cultivation, but all forms of
activities related to agriculture itself, starting from the procurement process of materials and
equipment related to agriculture, the harvest process, and the distribution of the harvest. So to
organize these complex activities requires a good management as well.
From the explanation above, agribusiness management is a process of planning,
organizing, coordinating, to achieve goals effectively and efficiently in the development of
agriculture-based businesses starting from the process of procuring materials, managing, to
the process of distributing crops. Planning in agribusiness development is a process that
involves efforts made to anticipate future trends and determine the right strategies and tactics
to realize the targets and goals of the pesantren. Organizing is a process that involves how the
strategies and tactics that have been formulated in planning are designed in an appropriate and
resilient organizational structure, conducive organizational system and environment, and can
ensure that all parties in the organization can work effectively and efficiently to achieve
organizational goals. Implementation is the process of implementing the program so that it
can be carried out by all parties in the organization and the process of motivating so that all
parties can carry out their responsibilities with full awareness and high productivity.
Supervision is a process carried out to ensure that the entire series of activities that have been
planned, organized, and implemented can run in accordance with the expected targets despite
various changes in the business world environment faced. Evaluation emphasizes efforts to
assess the process of implementing the plan, regarding whether there are any problems
whether or not there are deviations, and whether or not the goals set based on the plans that
have been made are achieved.
2. Agribusiness Strategy Management Tasks and Processes:
Strategic management tasks Peter Drucker states the main task of strategic management
is to think through the mission of a business:
that is, asking the question, "What is our business?" this question leads to setting objectives,
developing strategies, and making decisions now for future results. this must be done clearly
by a part of the organization that can see the business as a whole; that can allocate human
resources and money to key results.
According to Pearce and Robinson, strategic management consists of nine important
197
tasks, among others:
a. Formulate the company's mission, including a broad statement of the company's purpose,
philosophy, and goals.
b. Conduct an analysis that reflects the company's internal conditions and capabilities.
c. Assess the company's external environment, including competitive factors and other
general contextual factors.
d. Analyze the options a company has by matching its resources with the external
environment.
e. Identify the most profitable options by evaluating each option based on the company's
mission.
f. Select a set of long-term goals and key strategies that will result in those most profitable
options.
g. Develop annual objectives and short-term strategies that are in line with the long-term
objectives and key strategies that have been determined.
h. Implementing the chosen strategy through the allocation of budgeted resources, where
adjustments between work tasks, people, structure, technology, and reward systems are
emphasized.
i. Evaluate the success of strategic processes to inform future decision-making.
As indicated by these nine tasks, strategic management includes planning, directing,
organizing, and controlling decisions and actions related to corporate strategy. Strategy for
managers is a large-scale, future-oriented plan to interact with competitive conditions to
achieve company goals. Strategy is the company's game plan. Although it does not detail all
future utilization (human, financial, and material), the plan provides a framework for
managerial decisions. Strategy reflects the firm's knowledge of how, when and where it will
compete, with whom it should compete and for what purpose it should compete.
While the process of the strategic management process from the perspective of Fred R.
David consists of several stages, namely as follows:
a. Strategy formulation. This stage involves developing a business mission
statement, recognizing the company's external opportunities and threats,
establishing internal strengths and weaknesses, setting long-term objectives,
generating alternative strategies, and selecting a particular strategy to
implement. Strategy formulation issues include formulating what new
businesses to enter, what businesses to discontinue, how to allocate resources,
198
whether to expand operations or diversify, whether to enter international
markets, whether to merge or form joint ventures, and how to avoid takeovers of
competing companies.
b. Strategy implementation. This stage requires the company to set annual objectives, equip
it with policies, motivate employees, and allocate resources so that the formulated
strategy can be implemented; strategy implementation includes developing a culture that
supports the strategy, creating an effective organizational structure, changing the
direction of marketing efforts, preparing budgets, developing and utilizing information
systems, and linking employee compensation to organizational performance.
c. Strategy evaluation. This is the final stage in strategic management. Managers need to
know when a particular strategy is not working well; strategy evaluation mainly means
trying to obtain this information. All strategies can be modified in the future because
external and internal factors are always changing. The three fundamental activities for
evaluating strategies are: 1) reviewing the internal and external factors on which the
current strategy is based; 2) measuring performance; and 3) taking corrective action.
In addition, according to J. David Hunger & Thomas L. Wheelen,30 the strategic
management process includes four basic elements, namely:
a. Environmental observation. Environmental observation is divided into two, namely
external analysis and internal analysis. The external environment consists of variables
that are outside the organization and are not specifically within the short-term control of
top management. Meanwhile, the internal environment consists of several variables that
exist within the organization but are usually within the short-term control of top
management.
b. Strategy formulation. Strategy formulation is the development of long-term plans for the
effective management of environmental opportunities and threats, seen from the strengths
and weaknesses of the company. Strategy formulation includes determining the
company's mission, determining achievable goals, developing strategies, and setting
policy guidelines.
c. Strategy Implementation. Strategy implementation is the process by which management
puts strategies and policies into action through the development of programs, budgets,
and procedures...
d. Evaluation and control. Evaluation and control is the process through which company
activities and performance results are monitored and actual performance is compared
199
with desired performance.
According to Pearce and Robinson, strategic issues have the following dimensions:
m. Strategic Issues Require Top Management Decisions Since strategic decisions cover
various areas of a company's operations, they require top management involvement.
n. Strategic Issues Require Large Amounts of Company Resources
o. Strategic Issues Often Affect the Long-Term Prosperity of the Company. Strategic
decisions usually commit the company to a long term, generally five years.
p. Future-Oriented Strategic Issues. Strategic decisions are made based on what managers
predict, not what they know.
q. Strategic Issues Usually Have Multifunctional or Multibusiness Consequences. Strategic
decisions have complex implications for almost all areas of the company.
r. Strategic Issues Require Consideration of the Company's External Environment. All
business enterprises operate in an open system.
M. Conclusions:
Strategic management is a process to assist organizations in formulating, implementing
and evaluating managerial decisions and actions that make the organization able to achieve
goals effectively. Methodologically, strategic management consists of three interrelated and
uninterrupted processes, namely the formulation process (formulation), the implementation
process (execution), and the strategy monitoring process (control). The benefits of strategic
management in general are as a means of communicating company goals and the path that
will be taken to achieve these goals. Thus, various parties, especially those with direct
interests, can better understand the business opportunities and challenges faced. They will
have sufficient sensitivity to the business environment and at the same time have sufficient
readiness if the company decides to make internal changes.
Agribusiness is an activity that includes all sectors involved in the procurement of farm
inputs; involved in the bio-economic production process; handling the processing of farm
products; distribution, and sale of these processing products to consumers. Agribusiness
strategy is a process of planning, organizing, coordinating, to achieve goals effectively and
efficiently in the development of agriculture-based businesses ranging from the process of
procuring materials, managing, to the process of distributing crops. The basic elements of the
200
strategic management process include environmental observation, strategy formulation,
strategy implementation, and evaluation and control.
