Academic journal article Journal of Financial Management & Analysis

Strategic Planning in Response to Global Environmental Changes: The Case of Israeli Agriculture

Academic journal article Journal of Financial Management & Analysis

Strategic Planning in Response to Global Environmental Changes: The Case of Israeli Agriculture

Article excerpt

Introduction

Agriculture around the world is going through some global changes'. These changes can be seen in Indie; France' Spain 4 and in other countries. Israeli agriculture, too, is facing radical changes in its relevant environment that will transform the shape of agriculture. If it is to survive and prosper, it must adopt the right strategy to react to these changes.

The process of choosing the right strategy starts with situation assessment, identifying strategic assumptions, and integrating analytical planning methods into the planning process5. Accordingly, the first part of our paper deals with situation assessment the development and current situation of Israeli agriculture. Next we identify the strategic assumptions by forming a scenario of the future environment that Israeli agriculture will face. Finally, using existing strategic planning methods, we analyze the competitive advantage of Israeli agriculture according to standard economic theory, and suggest some strategies for Israeli agriculture to adapt to the expected changes in the environment.

The strategy analysis in this paper is loosely based on the PIMS approach to strategy analysis5. The PIMS approach to strategy analysis roughly follows the planning process:

* describe the situation; ur

* assess the current performance. and strategic potential of the business;

* select businesses that are most like the ones being studied for comparison;

* assess the strengths and weaknesses of competitors; and

* test profitability consequences of feasible changes. In want follows we describe the situation and assess the current performance. Subsequently we deal with expected changes and the strategic potential.

Evolution of Israeli Agriculture Israeli society has transformed in the past century from an agrarian society in the twenties, with two-thirds of its population living in villages6, to an urbanized country, with 91 per cent of the population living in cities". Israeli agriculture has undergone several transformations during this past century, in response to changes in the environment. At the beginning of the twentieth century Israeli agriculture was based on fruit trees, mainly wine grapes6. After the first world war, agriculture became based predominantly on fresh citrus for export-from 1918 to 1935, the area of citrus trees increased by over 7000 per cent6. During the Second World War (1939-1945), agriculture adapted to producing a variety of products for sale in the insulated local market. After the war, in response to mass immigration to Israel, agriculture increased production rapidly to serve a large local market created by mass immigration. The 1950s and 1960s were characterized by a diversification of crops for exports, and by the beginning of extensive growing of wheat, cotton, vegetables and livestock. In the 1970s Israeli agriculture began extensive export of flowers and vegetables. In the 1980s began a high inflation, reaching over 350 per cent a year at its peak, and causing a financial crisis in the Israeli cooperative settlements, who took out loans whose payback had increased with inflation beyond their capability to pay.

The organization in small households cooperative settlements in Israel (called Moshavim) was based on individual production and consumption but cooperative municipal and productive services. This cooperation was based on the ability of individual farmers to return loans taken throughout the cooperative as intermediary. These loans could be returned through common marketing. When farmers began to market individually debts increased, initiating severe financial problems8. The change in marketing and financial structure was followed also by a change in employment framework. Instead of working mainly on-farm, inhabitants began seeking off-farm employment opportunities which further cut off connections with the cooperative organization9. Increased unemployment, mainly in peripheral areas, as combined with individual marketing and off-farm employment, enhanced organizational, financial, agricultural and structural changes". …

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