A34-Lancaster Farming, Saturday, June 28, 2003
A FRAMEWORK FOR
UNDERSTANDING
INDUSTRIES
John Berry
Agricultural Marketing Agent
Lehigh County
Cooperative Extension
Crop and livestock fanning are
part of the food industry. As I
give presentations and talk with
farmers, it amazes me how many
segments there are in the farming
business despite less than two
percent of the population being
involved in producing the food
we eat.
Exploring business growth, cal
culating the potential of a new
enterprise, or planning to more
effectively deploy resources often
involves studying industry
trends. As we examine the busi
ness of farms, farming and food
production, it is often helpful to
put a framework around the food
industry.
There are three dimensions to
the concept of an “industry” that
might help the entrepreneur
grasp the nature of an industry
and a venture’s potential for suc
cess in that industry: 1) carrying
capacity, 2) uncertainty, and 3)
complexity.
Carrying Capacity
Carrying capacity or degree of
saturation is the extent to which
the industry can support growth,
from both the entry of new ven
tures and the growth of existing
ones. Entrepreneurs typically
seek out an industry that can
support expansion, thus allowing
the new venture to grow and to
obtain the resources it needs.
Difficulty entering a specific
industry because of many com
petitors, major companies that
control needed supply chains, or
economies of scale, suggests that
the industry may be approaching
saturation that is, the produc
tion capability of the existing
firms may equal or exceed cus
tomer demand for their products.
The only way to enter such an in
dustry is through the introduc
tion of new technology or the dis
covery of a niche where a need
has not been met. The growth of
organic food production and di
rect-to-consumer marketing are
examples of niche markets origi
nating from a saturated industry.
Uncertainty
Uncertainty is the degree of
stability or instability and ambi
guity in an industry. A dynamic,
uncertain environment is one
that is difficult to predict because
it is in constant flux.
Industries that operate in vola
tile environments, such as the
pharmaceutical industry, contain
higher degrees of uncertainty or
risk. Consequently, the rewards
are usually higher as well. Dy
namic, even chaotic, environ
ments also provide a fertile grow
ing ground for new opportunities
and have given birth to many
successful companies.
Office Closed July 4
On Friday, July 4, Lancaster Farming office is closed. The
office will reopen Monday, July 7.
For the July 5 issue, there are some deadline changes:
Public Sale and Mailbox ads, 5 p.m., Friday, June 27.
Classified, Section D ads 4 p.m., Tuesday, July 1.
Classified, Section C, farm equipment ads, 4 p.m., Tuesday,
July 1.
General news noon, Wednesday, July 2.
Complexity
Complexity is the number and
diversity of inputs and outputs
facing an organization. Firms
that operate in complex indus
tries usually have to deal with
more suppliers, customers, and
competitors than firms in other
industries, and they regularly
produce a greater number of dis
similar products.
Industries with a high degree
of complexity, such as the
electronics industry are, by then
very nature, difficult for new
businesses to enter. They are also
extremely competitive; therefore,
new ventures often find a great
deal of hostility rather than col
laboration in those industries.
Telecommunications and bio
technology are both industries
with a high degree of competition
and government regulation and
in which product life cycles are
very short.
Industry Evolution
Industries do.not remain static
or stable over time on any of the
three aspects of this framework.
In fact, they are in an almost con
stant state of evolution. Like peo
ple, industries move through a
life cycle that includes birth,
growth, maturity, and ultimately
decline.
The stages of the industry life
cycle are identified by the differ
ent kinds of activities occurring
at each stage:
I. Birth: A new industry
emerges, often with the introduc
tion of a disruptive technology
such as the Internet.
2. Growth and adaptation: The
new industry goes through a vol
atile stage, and companies and
their respective technologies jock
ey for position and the right to
determine the standards. Proprie
tary rights give companies a brief
“quiet” period to gain acceptance
by customers.
3. Differentiation and competi
tion: As more firms enter the in
dustry, intense product differen
tiation occurs as the industry
established standards and propri
etary rights no longer provide the
exclusivity they once did.
4. Shakeout: When competi
tion is the most intense, those
companies that are unable to
compete leave.
5. Maturity and decline: The
industry reaches a mature state
with several major players that
dominate. If research and devel
opment in the industry do not
produce a resurgence of growth,
the industry could face decline.
Few worthwhile activities are
easily accomplished. Developing,
maintaining, and growing a busi
ness within the food industry of
fers many opportunities and
challenges. The likelihood of
finding fulfillment in our role as
an entrepreneur can be increased
by giving some consideration to
the industry we are a part of and
the business of farming.
Penn State S
UNIVERSITY PARK (Centre
Co.) Two one-day field clinics
at the Agronomy Research Farm
at the Larson Agricultural Re
search Center near Rockspring
have been scheduled by Penn
State’s Department of Crop and
Soil Sciences.
The clinics will be conducted
Tuesday, July 29, and Thursday,
July 31. The registration fee is
$45 per person and includes
lunch, refreshments, and support
materials. The late registration
fee of $65 will be charged after
July 21.
These one-day field clinics are
designed to improve the agron
omic management skills of indus
try personnel, extension and pub
lic agents, crop consultants, and
producers.
Specialists from Penn State
and the agricultural community
will provide hands-on diagnosis
training in crop production, pest
management, soil fertility and
soil and water conservation.
Participants will be able to
choose from a variety of topics
and have ample opportunity to
diagnose, solve, and discuss crop
management problems and situa
tions. In addition to gaining
agronomic knowledge, CCA and
pesticide applicator license cred
its can be obtained.
Registration can be made by
mailing or faxing the form repro
duced here or e-mailing informa
tion to LACB@psu.edu, fax (814)
863-7043, or standard mail to the
address on the form.
Farmers Group
Suggests Common
Sense Approach
To COOL
WASHINGTON, D.C. In
his formal.comments to USDA’s
Agricultural Marketing Service,
NFU President Dave Frederick
son addressed many of the recent
concerns and myths about the
new law, which was included in
the 2002 farm bill.
“It was clearly not the intent of
Congress that the full burden of
compliance and verification be
placed upon the American pro
ducer,” Frederickson said. “We
believe the voluntary program
guidelines should expand upon
current programs without cre
ating a costly new regulatory bur
den on producers or other food
product sectors. To the extent
existing record-keeping systems
and import information can be
utilized and tailored to meet the
COOL requirements for consum
er notification, the less costly and
more efficient the labeling system
will be for all parties.”
Frederickson explained that
the vast majority of U.S. live
stock and crop producers do not
import any livestock or crop
products that would subject their
operations to foreign origin veri
fication. “As long as these opera
tions continue a ‘domestic only’
production system, they should
be able to self-certify their com
modities as United States coun
try-of-origin when they market
their products,” he said.
For those fanners and ranch
ers who do market imported
products, Frederickson said they
should have an. appropriate re
cord-keeping system. Existing
identification programs, such as
health certificates from the
USDA Animal and Plant Health
Inspection Service or import in
formation gathered by the U.S.
Customs Service, can be coordi
nated and used to identify the
country-of-origin for imported
commodities, he explained.
hedules Two Field Clinics
10 th Animerstiry
2003 Penn State Agronomic-
Field Diagnostic Clinic
Please return this registration form by July 21 to
Field Diagnostic Clinic
Attn: Lisa Crytser
Dept, of Crop and Soil Sciences
Penn State University
116 ASI Building
University Park, PA 16802
You are invited to attend one of the following
programs
Tuesday, July 29 or Thursday, July 31
Number attending
Amount enclosed ($45.00 per person)
(make check payable to Penn State University)
(Late registration fee is $65 after July 21)
Name, company, address, and phone number
of primary registrant;
Name
Comi
ian'
.ddress
Phone
(please clip and return this registration form
before July 21 to avoid a late fee)
New Program Manager Joins
Penn State Dairy Alliance
UNIVERSITY PARK (Centre
Co.) Michele C. Moyer has
been named the new program
manager of the Dairy Alliance, a
statewide initiative in Penn
State’s College of Agricultural
Sciences.
The Dairy Alliance partners
with dairy producers and related
service providers across the com
monwealth to enhance the eco
nomic development of Pennsyl
vania’s dairy industry through
leadership and focused educa
tional efforts.
“Since its launch in 2000, the
Dairy Alliance program has
strived to play an important role
in increasing the profitability and
sustainability of Pennsylvania’s
dairy farms,” said Dr. Lisa Hold
en, associate professor of dairy
science at Penn State. “Michele’s
addition to the staff will help us
in our ongoing efforts to provide
excellent quality programs to our
progressive dairy producers.”
Dairy Alliance staff collaborate
with various segments of the
diary industry to deliver educa
tional programs focused on four
subject areas to dairy producers:
information management,
human resource management,
business management, and nutri
ent management. Through work
shops and conferences offered
across the state, dairy producers
are able to receive the most up
to-date information available
from Penn State agriculture fac
ulty and researchers.
In her new post, Moyer is re
sponsible for coordinating the
Dairy Alliance’s communication
and marketing efforts. Her duties
include promoting the education
al programs of the Dairy Alli
ance, maintaining a calendar of
statewide dairy events on the
worldwide web (www.dairyalli
ance.com), and directing calls re
ceived through the organization’s
toll-free dairy resource line
(1-888-373-PADA).
Moyer joined Penn State in
1998 as the public information
officer at Penn State Dußois.
Prior to that, she was the editor
of The Progress newspaper in
Clearfield. She serves as the edit
or of the Clearfield County Farm
Bureau newsletter and volunteers
as the dairy coordinator for the
Clearfield 4-H Livestock Club.