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Abstract

The objective of this paper is to present the teaching note of a case study. The case study outlines the strategic issues facing Excel Cooperative as a result of the rapid expansion of biofuel production capacity in the Midwestern U.S. Excel Cooperative is a mid-sized, ‘local’, farmer-owned cooperative serving farmers in north central Indiana. Excel is composed of four divisions: agronomy, energy, grain, and feed/livestock. With the Excel case, the reader must think strategically about the broad impacts of the biofuel “boom”, apply strategic management tools and decision-making under uncertainty concepts to better understand the impacts, and frame a response. The methodology proposed in the teaching note is composed of a SWOT analysis, scorecarding and heat mapping, scenario analysis, payoff matrix, and decision tree. A SWOT analysis is a useful way to identify the uncertainties. Scorecarding and heat mapping assessment tools can then be used to assess and map the uncertainties, and decide which uncertainties the company should capitalize on and which projects could be pursued to exploit those uncertainties. Scenario analysis can then help develop further how the uncertainties could unfold and affect the projects. Payoff matrix and decision tree (using real option valuation) analysis tools can then help make a decision on which project to pursue. Finally, these projects cannot be evaluated in a vacuum. Mapping the portfolio of projects is necessary to make sure the company diversifies the risk. This paper includes an illustration of the methodology by applying the tools to a real life example that has been tested in several executive agribusiness educational workshops. A list of psychological traps to avoid and be mindful of when making decisions in an uncertain environment is also proposed.

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