Advantages and Realities of Major Companies Newly Entering Plant Factories
When major companies enter a new business, they have strengths that other companies do not.
Financial strength, brand power, and sales networks are significant weapons.
If you leverage these weapons in the plant factory business, you will have the following advantages:
Cost reduction through large-scale operations: Large-scale initial investments are required for plant factories, such as acquiring vast land and introducing the latest equipment. Large-scale operations are necessary to reduce costs, and financial strength is essential for that.
Advantage through brand power: Brand power cultivated in existing businesses leads to gaining consumer trust, which is a significant advantage in the initial stages of sales.
Advantage in developing sales channels: Having an established sales network is advantageous for securing stable sales channels. New entrants tend to struggle with sales channels, but they may be able to overcome this.
As you can see, major companies have several unique strengths.
However, it is also a fact that many cases force them to withdraw because they cannot leverage these strengths.
Why do they withdraw? Aren’t they leveraging their strengths?
Why is that?
In fact, there are also “pitfalls” that exist because it is the plant factory industry or because they are major companies.
Why Do They Withdraw? ~”Realities” and “Pitfalls” I Have Seen~
I will specifically explain the “realities” that I have seen firsthand in the field for over 10 years and the “pitfalls” that emerge from them.
There are circumstances unique to major companies…
I think you will understand “why they withdraw” when you read it.
1. It takes time to become profitable
Large initial investment:
A large amount of initial costs is advantageous for major companies with financial strength compared to small and medium-sized enterprises.
The more advanced the technology introduced, the larger the investment and the longer it takes to recover the investment.
This point does not necessarily align with the management policies of major companies, which tend to seek short-term success.
Cannot wait until break-even:
Stabilizing the business requires several years of activity as a prerequisite. There are waves in the market price of fresh produce, so there are good times and bad times.
A long-term perspective and the determination to continue challenging even if results are not achieved are necessary.
However, in major companies, there is a risk of withdrawing early if results are not achieved (or they have no choice but to withdraw).
Challenges for improving profitability:
It is an illusion to think that you can sell high-quality vegetables made with the latest technology.
Major companies are no exception to the fact that they cannot win the price competition with that alone.
Even if you can leverage the strength of having your own sales network, flexibility to respond to needs is required for branding and developing sales channels.
For major companies, most of whose employees are inexperienced in agriculture, a lack of specialized knowledge and experience in cultivation technology, growth environment control, hygiene management, etc., is a serious problem.
The use of external personnel and human resource development are indispensable, and it takes time to accumulate know-how.
In the cases I have seen, some people were confused by the unfamiliar environment and highly specialized work, and ended up in a situation where it was difficult to maintain motivation.
Data analysis and utilization capabilities:
Even if you introduce the latest equipment, you need specialized knowledge to use the equipment to create the optimal environment for plants.
Effective production management is not possible without interpreting data based on on-site experience and accumulating know-how.
In plant factories where cost reduction is required, the existence of highly paid employees (e.g., seconded employees) based on different industry standards is a significant burden.
As the overall personnel costs of the facility increase, it becomes difficult to hire even if there is a shortage of staff.
Difficulty in reforming awareness:
In major companies, past success experiences and organizational culture remain deeply rooted, which can hinder adaptation to the new plant factory business.
Entering different fields requires breaking away from existing business models and values, but it is not easy to change a long-cultivated organizational culture.
In particular, when projects are led by headquarters, the opinions of the field tend to be neglected, resulting in inefficient operations and reduced employee motivation.
It is important for senior management to have a deep understanding of the plant factory business. Otherwise, appropriate investment decisions and strategic planning cannot be made.
Slowness of decision-making:
In a rapidly changing market environment, rapid decision-making is essential.
The complex decision-making processes unique to major companies can lead to delays in responding and lost opportunities.
Secrets to Success: What Does It Take for Major Companies to Succeed in the Plant Factory Business?
So, how can major companies succeed in the plant factory business?
The “secrets to success” that I believe are the following three:
Business plan from a long-term perspective:
The pitfall that many companies fall into is demanding “short-term profits” too much. Plant factories require large initial investments and sell vegetables that tend to be inexpensive. It is a business that takes time to break even in the first place. If you demand results from a short-term perspective, the field will be forced to make unreasonable plans due to pressure, which will lead to a vicious cycle of further failures.
The important thing is to share a long-term vision and work on the business with the entire company in a steady manner.
On-site principle:
Major companies tend to have organizational structures in which decision-making is slow and the voices of the field are difficult to reach. However, plant factories are a business that deals with living things. In the field, where the situation changes every moment, experience and knowledge cultivated in the field, not armchair theories, are important.
In the success stories I have seen, people with extensive field experience were appointed as leaders, and most of the decision-making was left to the field. Conversely, I feel that organizations where leaders without field experience make decisions are more likely to fail.
Cross-industry collaboration:
Major companies tend to be bound by their past success experiences and carry over the methods of existing businesses to the plant factory business. However, this is dangerous if there are many inexperienced people.
Success requires the determination to create a completely new organization from scratch, without being bound by the success experiences and common sense of existing businesses. Building an optimal organizational structure, personnel, and know-how for the new plant factory business from scratch is the key to success.
Past success experiences do not necessarily work when challenging a new business.
It is important to actively absorb know-how in the new field of agriculture with a humble attitude as a shortcut to success.
In particular, it is important for people who have been active in different industries to have a humble attitude of “I still don’t know anything,” listen to the opinions of the field, and have a learning attitude.
How to become a “profitable” plant factory?
It is natural that a business cannot be established if it does not make a profit.
To become a “profitable plant factory,” you need to learn a lot. In fact, plant factories that are producing results have their own know-how.
We provide plant factory managers with know-how to improve profitability.
If you are thinking, “I want to improve the field!” please check the following content.
Plant factories have great potential for solving food problems and realizing sustainable agriculture.
In order for major companies to maximize their power and succeed, it is important to listen to the voices of the field and develop businesses from a long-term perspective.
I will continue to support the plant factory business by utilizing the experience and knowledge I have cultivated so far.
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