Strabag Construction Company - Essay Example

? Internal assessment Contents Contents 2 Executive Summary 5 Introduction 5 Research Question 6 Research Methodology 6 Secondary Research 7 PEST Analysis 7 Political Factors 7 Economic Factors 7 Social Factors 7 Technological Factors 8 SWOT Analysis 8 Strengths 8 Weakness 8 Opportunity 9 Threat 10 Ansoff Matrix 10 Motivation 11 Marketing Mix 12 Product 12 Price 13 Place 13 Promotion 13 Risks, Opportunities and Challenges in Russian market 14 Risks 14 Opportunities 14 Challenges 14 Primary Research 15 Results or Findings 15 Analysis or Evaluation 17 Conclusion and Recommendations 18 Conclusions 18 Recommendations 18 References 19 Appendix 22 Questionnaire 22 Executive Summary Strabag Construction Company is a multinational construction company having set up different branches in several regions round the globe. This company focusing on different categories like civil, infrastructure and building projects is eyeing on Russia to gain a new market in future. Here the company though faced with initial setbacks owing to economic and infrastructural constraints is endeavoring to develop its hold through separate strategies. The paper in this connection focuses to evaluate the position of the Russian construction industry and thereby justify Strabag’s reason for choosing such for future growth. Introduction Strabag Construction Company is a multinational construction company that conducts large scale operation and construction activities on a global scale. The company since 1891 is found to perform a large number of construction projects in about 60 countries on a global scale. Construction activities of the company fall in the niche and classical construction categories and ranges from both large scale infrastructural to the completion of building projects to other civil engineering project activities. Strabag’s locus of business operation mainly centers on countries pertaining to continents like Asia, Africa and other Middle East nations. The company also boasts of its large pool of multi-cultural human resources that has helps the concern to gain around 12.8 billion Euros on an annual scale (Strabag). Research Question The international expansion activities carried out by Strabag are now focusing on another new international market, Russia. Thus the research formulated on that account tends to focus on the different challenges, opportunities and risks that Strabag would gain and face in its international expansion activities in the Russian region. The research tends to evaluate the operation parameters of the concern in the Russian market on the above accounts and thereby in focusing to render useful suggestions on that account. Research Methodology A formal look at the research objectives suggests that for the research in question there is a need for both primary and secondary research activities. In regards to secondary research the paper focuses on the company website along with other supportive literary sources like books and online articles. The use of secondary research activities is recommended for it helps in gaining access to a large scale of authentic data through the use of internet. This practice in turn helps in saving both cost and time and also acts as a formidable support to primary research activities (McQuarrie 35). However the research activity also focuses on conducting a primary research to gain meaningful insight into the practical scenario of the company’s expansion to Russia. Primary Research activity is conducted through designing a set of questionnaires based on which an interview would be taken of the managers of the company (Czinkota and Ronkainen 253-254). The questions would be prepared for conducting an interview on a sample size of 30 respondents that would comprise of senior and middle level managers of the company. Inference would be drawn in regards to the manager’s understanding of the Russian construction market and the strategies taken thereof to counter emerging constraints. Secondary Research The secondary research activity conducted over Strabag takes into consideration the following strategic tools that can be incorporated as follows. PEST Analysis Political Factors In the context of Russia the civil and other infrastructural projects are taken into conduct after they have significantly passed the documentation process as envisaged by the Environmental Impact Assessment program. This process put in by the Russian Federation works on evaluating the construction projects based on environmental norms (Krokeborg 690). Economic Factors The economic parameters reflect that the construction industry in Russia reflected a high growth track ranging from 10 to 15 percent on an average basis during the 2008 period. Major segments addressed in this sector range from building projects to other commercial and infrastructural projects and acts as a major source of revenue to the economy in catering to the needs of American consumers (Khalina 1). Social Factors The economic climate of Russia reflected parameters of a growing economy for the Gross Domestic Product of the country during the 2007 period $1.6 trillion. This level of rise in the Gross Domestic Product of the country also happened to help the per capita income level to grow to $11,000 for the mentioned period. These factors taken largely contribute to the demand of the people for the construction of modern buildings in the region (Perkins 168). Technological Factors The government of Russia is found to invest heavily of the order of $4.5 billion to help in the growth of research and development activities pertaining to the improvement of productivity of construction machineries and equipments. Moreover the foreign investors are also pushing in efficient technological equipments to Russia to help gain more amount of revenues from the operations (Feiler and Garese 36). SWOT Analysis Focusing on the above discussion the analysis would now endeavor to highlight the key strengths and weakness of Strabag Construction in order to counter the emanating threats and gain the advantage of rising opportunities in the Russian region. Strengths The major strengths of the company are its continual endeavor to gain an entry into international market areas through rendering enhanced emphasis on qualitative construction work. The company focuses on meeting of specific consumer demands by working on projects in niche areas like infrastructure, civil and other building construction projects (Strabag). Another key strength of the company is the high amount of technological resources possessed by it of around 4.1 billion Euros. State of the art equipments and technological processes incorporated help in enhancing the competency potential of the firm (Strabag-a 46). Weakness Emergence of recessionary climate on a global plane hits a large number of industries. The construction industry though operating on a large scale basis is also duly hit by such recessionary climate hindering its growth (Khalina 1). A study made shows that the output volume of the company reduced by around 5 percent during the 2009 period in comparison to the 2008 period. Thereby the revenue reflected a rise of only 3 percent during the same period. This reflects a weak financial position for the firm that can be shown as follows (Strabag-d). Figure 1 (Strabag-d) Opportunity The economy of Russia is reflecting a pattern of continual growth. This growth in the economic landscape promotes large scale opportunities for the emancipation of industries like construction and other allied sectors like transportation. Government of Russia is largely focusing to deliver turnkey projects pertaining to civil and infrastructural sectors to help transform the face of the nation (Perkins 168). Threat The modern demand in regards to construction projects focus much more on the quality parameters and meeting of project schedules on a timely basis. Thus Strabag needs to continuously work upon such areas to enhance and sustain the quality parameters by and by completing the projects on time. Existence of stiff competition in the global landscape depending on the above parameters poses a threat for the company (Strabag-a 31). Ansoff Matrix The Ansoff Matrix designed by Igor Ansoff focuses on understanding the corporate strategies conducted by companies based upon two significant parameters-product and market. The company can continue selling the existing products manufactured in the same market through countering price penetration strategies and thereby to gain a larger market share. Similarly the company can effectively search new market areas for the sale of such existing products. Again the firm can develop on the existing product parameters for helping it gain a larger market share in the existing market or totally develop new products for gaining entry into newer market zones (Stone 50-51). The same can be diagrammatically shown as follows. Figure 2 (Stone 51) Strabag Construction Company in regards to the above discussion is found to fall in the third segment wherein it endeavors to produce and develop quality products for helping the company gain newer markets on a global landscape. In terms of designing railway tracks the company is found to largely work on innovation to modify the existing production scenario of tracks. Similarly the company also works on innovating highly efficient automobiles for project and consumer use purposes thus helping in gaining a larger market (Strabag-a 39, 41). Motivation In terms of motivational factors the construction company works based on an effective teamwork of construction specialist, scientists, econometricians and groups of engineers to work behind the successful accomplishment of the project activity. The workers are not only encouraged to work in teams but also the company management encourages these people to widely incorporate an innovative climate in the organization. Similarly the opening up of several international branches helps in generating a large amount of exposure to the employees to work in a cultural mix environment and also in granting them greater opportunities to perform better. Similarly the company operates based on high amount of safety standards that helps in the reduction of accidents harming the people at the construction sites. This safety, cooperative, diverse and innovative work culture in the organization largely works to motivate the people pertaining to different levels and sectors in the company (Strabag-a 44, 47). Moreover the company management also encourages the employees to develop their knowledge potential through the creation of Stranet, an Intranet profile aimed at enabling the people gain further knowledge on several technical and legal documentation process required for construction activities. The company has also created a reward program called Straward to award the teams having performed considerably and rendered high amount of productivity for the concern (Strabag-c 10-11). Marketing Mix The marketing mix for Strabag Construction Company can be evaluated based on the parameters like product, price, place and promotion or based on the 4Ps of Marketing. Product In terms of product the company reflects the potential in producing highly effective quality products that not only meets quality standards but also passes significant environment tests prior to its final launch in the market. The company management promotes an innovative climate for the successful production of such quality products and services (Strabag-a 39, 44). Price In terms of pricing activities the construction firm through the large scale incorporation of an efficient technological base works effectively in producing high quality construction products in bulk and also satisfying its clients through effectively pricing such. Thus operating on such enhanced quality and technology standards helps in creating a niche market for the products and helps the company to counter the price pressure rendered by competitor firms (Strabag-b). Place In terms of place mix the company has largely expanded its operations from only operating in the European countries like Austria and Germany. The company has opened up a number of branches in several European countries pertaining to the Eastern and Western sector. Moreover the expansion activities of the company in the Asian and Saudi Arabian markets also create a larger visibility for the company in the eyes of global consumers. The company management largely works to mix up with the local culture thereby helping in carrying out effective penetration (Strabag-b). Promotion In regards to promotional activities the company is found to largely publicize on the launch of the Initial Public Offer through large amount of imagery and visual publicity aired through television. Apart from taking part in television advertisements the company also worked to gain public eyes through print media using image and colors. The print advertisement campaign helped Strabag gain the best award for the magazine advertisement category (Strabag-c). Risks, Opportunities and Challenges in Russian market Risks Strabag focuses to expand in the Russian market through the help of Rasperia Trading Limited. However such expansion plans are held to generate risk for the company in that during 2008 the company suffered a huge backlog of 2.0 billion Euros. Furthermore the Russian economy is considered opaque for which the company is required to work on an effective tracking system along with working strategies to gain revenue margins from clients (Standard and Poors 3). Opportunities Strabag has gained a new leash of life while tending to operate in the Russian market for gaining the effective partnership of a Russian real estate company, OTKRYTIE-Nedwishimost. This company has signed in an effective partnership with Strabag for generating space in the development of commercial real estate projects. During 2008 the strategic partnership helped Strabag gain potential revenue of 275 million Euros (Strabag-e). Challenges One of the main challenges countered in by Strabag while tending to operate in the Russian region is in the gaining of qualified personnel that would help in the expansion programs of the company. The applicants for the job are thus not only required to gain the knowledge of the Russian language but are also required to gain the knowhow of the documentation and other legal and operational processes required for the construction activities in Russia. Strabag to counter the above issue is working on designing of a brochure that would help the new applicants learn about the operational and employee requirements in the construction companies operating in the region (Strabag-c 12). Primary Research Results or Findings A.1. In regards to the question on expansion programs 24 out of 30 respondents from the group of managers at Strabag reflected that the company is still working on several acquisition and other operational programs to help expand its business in Russia. Only 6 respondents stated that the company is already in active operation in the Russian region and thereby is no hurry for further expanding. The same can be reflected through a pie chart as follows. A.2. The Russian market proves to the managers of Strabg as a fruitful market though subjected to a group of economic and infrastructural constarints. Around 9 and 10 managers out of the group of 30 resposndents reflected to the criteria of ‘somewhat justified’ and ‘justified’ respectively in regards to the productive nature of the region. These maangers thus feel that in the near future the region would certainly help the company to gain in its revenue paradigm. The same can be reflected by a bar-chart as folows. Justification of the Russian market as a good return market A.3. In regards to the question of competiveness of the Russian construction industry it can be stated that the industry is comepetive in nature though subjected to a large number of ethical, infrastructural and economic bottlenecks. Thus where 9 managers out of the group of 30 resposndents state that the construction industry in the region is quite competitve, 8 and 7 people respond that the construction industry is’somewhat competive’ and ‘competive to a little extent’ respectively. The same can be shown through a line chart as follows. Analysis or Evaluation Strabag is spontaneously working to join effective partnerships with other firms in the same or allied sectors in Russia to help meet its expansion drives in the region. Real estate developers are closely working with the company to form contracts for designing of commercial and other buildings in the region. The construction industries in Russia though subjected to large number of economic, infrastructural, regulatory and ethical constraints yet prove to be a region that promotes the growth of the construction industry. Thus the launch of the Initial Public Offer by Strabag during 2007 gained huge applauds from the Russian market and helped the company gain a firm foundation. The construction industry in Russia is found to be in its growth stage and thus is quite fragmented in nature. With the development of the economic situation the construction industry both internally and externally is gradually focusing to gain soil in the region (Ernst and Young 57). Conclusion and Recommendations Conclusions Russia like all other new markets appears to Strabag as a region that would help the company gain future business growth. The region initially reflected some economic and structural constraints disturbing the growth of companies like Strabag. However later on the economic condition of Russia largely developed helping in the demand for modern construction and thus helps in the growth of Strabag in the region. Strabag also through its highly developed employee and technology base targets to gain a larger market in Russia. Recommendations Strategic tools like Porter’s Five Forces Model can be effectively incorporated in the paper that would help in analyzing the competitive position of Strabag in the construction market in Russia. The model would help in highlighting different strategies that the company needs to take to gain a much potential position in the region. References Czinkota, Michael, R. and Ronkainen, Ilkka, A. International marketing. Cengage Learning, 2007. Ernst and Young. “Risk and competitive advantage in the Russian construction industry”. No date. http://apportal.ey1.dedicated.nines.nl/wp-content/uploads/2011/02/C2-Risk-and-competitive.pdf. January 30, 2012. Feiler, Gil and Garese, Alexandre. Investing in Russia, the Ukraine, Latvia, Lithuania and Kazakhstan. Sussex Academic Press, 2007. Khalina, Valeria. “Russia: Building Products Industry”. November 2009. http://www.ado.alabama.gov/content/media/publications/trade/mission/russia/RUS%20Building%20Products%20Industry%20110209.PDF. January 30, 2012. Krokeborg, Jon. Strait crossings 2001: proceedings of the Fourth Symposium on Strait Crossings, Bergen, Norway, 2-5 September 2001. Taylor & Francis, 2001. McQuarrie, Edward, F. The market research toolbox: a concise guide for beginners. SAGE, 2006. Perkins, L. Bradford. International practice for architects. John Wiley and Sons, 2007. Standard and Poors. “Ratings Direct”. June 24, 2008. http://www.strabag.com/databases/internet/_public/files.nsf/SearchView/09D51DF9237D13D1C125747B00267640/$File/S&P_STRABAGSE_June08.pdf?OpenElement. January 30, 2012. Stone, Phil. Make marketing work for you: boost your profits with proven marketing technique. How to Books Ltd, 2001. Strabag. “Construction Worldwide”. No date. http://www.strabag-international.com/databases/internet/_public/content.nsf/web/EN-STRABAGINTERNAT.COM-HOME-Company#?men1=1&sid=10&h=2. January 30, 2012. Strabag-a. “Constructions Worldwide”. No date. http://www.strabag-international.com/databases/internet/_public/files.nsf/SearchView/01124F588ED4A12EC12577A4003FE2F2/$File/Brochure_Division3G_final_A4.pdf. January 30, 2012. Strabag-b. “Growth drivers - How we want to stay successful”. May 10, 2011. http://www.strabag.com/databases/internet/_public/content.nsf/web/EN-STRABAG.SE-STRABAG%20SE-Growth%20drivers%20-%20How%20we%20want%20to%20stay%20successful. January 30, 2012. Strabag-c. “The Magazine of Strabag Se”. Inform. Issue 15. August 2008. http://www.strabag.com/databases/internet/_public/files.nsf/SearchView/7D5D5E8E97B7FD1AC12574EB00408A6F/$File/STRABAG_inform_15_eng.pdf?OpenElement. January 30, 2012. Strabag-d. “STRABAG SE Annual Report 2009”. 30th April, 2010. http://www.strabag.com/databases/internet/_public/content.nsf/web/EN-STRABAG.SE-INVESTOR%20RELATIONS-REPORTS-STRABAG%20SE%20Annual%20Report%202009. January 30, 2012. Strabag-e. “STRABAG and Russian real estate developer conclude strategic partnership”. 24 January 2008. http://www.strabag.com/databases/internet/_public/content.nsf/web/EN-STRABAG.SE-PRESS-PRESS%20RELEASES-2008-STRABAG%20and%20Russian%20real%20estate%20developer%20conclude%20strategic%20partnership. January 30, 2012. Appendix Questionnaire Q.1. Is the company working on programs to counter its expansion in Russia? A.1. (a) Yes (b) No Q.2. Do you think that the Russian market is justified enough to render good returns to the company? A.2. (a) Very justified (b) Justified (c) Somewhat Justified (d) Justified to a little extent (e) No at all Justified Q.3 How much competitive is the construction market in Russia? A.3. (a) Very competitive (b) Competitive (c) Somewhat Competitive (d) Competitive to a little extent (e) Not at all competitive Read More