Worlds Leading Construction and Infrastructure Development of Balfour Beatty - Assignment Example

Balfour Beatty Introduction This paper provides strategic analysis of world’s leading construction and infrastructure Development Company from UK, Balfour Beatty (Balfour Beatty 2011). The strategic analysis are conducted by utilizing Michael Porter’s five competitive forces analysis and is supplemented by the financial requirements of setting up company’s business in Turkey and what are the opportunities available to the company in the country. By the end of this paper, certain recommendations are made to improve the short and long term performance of the company in Turkey. Porter’s Five Forces Analysis The analysis of Michel Porter’s five forces helps to increase the market value of the firm. These five forces would enable the company to have the insight of the competitors, and how the suppliers and rivals would affect Balfour Beatty to establish itself in Turkey’s infrastructure development industry. Existing position of Rivals There is intense competition in the infrastructure development industry of Turkey. The customers of infrastructure development industry in Turkey especially the elite class are highly conscious about the quality of infrastructure provided to them and the risks involved within. Therefore; a number of infrastructure development companies are competing in the industry to provide better services to the customers. Although these rivals have a significant market share in the industry, but Balfour Beatty have the potential to become one of the finest infrastructure providers all around the Turkey due to their remarkable performance in United Kingdom, United States, United Arab Emirates and other prominent countries of the world. It has created a market niche by providing product differentiation to its users. It is also using a low medium pricing strategy, which would help the company to compete easily in the Turkey’s infrastructure development industry. New Entrants A number of international infrastructure development companies are entering in Turkey, as a huge potential has been seen in this country and the economic development in recent years has been phenomenal. These new entrants possess a lot of potential to become a threat to the local infrastructure development companies as they have an established name in foreign markets. Balfour Beatty already has established brand loyalty throughout the countries in which operates. These all factors depict a positive aspect, and will help to lessen the entry barriers for the company to launch its operational activities in Turkey. Substitute Products The major focus on construction and infrastructure development companies in Turkey has shifted from constructing buildings, to providing existing infrastructure and buildings on rental basis to the customers. In this scenario, the business and importance of infrastructure development companies is distorted and customers also shift their focus on hiring buildings for rent for temporary purposes. On the other hand, existence of such substitutions does not harm significantly the interest of Balfour Beatty, because the company is not only involved in constructing buildings but also involved in developing basic public interest infrastructure, i.e. railways, highways, roads, and airports. Therefore; the company might shift the focus on the development of infrastructure when its construction business is facing tougher times. Buyer Power It is essential to provide product differentiation in the Turkey’s infrastructure development and construction market in order to reduce the bargaining power of t he customers. The customer’s are price sensitive, so it is necessary to provide reasonable prices and diverse collection which would help to attract more customers. The current situation of global economy compels Balfour Beatty and other companies in the same business to accept strong bargaining power of the customers. This is because; the number of infrastructure and construction projects has also decreased. At the same time, the losses incurred due to customers’ high bargaining power in construction business can be covered by Balfour Beatty by dictating its terms and conditions to the customers in infrastructure development sector. Supplier Power Due to the economic development in Turkey, construction and infrastructure companies has enjoyed greater control on their supply chain members, because there is more construction and infrastructure development taking place in the country. On the other hand, the economic downfall globally has compelled Balfour and its competitors in the industry to slow down their business activities and cut down demanding supplies from the suppliers in return. This is the reason, that the suppliers in the construction and infrastructure development companies in Turkey do not enjoy much bargaining power. Possible Changes, Resources, Costs Required and Recommendations for Improving Performance Considering the fact that Turkey is an Islamic country, it is proposed to Balfour Beatty to change its architectural designs and conduct deep study regarding Islamic architectural heritage and Islamic history. In this way, Balfour Beatty will be successful in wining the heart of Turkish nation and its valuable customers in the country. On the other hand, Balfour Beatty need to enter the market with distinctive set of skills and work force, which do have a sound knowledge about the preferences of company’s customers in the country. Following table sums up the financial costs that will be involved in setting up Balfour Beatty’s business in Turkey: Start-up Requirements £ License Fees 63,200 Start-up Expenses Legal 1,896 Stationery etc. 316 Insurance 1,106 Brochure 1,580 Advertisement 23,700 Website Designing 790 Rent 1,896 Furnishing and Equipment 118,500 Total Start-up Expenses 212,984 Start-up Assets Cash Required 47,400 Start-up Inventory 118,500 Other Current Assets 7,900 Long-term Assets 31,600 Total Assets 205,400 Total Requirements 418,384 Table 1 Start-up Requirements £ Start-up Funding Start-up Expenses to Fund 212,984 Start-up Assets to Fund 205,400 Total Funding Required 418,384 Assets Non-cash Assets from Start-up 158,000 Cash Requirements from Start-up 47,400 Additional Cash Raised - Cash Balance on Starting Date 47,400 Total Assets 252,800 Liabilities and Capital Liabilities Current Borrowing - Long-term Liabilities 118,500 Accounts Payable (Outstanding Bills) - Total Liabilities 118,500 Capital Planned Investment 236,684 Total Planned Investment 236,684 Loss at Start-up (Start-up Expenses) (212,984) Total Capital 23,700 Total Capital and Liabilities 142,200 Total Funding 418,384 Table 2 Start-up Funds Benefits of Setting up Business in Turkey The major benefit that Balfour Beatty can achieve by setting up business in Turkey is the location of country. Turkey is located in between Europe and Asia; therefore it provides a gateway to major countries in both continents. Moreover, Turkey is on the verge of becoming one of the most modernized and industrialized economies in the world and provides enormous chances to construction and infrastructure development companies to boost their business. List of References Balfour Beatty, 2011. Annual Report 2010. Annual Report. London: Balfour Beatty. Read More