Business Strategy and the Kingspan PLC Group - Case Study Example

Business Strategy and the Kingspan PLC Group A. Strategy There is no universal meaning of the word strategy but in general view this word is used to mean the efforts that one applies in achieving the objective of an organization where by it enables a firm to adopt its scope, resources and operations to environmental changes. It is normally a long term plan of action designed to achieve a particular goal whereby it is viewed as a course of action by its prediction that a certain future position taken by a firm will lead to achieving some benefits. The other view on the strategy by business firms is that it involves rules that are set by, traders, investment firms who use it to help them make wiser investment decisions and eliminate the emotional aspect of trading. According to this view strategy wraps around trading formulas into an acceptable systems where all or part of the firm's investment portfolio are integrated. This view is governed by rules that do not deviate, based on anything other than market action and it eliminates emotions bias because the systems operate within the parameters known by the trader or an investment firm. The proponents of this view argue it in two ways: firstly where a trader only needs to trade at the beginning and at the end to ensure the payoff and secondly it is applied between the start and the maturity of the derivative where a trader needs to trade more than once to ensure the payoff at maturity. 1 The second view of strategy is directed to the production, distribution and consumption of goods and services, this have been applied to fields that involve people making choices in a social context. It relies on the collection of economic data which consists of measurable values of prices and changes in prices, for measurable commodities for example the cost of a particular commodity and how much of it is being used, the relationship between the general level of prices and the general level of employment this including the observable forms of economic activities such as money, consumption, preferences, buying, selling and prices. A strategy can also be viewed as a planning process that can allow an organization to concentrate its resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage, serving as a fundamental underpinning of marketing plans designed to reach an organizations marketing goals, policies and action tactics into a cohesive whole. This view may take the form of market dominance where organizations are classified based on the market share or dominance of organization for example, a market leader, a market challenger and a market follower. It may also take the form of the dimensions of the strategic scope relating to the market penetration and strategic strength of the competing firms, where by competitive advantage such as cost leadership, product differentiation and market segmentation can be achieved. 2It also takes the form of dealing with the firm's rate of new product development and business model innovation. It also describes how the firm should grow which is normally done by horizontal integration, vertical integration, diversification or intensification. Another view of a strategy is a process of specifying an organization's visions, initiatives and processes in order to deploy their online assets including: websites, digital audio and video content, rich internet applications, community groups, banner advertisements in a manner that maximizes the business benefits they provide to the organization. This plan is normally presented in three ways:-identifying key opportunities or challenges in a business where online assets can provide a solution:-identifying the unmet needs and goals of the customers that align with key business opportunities and lastly developing a vision on how the assets will fulfil the business and customer needs, goals, opportunities and challenges. The other view of strategy is concerned with geographic direction of state's foreign policy. This describes a foreign policy thrust of state and does not deal with motivation or decision making processes; therefore, it is not motivated by any geographic or geopolitical factors. Under this view a strategy may state a project power to a location because of ideological reasons, interest groups or the wish of the leader. It is more often used in a global context denoting the consideration of global land sea distribution, distances and accessibility among other geographical factors. 3 A Strategy can also be viewed as a document that explains how information technology should be utilized as part of an organizations overall business strategy. It is normally created by an organizations' Chief Information Officer or a technology manager. Such a document is designed to be read by the non-technical stakeholders involved in a business planning within an organization. It must be free from information technology jargon and it should also be presented to or read by internal information technology staff members. Such structure indicates the level of the organizational benefits, relationship to overall business strategy and a resource summary, internal capabilities which shows the strengths and weaknesses of the department, external forces-that indicates the rising expectations of the users, changes driven from outside the organization, opportunities that describes the efficiency increase opportunities and the threats which are disruptive forces that could cause the organization to be less profitable. The other view of a strategy is typically directed by the political leadership of a particular country with input from the most senior military officials. It is normally put at the level of movement and use of entire state resources such as the general types of armaments to favour manufacturing and which international alliances best suit national goals. This view overlaps with foreign policies but focuses primarily on the military implications of policy. Because of its scope and the number of different people and groups involved, a strategy is usually a matter of public record though the details of implementations are always concealed. How the Kingspan PLC group management functions Kingspan PLC group was founded in 1972 as a family business by Eugene and Brendan Murtagh who are both currently the members of the board of Directors. The group was initially involved in the manufacture of metal cladding and rolls, it formed structural sections later the group expanded into the manufacture of insulated panels and insulated products whereby it established numerous manufacturing plants in the U.K and Ireland. The group floated on the Irish stock exchange in 1989 at a share price of EURO. 20 equivalents, with a market capitalization of EURO 25.0 million. In 1990s Kingspan expanded through acquisitions and the addition of manufacturing plants and sales companies in the U.K, Benelux, Germany, Poland, Hungary and the Czech Republic providing the group with additional geographic diversity. Large scale expansion also occurred across the groups main operating rules. The group has been responsible for the development of the market for insulated cladding panels in the U.K and Irish markets. It is most highly recognized brand for these products in the markets it services across Europe. The group manufactures a range of rigid insulation products for use in the construction and related industries. 4 Kingspan seeks to evaluate and acquire businesses with its strong product, technical, manufacturing and management capabilities that are effectively integrated in the groups existing business model. The group has been acquiring companies that created value by expanding its products and operations to continue being acquisitive in future as it considers the optimal mix of products and operations to serve its potential markets. Kingspan is recognized throughout the construction industry for its commitment to innovation, design quality and technical expertise. It has an integrated approach to building, envelope solutions has made the groups approach first choice in meeting the specialist needs of architects, specifiers, developers and owners. Kingspan has manufacturing and distribution operations throughout Europe, the Far East and the United States on its operations on an international level. It evaluates the completion and performance of the projects in terms achieving excellence in construction strategic targets, whole-life value including financial performance and delivery of better public services and sustainable development. Operation departments considers linking suppliers' contract incentives to the delivery of post-completion improvements, which include assessment of environmental impacts such as carbon dioxide emissions, energy and water usage, waste, and workforce wellbeing. 5 The groups' products are designed to reduce capital costs and improve the quality and working environment both in new and refurbished buildings; under this many products are integrated offering the client improved build speed, exceptional thermal performance and undisputed fire-safe construction. Through the company's continued investment in research and development, commitment to quality and performance the group is looking forward to a future of continued service to the construction industry world wide. Kingspan human resource depends on the commitment, skills and adaptability of its workforce. The group depends largely on a continuing supply of skilled people, at all levels, to enable it provide the buildings and structures clients needs, other dimensions include fostering management and leadership skills, and addressing the disproportion between men and women in the industry, and the low proportion of those from ethnic minorities. The internal control of the group include the board of directors whose responsibility is to implement the groups internal control system to executive management. This delegation ensures the embedding of the group's operations and ensures that the organization is capable of responding quickly to evolving business risks. Under finance department, the internal control system is required to report risk issues to the appropriate level of management quickly as soon as they arise. This system is designed to manage rather than to eliminate the risk of failure to achieve business objectives, it can also provide a reasonable but not absolute assurance against material misstatement or loss. 6 A comprehensive Annual Budgeting process and a review by the board of actual performance compared with budget on a monthly basis, clearly defined and appropriate levels of authorization for all transactions, the audit committee and an internal audit function. The financial Statement is regularly reviewed by the Board. Consideration by the board of the impact of the companies (Auditing and Accounting) Act 2003 on the group, the approach by the group is proactive in identifying possible weaknesses and obtaining the relevant degree of assurance on specific areas of internal control. Under the corporate governance the group's directors are committed to achieving the highest standards of corporate governance and this describes how the principles of good governance set out in the combined code on the Corporate Governance July 2003 as appended to the listing rules of the Irish stock exchange and the U.K listing authority have been applied by the company. 7 The board of committees has appointed Audit, Remuneration and nomination committees and all committees of the Board have written terms of reference setting out the authorities and duties which are in accordance with the provisions of the combined code whereby the chairman of each committee is to give a report on the committees proceedings at Board meetings when required to do so. 8 The Board of directors of the Kingspan Group consists of six executives and seven non-executive directors whereby each of them has a combination of general industry and business experience, functional skills and experience in construction materials market. These directors bring an objective judgment to bear on issues of strategy, resources and standards of performance. The Board of Directors reserves for itself a formal schedule of matters which it takes the ultimate decision, covering the assets, the raising of capital, strategic plans, operating budgets, treasury and risk management policies, organization structure, recruitment of senior executives and overall personnel policy while other matters are delegated to the Board Committees. The division of responsibilities between the Chairman and the Chief Executive is clearly established, set out in writing and agreed by the Board. The Group has arranged appropriate insurance cover in respect of legal action against its directors. The group has an objective to conduct its business activities in an environmentally responsible manner. Kingspan Group normally sets out its formal Environmental Policy effective from 1 January 2004 this policy is described below: The Group is committed to: Complying with applicable environmental legislation Optimizing of Energy and Raw Material usage, Prevention of pollution and environmental damage, Continuous improvement of environmental performance. Kingspan Group has embedded environmental responsibility throughout the company by designating champions at Group and Divisional board levels; also it has set and has been Monitoring key objectives and targets to minimize environmental impact. 9 The Group and each business unit have been tasked with the development of a policy of communication with key stakeholders The Kingspan's businesses are focused on the maintenance of market leadership in their main product categories, based on their reputation for innovative design, exceptional quality, and technical expertise. These businesses have demonstrated an ability to re-invent in order to accommodate the requirements of an ever-changing construction environment. Kingspan's strategy recognizes that there is a continuous move towards environmentally friendly buildings. Kingspan group highlights the revenue-generating benefits of sustainable market strategies through, enabling a company to become more attractive to clients who have corporate responsibility policies, good environmental management policies and practices; increasing market share and earnings; producing more attractive flexible properties, with quicker or higher value rent-up of space, higher occupancy rates and or lower operation and maintenance cost, creating opportunities for new business such as environmental consulting. Kingspan's strategy is the notion that building methodology is significantly changing with a continual move across all sectors (industrial, commercial, institutional and domestic), in order to minimize site work, eliminate wet trades and reduce construction times. We can therefore conclude that, the movement towards environmentally sustainable buildings that incorporate elements of renewable energy is driven by ever the stringent building regulations and environmental legislation. The Group's strategy is designed to position Kingspan where it will have high recognition for providing the best-integrated solutions for all principal segments of the construction industry. 10 References Axelrod, R. and Cohen, M. (1999): Harnessing Complexity: Organizational implications of a scientific frontier: New York, The Free Press Buzzell, R. and Gale, B. (2000): The PIMS Principles: Linking Strategy to Performance: New York, The Free Press Hamel, G. and Prahalad, C.K (1994): Competing for the Future: Boston, Harvard Business School Press Kingspan (2007): Kingspan Group Plc. Retrieved from, http://www.kingspan.com/, Accessed on April 12, 2007 Liekskin, J.P. (1996): Knowledge, Strategy, and the Theory of the Firm, Strategic Management Journal, Vol. 17, Winter 1996 Read More