Business Strategy of Kelly Services, Inc - Case Study Example

BUSINESS PLAN: Kelly Services, Inc. 1. Executive summary Kelly Services, Inc., headquartered in the United States, is an expert staffing organisation that provides temporary support workers to many different industries across the globe. As an employee of Kelly Services, the company provides considerable benefits such as flexible hours, highly competitive pay structures, and the ability to move from industry to industry in order to gain practical working experience. The company even offers vacation time based on the amount of hours accrued, and can be as much as three to five weeks each year. With the current growth levels in temporary staffing within many companies looking to outsource some of their labour costs, Kelly Services is often a name that is trusted to provide ongoing business expertise and it has a trusted brand name in Europe, North America, Asia, and Australia (and many other regions). 2. Opportunity analysis Kelly Services boasts considerable revenues, making it one of the largest temporary labour staffing companies in the world. In 2006, in just a single quarter, the company’s total sales were over 1.36 billion USD (ir.kellyservices.com, 2006). In the same year, international revenues accounted for 32 percent of total global sales, with increases in international sales at over 7.6 percent (ir.kellyservices.com). These figures, even in times of economic recession, continue to show chartable growth rates, making this a lucrative business with not a great deal of overhead. Much of this growth is due to the knowledge and expertise that the company provides to clients internationally, using a dedicated and educated labour pool to provide instant temporary support when needed to small, medium and large-sized companies. Kelly Services recently launched a new temporary staffing division in Portugal, via acquisition of a smaller staffing company. Offers President Carl Camden, “This acquisition supports our strategy of global growth to serve or worldwide customer base with a full array of human resources solutions” (Polehna, 2008, p.1). Further, Kelly services has a division in India, a growing industrial market, and is the leading staffing agency for this country offering HR services, staffing and related support services (kellyservices.co.in, 2010). This ability to function within multi-national environments and provide temporary support to global customers illustrates that Kelly Services has the internal expertise, legal knowledge, competency in human resources and human relations, and cultural awareness needed to provide excellence in service and labour support. Because of this expertise, Kelly Services will be launching a new division of the company that can allow the company to seize higher market share and use its functional structure to provide marketing research services to many small, mid- and large-sized companies around the globe. Marketing research consists of performing primary or secondary research efforts to uncover what the driving forces are behind certain consumer, commercial or other industrial markets. It is a process of using surveys, focus groups, questionnaires, data mining, or other research efforts to uncover what buyer markets “want, need or believe and can also discover how they act so as to determine how to market a specific product” (marketresearchanalyst.com, 2008, p.1). Marketing research services then take this information and compile it into meaningful reports with recommendations for how the client should proceed with strategy based on data findings. Growth in market research is substantial as it a service being demanded by companies that are looking to outsource this function to avoid overhead costs to conduct this process. The Market and Information Technology research industry grew 8.9 percent in 2006 (Garnett, 2007). In non-specific industries, generic need for outsourced marketing research professionals experienced growth of 7.9 percent in 2008 which represented an industry valued at 33.1 billion USD (outsellinc.com, 2008). This is a tremendous opportunity for Kelly Services to expand its client base, improve global sales figures, enter new markets for both market research and temporary staffing and also give the business a better competitive edge through diversification of service offerings to international clients. The market size is virtually limitless, especially when businesses are relying on outsourced talents to avoid having in-house marketing research teams. In a period of economic recession, it is also an excellent opportunity for Kelly Services to rely on its talented and educated international labour pool to assist in these marketing research efforts. Using its divisional outlets and support teams in Asia, North America, Europe and Australia, Kelly Services will offer hands-on marketing research services for many different market segments or key buyers of products and services. 3. The risks Fortunately, the risks to this new business venture are minimal due to the wide availability of employees and internal management with the skills and resources already developed to work with many different foreign or domestic clients. These skilled, functional teams have the practical knowledge in overseas labour laws, already have developed human resources models in use for temporary staffing assignments for many continents, and have established positive relationships with governmental leadership as a trusted staffing agency. Kelly Services also has a business model that is not subject to many barriers to new market entry because of the nature of the services (Kelly Services, 2008). The product being offered is the human talent and knowledge backgrounds of dedicated temporary teams, thus it is not subject to the regular product-related issues usually associated with companies that market tangible goods. Kelly Services provides, from a political perspective, very little risk in loosening regulations for new market entry as our people provide both business and economic support to these foreign countries with all of our current staffing models. This is, by most accounts, a virtually risk free addition to the Kelly Services staffing model that could increase sales revenues and improve our market share by an estimated 10 to 15 percent in just under two years as long as outsourcing service contracts can be procured by our sales teams. 4. Estimated start-up costs Kelly Services already has international staffing locations that generally used rented professional office space as a means to reduce operational costs. The new marketing research function will rely on these existing branches to support the new service concept. In terms of buildings and equipment, these are already recognised in the Kelly Services accounting platform. Other than the corporate talent and management teams needed to support the new marketing research division, there is very little in terms of start-up costs in order to make this a success. Below is a breakdown of the expected costs, at the international level, in U.S. dollars, for proposed start-up needs: Labour Labour costs – Including management and support $510,000 North America Labour costs – (et.al.) $850,000 Europe Labour costs – (et.al.) $1,190,000 Asia Labour costs – (et.al.) $510,000 Australia Labour costs – (et.al.) $1,275,000 Misc. territories In more developed regions, such as North America, the ability to transfer existing staff to other locations is more readily available, thus the expenditures for labour are significantly reduced comparatively to Asia and other global regions. The figures identified for labour represent annual salaries for a single support/operational manager at 50,000 USD, with two support specialists annually earning 35,000 USD. All other labour associated with the provision of the new marketing research service will be current in-house support staff that will be trained to assist in this new divisional development. Equipment, sales and miscellaneous support needs The following start up costs include interoffice communications equipment purchases needed to support the new division, sales support tools, software purchases, office supplies, legal representation, and other miscellaneous expenses linked with a start-up operation. Cumulative support costs – globally $800,000 Total Start-Up Costs $2,075,000 Though this expenditure might seem higher than expected, it represents less than 1% of current total sales revenues, which Kelly Services, Inc. believes is well within tolerable spending norms. Even with unforeseen costs rising upwards of 10 million USD, this would still represent less than 2% of total global sales and would fall within tolerable norms for this new research venture. The gains from increased revenue production over the first two years of launch would supersede even the higher $10 million potential budget figure based on market growth in research, outsourcing growth, and our strong connections with large marketing firms, such as Nike. Kelly Services will rely on the considerable word of mouth reputation it currently has in many international markets and our reputation for service quality and support provision with major industrial and consumer-based clients. 5. Environmental analysis Kelly Services relied on the PEST framework for environmental analysis to identify situational events or threats associated with the new Kelly Marketing Research Service Division. PEST factors “play an important role in the value creation opportunities of a strategy. They are usually beyond the control of the operation and must be considered as either threats or opportunities” (valuebasedmanagement.net, 2010, p.1). Economic Most businesses have problems with labour costs being high due to the global economic recession and therefore are looking for ways to cut costs, often through labour reductions or early buyouts. However, for Kelly Services, this is a large strength as with the need to reduce costs associated with health care, bonus programmes, or other employee support services, we can provide their needs at a much lower total cost and still guarantee knowledgeable temporary workers or support team services. The economic climate is generally favourable for this type of outsourced talent in every international territory, most of which have achieved year by year sales growth. Political As identified, strong relationships are currently in place with many international administrators because of the limited stress that our business model puts on government in terms of adhering to national labour laws and the nature of our service provision. We are a low-risk company to political powers or other regulatory bodies and we are granted new market access relatively quickly. This is also based on our strong cultural model in human resources that helps our internal teams (or externally procured support staff) to work with individuals from all market environments. Pricing is a concern at the political level and it is something that must be aligned to meet profit objectives and avoid the perception of being over-priced based against our many competitors. Changes in laws and labour regulations occur often in different regions and this pushes up our labour margins when we have to offset support costs associated with making changes to our human resources policies or technologies. Increased taxes, including payroll taxes, can reduce revenues and total earnings (Kelly Services, 2008). Social Some of the marketing research services will be conducted using temporary help, rather than full-time internal associates directly employed as corporate representatives of Kelly Services. Recent findings have discovered that temporary employees have difficulty adjusting to new environments or functioning effectively within them without some degree of fitting in with the outsourcing partner’s culture. Temporary employees, based on the results of a recent employee-based research study of temporary workers, offered that temporary staff are highly concerned about work relationships because their status is often quite ambiguous among the permanent employees not working directly for Kelly Services (Blatt, 2008). Though this will not fit every temporary needs profile, it is a concern that must be addressed. Our headquarters in the U.S. and our support management teams in other territories will need to invest more research and cooperative tools to work with our outsourcing clients to help stabilize the ambiguous nature of our temporary teams to boost motivation and excellence at the psycho-social level. Dedication will be a large source of competitive advantage against our largest temporary staffing competition and social needs will need to be identified, isolated, and transformed through collaborative human resources processes. Cultural Adapting to local cultures is a matter of business norm and the HR talent and support tools recognising local values is superior to that of competition. For example, in Asian countries, group consensus is usually valued over individualistic expression or accomplishment (Blodgett, Bakir & Rose, 2008). Our teams have the resources needed to adjust and satisfy cultural needs at the management, executive and temporary support staff levels. 6. Competitive analysis Our competitors consist of many smaller staffing agencies supplying services for local regions. As a whole international group, small competitors make up about 20 percent of global market share. Larger competition include Allegis Group, Spherion Corporation, Manpower Inc, Adecco, Robert Half and Randstad Holding NV (Kelly Services, 2010). The majority of these competitors provide competitive opposition in most of our international regions and make up, as a whole, approximately 50 percent of global market share. Pricing is the most competitive strategy used in all international markets, therefore Kelly Services must remain loyal to conducting routine competitor analyses to identify if we are being undercut or whether our pricing model is set too low to remain competitive financially. Some of our expert support members earn upwards of 20 USD per hour, down to as low as six or eight USD per hour based on level of knowledge or regional salary guides. Outside of price, the majority of our services are homogenous and difficult to differentiate outside of pricing or level of quality through branding exercises in promotion. Kelly Services expects some of our larger competitors to witness our new service strategy and attempt to benchmark our successes or adapt to a similar model shortly after launch. For this reason, we will consider our major competitors to be our current temporary staffing competition rather than large-scale industrial marketing research companies, as Kelly Services has a model that can outperform even these research companies with our highly competitive labour pricing ability as a competitive tool. 7. Strategic analysis Kelly Services’ core competency is the transformational leadership model that is used in most of our international divisions. This deals with training and reinforcement for managers to use concepts of vision formation, leading through vision, realignment of organisational structure to fit new business scenarios, motivation, inspiration and modelling ethical behaviours (Adams & Adams, 2009). Our largest is strength is in adaptability to unique business situations and then having the leadership that is educated on transformational policy and procedure. Our recruitment and retention efforts locate talent that can be identified as having these desirable traits and then developing them further to make them unique for the Kelly Services global models. The human resource frameworks used work with concepts of distributive justice, dealing with employees’ different perceptions of fairness or justice versus consequence that is quite different in all of our international divisions. For a distribution to be perceived as fair, it must be consistent with local or business norms associated with allocation (Monin, Noorderhaven, Vara & Kroon, 2009). A major strength is in the focus for developing more skilled human resources knowledge and support policies that is unparalleled in the global marketplace. This helps to aid in building a solid global brand and word of mouth reputation, which we estimate verbal third party representation of our brand to account for 15-25 percent of our new business clients that are referred. Mode of entry has been described, simply aligning the necessary local or expatriate talent needed to provide divisional support, and the sales teams needed to retain and procure new research-based accounts. This function of aligning the business can be accomplished within four to six months after assigning international budgets to our support locations and procurement of support tools and equipment begins. We will be, during this time, making contact with our current clients to identify their marketing needs by scheduling formal meetings to discuss our new business venture, our plan for supporting it, pricing, and its functional design in order to gain attention from our highest profit-generating clients. Nike is currently under a multi-million USD contract allowing Kelly Services to manage contingent workers at its facilities (Hansen, 2007). Contact will be made with these larger clients first to discuss our marketing research knowledge and attempt to draw further contacts. After such negotiations have been secured, new prospects will be identified and then sought after by our local support teams and expatriate sales groups internationally. 8. Identifications of weaknesses to strategy The only real identifiable weakness to the new business concept is associated with sales teams who will need to convince organisations that we can not only provide their staffing needs effectively, but handle their important marketing functions related to their products with the same dedicated service. This involves a brand transformation from simply staffing and support to one that works directly with their sources of revenue creation. Sales teams will need intensive training to manage this effort, which could push budgets higher than expected for training initiatives. This will be considered after executive analysis of our sales team competence and must be led by senior managers to ensure it is aligned with corporate goals. It cannot be controlled locally for it requires extensive knowledge of governance principles, executive strategy, and legal representation. 9. References Adams, W. & Adams, C. 2009, Transform or reform, Leadership Excellence, 26(11), p.17. Blatt, R. 2008, Organisational citizenship behaviour of temporary knowledge employees, Organization Studies, 29(6), pp.849-866. Blodgett, J., Bakir, A. & Rose, G. 2008, A test of validity of Hofstede’s cultural framework, The Journal of Consumer Marketing, 25(6), p.339. Garnett, L. 2007, Market and IT & Telecom Research, Reports & Services Market Size and Share Rankings: 2006 Results. http://www.outsellinc.com/market_research/products/511 (accessed April 2, 2010). Hansen, F. 2007, A permanent strategy for temporary hires, Workforce Management, 86(4), pp.25-31. Ir.kellyservices.com. 2006, Kelly Services reports 117% net earnings growth for the first quarter of 2006, Kelly Services Reports. http://ir.kellyservices.com/releasedetail.cfm?releaseid=285645 (accessed April 3, 2010) Kelly Services. 2010, Kelly Services Inc. Annual Report, pp.6, 9. http://files.shareholder.com/downloads/KELYA/888664299x0xS950123-10-14089/55135/filing.pdf (accessed April 3, 2010). Kellyservices.co.in. 2010, News Room. http://www.kellyservices.co.in/web/in/services/en/pages/mediacentre.html (accessed April 3, 2010). Marketresearchanalyst.com. 2008, Market research methodology, Market Research Analyst. http://www.marketresearchanalyst.com/wp-content/uploads/2008/01/market_research_methodology.pdf (accessed April 2, 2010). Monin, P., Noorderhaven, N., Vara, E. & Kroon, D. 2009, A sense-making perspective on the Air France – KLM Merger. http://portale.unibocconi.it/wps/allegatiCTP/Monin-Noorderhaven-Vaara-Kroon.pdf (accessed April 4, 2010). Polehna, J. 2008, Kelly Services Expands into Portugal. http://ir.kellyservices.com/releasedetail.cfm?ReleaseID=320969 (accessed April 1, 2010). Valuebasedmanagement.net. 2010, Political, Economic, Social, Technological Factors – PEST Analysis (STEEPLE). http://www.valuebasedmanagement.net/methods_PEST_analysis.html. (accessed April 3, 2010). Read More