Business Strategy: Lafarge Tarmac Ltd - Case Study Example

Business Strategy Introduction The modern technology and the improvement of the quality education have been major catalysts in the development of modern business environment. Essentially, a keen overview of the modern business world reveals that massive transformation has taken place. Several developments have been introduced to boost the quality of production and service delivery. Consequently, numerous business strategies have been advanced to boost profitability and the quality of service delivery. For instance, business mergers have become very popular in the recent past. Witcher & Chau, (2010) states that mergers have proven to be effective strategies for conducting business of varied kinds. Several studies reveal that many business firms have recognized the need to combine forces in providing goods and service (Liedtka & Ogilvie, 2011). A good example of the benefit of establishing business mergers is the success of the Lafarge Tarmac Ltd, a joint venture between two multibillion companies. The joint venture was established in 2013 following an agreement by two firms and clearance by the UK competition commission. The agreement involved Lafarge UK and Anglo American plc. The two companies agreed to combine their assets and personnel to form an influential firm in the industry. The major focus of the report is to evaluate the business strategy employed by the Lafarge Tarmac and various challenges that the company experiences in its daily operations. Task one: Lafarge Tarmac Ltd strategic planning process The joint venture company has established cognitive structures for present and future prosperity. Primarily, the two firms entered the venture to fulfill certain objectives, goals and vision. The daily business of the joint venture is usually mission. Mission The mission for the venture is to be provide incomparable products and services in the construction field that are geared towards promoting safety and sustainable development. The mission motivates the company to provide solutions to various dilemmas experienced in the building and construction sector. In essence, the company’s activities are tailored towards achieving the already established mission. Vision The vision of the company is to be a leading company in the global construction field. Objectives and goals To develop a logical operational system that enhances efficient procurement process. To create quality brand. To enhance sustainable development by establishing measures that regulate the use of fossils fuels. To produce products that do not emit greenhouse gases. Core competence The merging of the two companies gave them an upper hand in the industry. The core competence of the company is a diverse workforce and sufficient infrastructure that facilitates quality production and transportation of materials from the production site to the required destination. That is, the company’s employees are specialists in the various areas of occupation and, therefore, it can be observed that the company has a promising future for development. In essence, strategic planning cannot be effective in absence of competent and reliable personnel. In addition, a well-structured production infrastructure is inevitable for proper implementation of strategic plans. Therefore, the Lafarge Tarmac Ltd has most of the required facilitates for the implementation of an outstanding strategic plan. In essence, the various competence components of the company have been very influential in its outstanding performance in the industry. Factors to be considered when formulating strategic plans The process of formulating strategic plans is quite comprehensive and, therefore, an effective foundation is inevitable. In essence, various factors have to be considered when formulating strategic plans (Sengupta, 2006). Some of the factors that have to be considered when formulating strategic plans include available finances, infrastructure, personnel competence and prospects for future development. The effectiveness of techniques used when developing strategic business plans There exist numerous mechanisms that are used to develop strategic business plans (McKinley, 2005). The Lafarge Tarmac Ltd can employ the BCG growth share matrix to develop new strategic business plan. The matrix provides an oversight of the process involved in developing a business ventures and the stages involved in making the entire process successive. Moreover, the company should investment in the modern technology to enhance compatibility with emerging trends. In essence, the use of modern technology facilities to develop strategic business plans is quite appropriate for the company. Apparently the new developments in the construction industry necessitates the inclusion of modern technology in planning the various activities of the company. Therefore, the company should increases its budget on research and installation of modern technology facilities to facilitate effective implementation. Task two: Formulating the new strategy Organisational Audit Benchmarking Benchmarking can be termed as the practice of evaluating various business practices in the industry to identify the most appropriate one. The Lafarge tarmac Ltd stands a better chance of implementing the best strategies than its competitors since it combines the expertise of both Anglo American and the Lafarge UK. In essence, the effective implementation of strategic plans SWOT analysis Strengths Competent and skilled workforce in the management body Provision of quality and reliable products that are friendly to the environment. Affordability of the products offered by the company Customer friendly employees that are committed to providing quality services. Weakness Challenges in merging the two companies Poor predictions to future market trends and developments in the industry Limited chances of employees meeting the top company officials Opportunities Adoption of modern technology to access external markets Unlimited prospects for expanding the line of business that the company operates Possibilities of acquiring some firms in the industry. Treats Massive competition in the industry Government regulations and controls Rapid changes in the industry Positioning The techniques adopted for market positioning of an enterprise determines the overall performance in the market. In essence, several studies have identified that positioning is one of the most crucial factors for business success. Fortunately, the Lafarge Tarmac Ltd recognized the importance of strategic positioning for all its establishment. Apparently, positioning is usually determined by several factors. Some of the major factors that influence positioning include accessibility of the raw materials, market proximity, transport means, future prospects and many others. In essence, if the cost of transporting raw materials is too high, the production plant is positioned close to the source of the materials. Basically, the nature and reliability of the available means of transport influence strategic positioning of firms (Thompson & Martin, 2005). The production plants of the Lafarge Tarmac limited are located close to the sources of raw materials. In addition, the company considers the accessibility of their area chosen to establish its factories to avoid transportation inconveniences and delays in delivery of materials. A critical analysis of the company’s structure reveals that it is strategically positioned since the location is reachable as it is connected by a well-developed transport network. It is imperative to point out that managers should assess the accessibility of an area before establishing a business concern. Value-chain analysis Value chain analysis focuses on interaction with business partners in the industry to assess the progress of the company. The Lafarge Tarmac Ltd is now for its emphasis on value creation and customer satisfaction. In essence creation of value in the customer’s expenses has offered the company a competitive advantage over its rivals. Essentially, the company has a broad customer service network that enhance quality customer services and timely response to customers’ queries. Ansoff’s matrix According to Bachmeier (2009), Ansoff’s matrix is used to evaluate the company’s growth strategy by focusing on its market penetration plan, market development potential, and ability to develop its products as well as to diversify its product range. The merger of Lafarge and Anglo American enabled Lafarge Tarmac to increase its operations branches throughout UK. These branches enable Lafarge to penetrate in the industry due to enhanced coverage. Lafarge is also able to develop its market by distributing its products to places that it was not able to serve before. With over 500 formulations of concrete, it is evident that Lafarge’s product development strategy is effective in serving the market needs. Lafarge has also managed to diversify its market operations through targeting different forms of construction projects and serving them with their innovative products. Porter’s 5 force analysis Regardless of the huge coverage by Lafarge, there still remains to be threat of competition from new entrants. Lafarge can counter this threat by provision of quality products to ensure customer loyalty. With the ability of Lafarge’s concrete products to reduce time in construction projects, the customers are able to handle multiple construction projects within a short period of time, thus increasing their purchase power. Lafarge on the other end has the potential to alter the prices of the products due to the functionality of these products. However, Lafarge stands to benefit more by employing economies of scale in its operations. In order to counter potential of losing market share to substitute products, Lafarge will have to keep innovating its products and ensuring availability of the products whenever the customers are in need. The merger of two rival companies means that Lafarge is able to provide timely services and employ new technology while at the same time controlling the market share with its wide range of products (Henry, A. (2008). Stakeholder analysis As Lafarge formulates its new strategies, the management needs to understand the extent that the new strategies will have on their stakeholders. This will ensure that the new strategies do not have a negative effect on the company’s image and performance. Understanding the stakeholder’s needs will also help the company to be able to enhance co-operation with stakeholders. Companies need to rank stakeholder interest and contribution to the overall goal of the company (Dransfield 2004). This ranking will ensure that the organizational strategies are in line with stakeholder expectations subject to priority. The management will have to understand who their stakeholders are, evaluate the level of importance of all stakeholders, strategize how to be effective with handling and satisfying the stakeholders and finally engage the stakeholders meaningfully in a manner that will benefit the organization. Task Three: Approaches to strategy evaluation and selection Market entry strategy There exist unlimited strategies that a company can use to enter new markets. Birkin, Clarke & Clarke (2002) sates that market entry strategies include merges, acquisition, relocation and many others. For instance, the Lafarge Tarmac Ltd employed the merger market entry techniques to penetrate the UK market. Through margining, the company has unlimited advantages. For instance, the company has numerous assets since the two firm brought their resources together, in addition the company has the advantage of being served by employees who are experts in various field. In this regard, the company enjoys a broad capital base. Task four: Assess the roles and responsibilities of personnel who are charged with strategy implementation at Lafarge Tarmac Table 4.1a – Provide theoretical evidence to support what strategy implementation would mean to the operation of the business Strategy Implementation Business Operation (The impact of strategy implementation on the operations of the Business) Culture According to Schein (2010), a culture that is well established will affect all the operations of the company. It is the culture of Lafarge to offer proper customer service to its clients. The implementation of the substantive growth strategy will enable Lafarge to acquire more outlets, therefore enhancing the interaction with the clients, thereby enhancing customer confidence. The strategy will also expose Lafarge to a wider range of ideas and opinions. Lafarge allows its employees to contribute their opinion in decision making process. The presence of more staff will mean that Lafarge will have more opinions which will play a vital role in decision making. The research and development team of Lafarge will benefit from the additional information from the staff of the newly acquired company. The information harvested will assist Lafarge to come up with new innovations that will enhance solutions to the challenges in the industry Structure According to Aquinas (2010), organizations face a major challenge in coming up with effective structures that enhance productivity from all the levels of operations. The substantive growth strategy will expand the size of Lafarge and therefore increasing the need for a comprehensive structure that will be able to manage the company effectively. The management of Lafarge will need to change the organizational structure by creating other positions like regional managers so as to manage the company effectively. Creation of such positions will affect how tasks are allocated to the different departments. The company will have wider coverage and more employees working towards the same goal. Resource allocation will also change since there will be increased operational costs to cater for operations of the new regions of operations. Lafarge should be prepared to face rigidity in acceptance of the proposed structure from both its employees and those of the newly acquired company. Lafarge should also assimilate the management team of the acquired company to positions that suit their status in order to enhance productivity. Systems When Lafarge merges operations with Anglo American, two operational organization systems will be in place. The challenge that the management will face will be to harmonize the system and enable Lafarge to operate under one system. To achieve this, the management of Lafarge will need to orient all the employees on the system to be used and the different processes involve in a day to day operation. Lafarge will be better placed to adopt best practice from Anglo American and integrate them in the new system of operations. Table 4.1b Use the Strategy Practice Model to identify the roles and responsibilities of personnel who are charged with strategy implementation at Lafarge Tarmac and state which methods could be used to communicate the strategy Strategists (Who?) Activities (What?) Methodologies (Which?) Executive committee In charge of Lafarge’s strategy formulation. Through goal setting, the committee will be responsible for managing the operations of Lafarge and supervising the operations of the firm to ensure that functions are executed appropriately within the required systems and structures. Senior management team Responsible for interpreting strategies and setting procedures to be followed to achieve the organizational goal. The situational knowledge of Lafarge will enable the senior management team to formulate operational policies that will best suit the position of the organization. Setting the procedures will enable the company to adjust to the new structures and implement the substantive growth strategy. Departmental heads The departmental heads will oversee implementation of company policies in their respective departments. The departmental heads will use their competency in communication to ensure that the company strategies and policies are well understood within their departments. They will conduct regular follow ups to ensure that the strategies are followed as stipulated. Regional Management The regional management teams will ensure that their regions operate under the company strategies. The regional managers will use their competency in communication to ensure adherence to company strategy in their regions. They will be responsible for maintaining a uniform company image across all regions of operations. Sustainability team The sustainability team of Lafarge will work to ensure that the strategies implemented are sustainable and beneficial to the company. Through anxiety management, the team will be able to observe all levels of the company and take note of the challenges being faced so that they can advice the company on need for changing the strategies if need be. Table 4.2 Analyse the estimated resource requirements for implementing a new strategy for Lafarge Tarmac Type of resources required Access to / availability of resources Constraints/ obstacles that may affect the implementation Financial resources Lafarge will be able to raise more funds for running the company from the merger. These funds will enable seamless operations of the company. Despite the funds being available, there will be challenges on how the funds can be accessed due to difference in systems of operations. Merging the two enterprises will create a conflict between the systems to implement in Lafarge’s operations. This might take substantial time before finally agreeing on the most effective system to adopt for the whole company. Such cases stand to create delays in operations. According to the case study, it took Lafarge two years to be efficient in operations since merging the two companies. Management skills Merging the two companies will provide Lafarge with huge management experience and skills. The two management teams from both companies will be able to brainstorm and come up with the best strategies to implement in the company. There might be challenges and supremacy battles among the management team of the two companies. Some managers may feel superior that those of the other company. This might frustrate some member of the management team and affect their overall performance. Work force The merger will enable Lafarge to cover large geographical areas; this will mean that Lafarge will need to have a large number of staff in order to perform effectively. Both companies that merge will provide the staffing needs of the formed company. These staff will be best suited for the job since they understand the operations and the industry well. Having many staff will affect the financial position of the company when it comes to paying salaries and wages. Lafarge will have to ensure that there is optimum productivity from the staff and high return on investment in order to be sustainable. Operating space With the many staff on board, Lafarge will need to have sufficient operating space to ensure that the staffs are able to perform effectively. The assets of the two companies will provide this to the staff. The wide coverage of the merger will necessitate the management to conduct regular site visits. This will increase the cost of operations for the company. It will be in proper for Lafarge to place regional directors who will spear head of regional operations and report to the top level management. This will reduce the time and resources needed to conduct frequent site visits. 4.3 Evaluate the contribution of SMART targets to the achievement of strategy implementation in Lafarge Tarmac Targets (corporate, operational & individual) to be reviewed and evaluated SMART principles (specific, measurable, achievable, realistic and time constrained) Tool of evaluation/control and its suitability to evaluate/control the target Corporate Lafarge targets to be the market leader in the construction industry by commanding a large market share. This is made possible through the merger of the two companies Lafarge and Anglo American. This can be evaluated through income analysis as well as evaluating the number of clients that Lafarge serves in relation to the clients in the market. Operational Lafarge prioritizes the provision of up to date customer care including dialled deliveries so as to be efficient in serving the customers and encourage customer loyalty. Innovating new products ensures that Lafarge is able to satisfy the needs of its clients in the dynamic industry. This can be measured by conducting customer satisfaction surveys as well as evaluating the number of repeat clients. The management can also evaluate the time take to attend to a client. Individual Lafarge focuses on individual wellbeing by ensuring safety in the workplace as well as adopting the use of employment strategies that result to job satisfaction among the company staff. This can be evaluated by analyzing instances of accidents and injuries in the workplaces. Job satisfaction can be evaluated by evaluating the rate of staff turnover. 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