Business Environment of Tarmac - Case Study Example

Business Environment of Tarmac Name: Institution: Date: Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Brief Company Background 3 3.0 Internal Business Environment Analysis 4 4.0 External Business Environment Analysis 5 5.0 Key/Critical Success Factors 6 5.1 Extensive Research and Development 6 5.2 Innovative Activities 6 5.3 Brand Name 7 6.0 Internal and External Capabilities Analysis 7 7.0 Developing Medium-Term Strategic Options 8 8.0 Recommended Medium-Term Strategic Options 9 9.0 Conclusion 9 References 11 1.0 Introduction The corporate world is transforming at a rapid rate as a response to the changes emanating from the adoption of new technology and the dynamic tastes and preferences of customers. As such, firms need to be concerned about the business environment they operate because it consists of all the elements that have an influence on the operations and performance of the firm. The business environment is divided into two; the internal and the external factors. Internal factors are the elements within the firm, which it has control over and can choose to improve in order to increase its performance and the productivity of its employees (Waldersee & Tywoniak, 2007). On the other hand, the external factors are those elements that are beyond the management and control of the firm, although they influence its performance. Therefore, this report conducts an analysis of the internal and external business environment of Tarmac. 2.0 Brief Company Background Tarmac is a global construction materials firm that was established in 1903 in the United Kingdom. The company manufactures heavy construction materials, such as cement, lime, concrete, and road surfacing. Owing to the developments that were taking place during the time of establishment of the firm, Tarmac managed to secure a ready market, a situation that resulted in its rapid growth. Thus, by 1913, the company was listed in the Birmingham Stock Exchange, which was followed by its listing in the London Stock Exchange as of 1922. However, in the 1920s-1930s, the company faced huge criticisms, which emanated firm the numerous employee strikes, economic recessions that led to low sales and intense rivalry from new entrants in the market. Nevertheless, the firm expanded its coverage to other geographical regions and was in a position to restore its previous position in the market. Currently, Tarmac is a subsidiary company of Anglo America, which acquired in 1999. The firm operates in more than 10 countries, has an employee base of more than 25000 individuals and recorded a profit of $73 million in the year 2012 (AngloAmerican, 2014). 3.0 Internal Business Environment Analysis Grant (2008) asserts that the internal environment of a firm consist of the factors that have a direct influence on the firm and which are controllable as the firm has control over them. That is, the internal business environment of a firm can be altered or adjusted in an attempt to improve the firm’s performance and the productivity of its employees. The internal environment comprises of the physical facilities of the firm, the human resources, and the functional activities the firm engages in order to improve its performance, such as advertising, product positioning and marketing (Walker, 2003). Tarmac maximizes on the value system of the pioneers of the company, whose helm of affairs that has an essential role in the choice of business, objectives and mission of the firm. The mission of Tarmac is to be the first choice for construction products and services, which satisfy the crucial demands for the development of the globe. In other words, Tarmac wants to be the first firm of choice that customers think about in situations where they want to engage in construction activities. It is through the mission statement that Tarmac focuses on its corporate values, which include: being understanding, responsive, reliable and straightforward with its customers. The other factor that influences the internal business environment of a firm is the management structure as it has a straightforward impact on the decisions made regarding the operations of a company (Fleisher & Bensoussan, 2002). The corporate governance at Tarmac comprises of the board of directors, the chief executive officer, and the senior managers. However, these individuals work hand-in-hand with the junior managers, such as supervisors and plant managers in an effort to alleviate the performance of the firm. Per se, while conducting an internal analysis of Tarmac, a SWOT analysis would help establish the factors within the firm that affect its performance (Barney and Hasterly, 2008). SWOT analysis is the evaluation of strengths, such as a strong brand, reputable corporate image and financial stability in the case of Tarmac; evaluation of weaknesses, such as operating in maturing markets and increased competition from rivalries. On the other hand, opportunities including maximizing the opportunities availed by the emerging markets; that is, the BRIC, Brazil, Russia, India and Chin, which are said to have market potential, as well as maintaining an uptrend of technology adoption (Gamble and Thompson, 2010). The last factor in the SWOT analysis is threat, which evaluates the factors that can uncertainty in the firm, such as intense competition from rivalries and stringent government regulations in the case of Tarmac. 4.0 External Business Environment Analysis The external environment is complicated as it consist elements that the firm no control over, and which can tremendously impact on its performance. Porter’s five forces of competition are the best way through which analysis of the external business environment of Tarmac can be conducted (Porter, 1998). In regard to suppliers bargaining power, Tarmac has a higher bargaining power than its suppliers owing to the wide array suppliers it has to choose from. The threat of new entrant in the construction materials industry is minimal owing to the huge capital requirements, as well as customer loyalty towards established brands. The threat of substitutes is high as there are numerous cheap substitutes from which customers can choose from, a situation that possess a threat to Tarmac. Rivalries pose intense competition, most especially those that are financially stability and have been in the market almost for the same period as Tarmac. Thus, the firm needs to constantly formulate strategies to help it remain relevant in the market. However, buyers have a higher bargaining power owing to the number of substitutes they are required to make a choice from, a situation that means that only firms with a strong brand, such as Tarmac are in a position to remain competitive and attract customers. 5.0 Key/Critical Success Factors 5.1 Extensive Research and Development Johnson, Scholes and Whittington (2008) hold that the research and development department within a firm has a vital role that helps maintain a given level of uniqueness in relation to the products it manufactures. Tarmac has been in the construction industry for more than 100 years, meaning that it critical success factor has been maintenance of an extensive research and development unit, which aids it is designing and producing products that align with the transforms in the industry as well as the demands of customers over the years. 5.2 Innovative Activities Dess, Lumpkin and Eisner (2009) holds that innovation is a crucial factor in the growth of a firm as it results in the design and production of quality products and services, as well a s processes of conducting business, which are unique to the firm . As such, innovation activities help a firm to gain competitive advantage as it leads the firm to produce quality products as is the case in Tarmac. Per se, depending on the demand of customers, as well as the civilization of the society has ensured that it products are of quality and unique, a situation that has helped it retain its global position in the production of building materials industry. 5.3 Brand Name The brand name of a firm helps it gain market relevance and customers’ loyalty and confidence, as far as it meets their demands, it’s of quality and affordable. This is the case at Tarmac, whose building materials have been used for ages, a situation that has helped it develop a reputable brand name, which assist it in fighting against the intense rivalry presented by competitors in the market (Bradley, 2008). In addition, the acquisition of the company by Anglo America helped it enhance its brand name, because Anglo America is a well-established and financially stable multinational corporation, which operates in more than 50 countries across the world. 6.0 Internal and External Capabilities Analysis Hoang and Rothaermel (2010) assert that capabilities comprise of a subset of a firm’s resources, which help it maximize the full advantage presented by the other resources. This relates to the fact that in order for firms to gain competitive advantage they must position their business in the midst of that of the competitor by utilizing their resources and capabilities. Tarmac has a number of capabilities; both internal and external that enhances its normal operations. Human resources of the company are one of the internal capabilities that it needs to maximize upon, in order to remain relevant in the market. Human resources are the employees within the firm, who help bring together the other factors of production in order to enhance normal operations of the firm. Tarmac has a qualities team as part of its human resources, which is credited for its current position. Financial stability is another internal capability that can help improve the performance of Tarmac as it will be in a position to finance most of its operations. In essence, the production of building materials industry requires huge capital for establishment as well as operations, meaning that Tarmac is better positioned. On the other hand, the principal external capability that the firm enjoys is the fact that it is a subsidiary company of a well established and reputable multinational corporation, Anglo America, which has been in operation for a long period. This alliance gives Tarmac a unique status in the market, because Anglo America has a strong brand name, meaning that products from Tarmac will be appreciated by customers. In this case, the cooperative relationship of Tarmac and Anglo America sets the ground for the external capabilities that the firm enjoys. 7.0 Developing Medium-Term Strategic Options In order to maintain market relevance and competitive advantage, firms need to formulate strategic options that will enable them achieve their goals. Medium-term strategic options are part of the process, and they act as a guideline regarding what a firm needs to focus upon in order to gain competitive advantage in the market that it operates (Johnson, Scholes & Whittington, 2008). However, while developing these strategic options, firm’s need to consider a number of factors, which include: there internal and external capabilities, which give them an insight as to the likely achievement of the strategic option targets. The level of competition in the industry, which can be established through benchmarking what the peers are planning to do in order to gain competitive advantage. The government regulations as they greatly influence the performance of companies, as well as the dynamic demands of customers, which must be aligned with the operations of the company. 8.0 Recommended Medium-Term Strategic Options The best strategic option for Tarmac, which needs to be incorporated in its medium-term strategic options for 3-5 years, is the market penetration strategy. Market penetration is a strategy that enables firms to expand their market share and increase their production capacity, through exploration of new target markets. As a multinational company, Tarmac operates in 10 countries across the world. However, owing to the recent developments in most parts of the world, the company has a good chance to expand its operations and most especially in the emerging markets, which has economic growth potential. The reason behind this assertion is that Tarmac has been operating in markets, such as the USA and the UK, which previously had market growth potential, but have reached a position in which they are referred to as mature markets (Grimpe & Kaiser, 2010). Mature markets experience sluggish economic growth has they are advanced and require minimal developments, meaning they are not suitable for operations of growth and success oriented companies, such as Tarmac (Brouthers, Brouthers & Werner, 2008). Therefore, by developing the market penetration strategy as part of its medium term strategic options, will help Tarmac collect information regarding markets that have economic growth potential, as they will be viable for its operations and expansion plans. 9.0 Conclusion In conclusion, this report focused on the internal and external business environment of Tarmac, a multinational corporation, which operates in the production of building materials industry. The company has been in operation for more than 100 years a situation that has helped it develop a strong brand image. Per se, its brand image was improved following the acquisition of the company by Anglo America, in 1999. The report further, focused on the critical success factors of Tarmac, the internal and external capabilities and the formulation of medium-term strategic options that the firm needs to consider as part of its strategic plan. Market penetration strategy was the recommended strategic option for Tarmac, which needs to expand its operations to other target markets across the globe. References AngloAmerican, (2014). Other Mining and Industrial: Tarmac. Retrieved from . Barney, J. B. & Hasterly, W. S. (2008). Strategic Management and Competitive Advantage Concepts, 2nd Edition. New Jersey: Pearson Prentice Hall. Bradley, J. (2008). Management based critical success factors in the implementation of enterprise resource planning systems. 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