Aerated Concrete Industries, Co - Case Study Example

29 March 2007 Strategic Human Resource Management Application Exercise Define Your Organization'sStrategy and Tasks 1. Articulate Strategy The chosen business organization is Aerated Concrete Industries, Co. (ACICO) which is engaged in the core business of production and manufacturing of light weight blocs (aerated concrete) and reinforced slabs. On the other hand, ACICO's subsidiaries are into contracting/construction, real estate development and/or investment and engineering consultant office. Because of the diversity of its business units, ACICO employs a corporate strategy centered on cost leadership. ACICO employs the expertise of its multiple sub-units in order to efficiently manage costs and enhance its expertise. It should be noted that there is a strong coordination among ACICO's business units which enable it to build skeleton houses in a relatively short period of three days. After purchasing land, the investment in real estate moves to develop the property. The engineering office processes the necessary permits and creates the design. Afterwards, the contracting unit takes over to begin and finish the construction. It can be seen that all the processes in real estate development and construction are all undertaken in-house. In fact, ACICO's competitive advantage is its capacity to undertake every process in the value chain efficiently enabling it to develop high quality housing at lower costs than competitors. ACICO's Annual Report in 2006 identifies three broad growth strategies: a. Intensive growth by expansion in existing services and businesses b. Integrative growth by acquiring new businesses or ventures that aid existing operations; and c. Diversification growth by exploring hitherto unexplored businesses and ventures. Being engaged in a highly capital intensive business operation, ACICO profits through economies of scale. Its multiple sub-units enable it to spread its expenditures in advertisement and administration in order to minimize unit production cost. The company has also developed expertise in different each value chain process allowing it to create high quality products and provide excellent services. The three main strategies discussed above consistently diversify risks and keep consistent cash flow by generating income from different sources as well as financial engineering. 2. Translate the Strategies Identified into Strategic Tasks The broad strategies mentioned above are efficiently carried out by ACICO through its operations. Intensive growth is expected to be achieved by exploring suitable opportunities with aim to expand by enlarging the scale of operations of its existing business operations. Through diligent implementation of this intensive growth strategy, ACICO becomes successful in entering the Dubai, Saudi Arabian, Qatar markets with its Autoclaved Aerated Concrete plants and is currently working to penetrate the market and improve its market share by forging alliance with renowned local partners possessing who are proven market influences and share good local standing. This enables it to attain its objective of increasing shareholder wealth by expanding in core knowledgeable business. Integrative growth is undertaken through the implementation of backward, forward, and horizontal integration within the construction and real estate industry. Management intends exploiting the opportunities offered throughout this industry's value chain, which ultimately slows greater operating flexibility, reduces reliance on third party providers, deliver quality client service and offer competitive products to customers. This serves ACICO's objective of maximizing shareholder wealth by operating in all spheres of the construction and real estate value chain. The implementation of diversification growth strategy is intended to multiply growth prospects by focusing on profitable business ventures outside its core businesses. ACICO does this through a detailed mapping of the market prior to any decision to venture and is considered only if the industry is highly attractive and within the management's acceptable level of risk. Specifically, ACICO undertakes the following in order to translate the strategies into tasks: a. Purchase and develop land in Saudi Arabia and United Arab Emirates; b. Open new markets Qatar/Bahrain/Saudi Arabia; c. Expand manufacturing plants in the GCC or sell the technology/plants to other potential investors; d. Sell AAC (autoclave aerated concrete) plants to potential buyers across GCC and offer management and marketing in return with some % fees; and e. Consistently offering high quality products coupled with excellent service through fast delivery of output. 3. Define Requisite Capabilities/Skills Needed Specialized competencies: In performing the tasks mentioned above, ACICO is required to have competencies in terms of technology and logistics. Based on its operation, ACICO has the technological "know how" of the load bearing system in construction which is used by the engineering office to design the residential villas in this system. In terms of logistics, ACICO has its own trucks to deliver its AAC blocks to its project sites or outside customers on time. Coordination: ACICO has a centralized Regional distribution network department based in Kuwait to coordinate its block delivery for local and international orders. Managerial Competence: ACICO has strong top management with proper coordination and team work effort, but lacks this at the lower level staff. There is also lack of training, communication, and informational transparency. Commitment: Having a highly centralized and top-down management decision making system, there is only a high level of commitment in the top management. However, the mid and lower level workforce lacks the essential motivation to excel as strategies, objectives, and changes are not clearly communicated to them. Communication: As mentioned above, the company lacks the essential communication competency in order to enhance operational efficiency. Creativity: ACICO does not require much creativity because of products are mostly standardize. Capacity Management: This is very important, considering the expansion strategy of ACICO which continuously demand more competent employees. Yet, this proves to be hard for ACICO because competence is often coupled with high costs. Read More