Efficiency Strategy of Basil Construction Company - Book Report/Review Example

Efficiency Strategy of Basil Construction Company Introduction This paper represents a strategic management report of Basil Construction Company. This report deals with in-depth analysis of current situation of the company, developing new strategies or strategic changes in the organisations for next five years. The objective of this study is to develop and implement effective strategies based on current situation of the organisation for long term growth and development of it. Multiple strategic options for the business are turnaround strategy, generic strategy, retrenchment or efficiency strategy, repositioning and reorganising strategy. Therefore, in this study, these strategies will be analysed with respect to company’s current situation and a long term strategic planning will be developed for development and growth of the company. Basil Construction Company is an active member of Basil Group of Companies. Having a prestigious existence for more than 99 years in UK market, the company has made a quiet strong foothold in its market. It has become recognised for delivering projects within proposed deadline and budget range of its clientele. The company has a strong base with an organised group of architect and construction experts. Combination of such leads to clientele satisfaction for determined accomplishment of projects. Current issues Despite of significant growth in 99 years of its business operation, there are some internal as well as external issues that the company has been facing. One major internal issue is that there is a great deal of repetition between departments and the company is also constantly losing its market share in the UK construction market. This indicates that there has not been any major change in the strategic decisions to turnaround the company’s position in the market. The company need to develop efficient strategic plans for next five years and implement those effectively. There is a range of management strategies held by the company since long past and the firm has been operating based on that. But, major external environmental factors have substantial impact on business activity. Therefore, a company need to constant focus on the effectiveness or from implementation of its strategies with respect to frequent change in the business environment. Strategic planning Objective and goals Main goal of the company is to become one of the leading architectural designer and construction service providers in United Kingdom. To achieve goal the company has multiple short or long term objectives. Customer satisfaction through innovative designs and technology used advanced construction process is the main objective of its business as a service company. Situation Analysis International market diversification has been an efficient strategic decision of the leading construction companies in UK since long past. The industry has eventually led to multiple opportunities through individual strategic decisions by its major constituents. With the substantial effect of current recessions and worldwide economic slowdown has led to sudden stop by the leading potential construction firms from internalisation. Therefore, to sustain businesses, the companies started focusing on the service diversification in the home market only possessing comparatively risk than internationalisation. The firms deviated from the basic trend line and started targeting very niche market and trying to become expertise on specific types of service. In light of this, major change in the overall industry, Basil Construction Company also needs to adopt major changes in its strategic level to become expertise in multiple niche categories of services rather than focusing on a broader category. Strategy formulation Strategy formulation is all about analysis of the macro and micro forces before the action (Ghosh, 2005). It is a consumerist activity on the basis of strategic decision making. Strategic formulation includes several strategic models such as follows: Generic strategy The turnaround of financial slowdown is related with generic strategy. This strategy includes cost leadership strategy, differentiation strategy and focus strategy (Griffin, 2011). Cost leadership strategy is all about cutting down the productivity cost in order to gain higher profit (Mitenburg, 2005). Lastly focus strategy is used to changing the path that organisations are managed. Here the generic strategy cannot be implemented as basil construction is a construction company. So the company cannot focus on cost leadership strategy and differentiation strategy because all of the construction companies’ market segmentation remains more or less same. Retrenchment or Efficiency strategy Efficiency strategy is used to increase the core competencies of any firm (Hitt, Ireland and Hoskisson, 2009). This strategy is an example of proper corporate practice. The company can achieve success by application of this strategy through cost reduction and asset reduction (Newton, 2009). Moreover this will reduce the operation time of a particular project. In terms of asset reduction the loss making company can exit from the market and sale his assets (Warren, 2010). As a result the company can use that resale amount in future for several projects. These two strategies are basically exit strategies which can help the loss making companies, but Basil Construction is an emerging firm which has the market potential. So this kind of pessimistic strategy cannot be implemented. Repositioning The companies adopt the repositioning strategy for several reasons. In order to enter into a new market, looking for several sources of revenue apart from the existing source, diversify the business by the introduction of various kind of products according to the particular segments and to create a large brand awareness in customer’s mind the leading companies do the repositioning activities. The companies are adopting a new characterisation of core activities either by becoming the leading player in the existing market or by diversifying their business into a new market (Graham and Dodd, 2008). This strategy cannot be applied because it is impossible for a construction company like basil construction, to reposition the products. Reorganising Re-organisation is a strategic concept in order to change the internal management structure (Bhatia, 2008). It is used to support the retrenchment and repositioning strategy. This strategy is used to transform a centralise organisation to a decentralise organisation. Moreover this strategy changes the culture, structure and human resource management of an organisation. According to Basil Construction’s strategic change, this strategy cannot be implemented the strategy changes the total structure and work culture of an organisation. It can be harmful to Basil construction. Turnaround strategy Turnaround strategy is a planned and designed corporate exercise which is used to reveal the issues like decreasing market share value, poor return on capital employed, several environmental factors that affects an organisation (Kim and Mauborgne, 2005). Basically turnaround strategy converts a loss making company to a profitable business institution within a fiscal year. This strategy removes all the internal weaknesses of the company. It is a long term restructuring strategic plan to make a company profitable. A company needs a skilled and developing leadership style for an effective turnaround. Basil construction is losing its market share due to problems like government non co-operation. Moreover due to increasing of carbon dioxide that formed from burning fuels and wastages companies like basil construction are ordered to follow the environmental rules during its operation. To overcome these problems the turnaround strategy can be implemented. Turnaround strategy would be the most effective strategy for the company according to current situation of the firm. Strategies implementation As per the various strategic discussions, it is identified that implementation of turnaround strategy will be effective to basil construction. Several stages of turnaround strategy are: Crisis stabilisation The major objective of crisis stabilisation is to recapture the control over the decline situation of the company. Basil construction was losing the control over the business due to some noncooperation policies of government. Moreover the external environmental issues like pollution was affecting the market share of the company (Calla and Thomas, 2010). According to crisis stabilisation company have to increase the employment and moreover the company have to control the carbon emission. Short-term focus on the unused asset and unnecessary cost reduction will be a successful approach of Basil construction. Determination of both internal and external causes is important, if the external cost reduction is not effective. Management changes Changes in top management may improve the performances of basil construction. As the performance is decreasing within an end of fiscal year, this change can help the loss making company. A new manager with a new and energetic turnaround leadership quality can change negative attitude of Basil Construction. As the old management are following the old management strategies, the introduction of the new managers’ will help the company to take new approaches. To make the changes in top management the stakeholders of Basil Construction should act fast. Moreover from the help of the outside consultants the problems can be overcome (Feldman, 2004, p.298). Gaining stakeholder support All the stakeholders should be aware of this crisis situation of Basil Construction. The management of Basil Construction must be keep informing to the stakeholders of the company like banks, shareholders and the employees. Clarifying the target market Basil construction has to do proper market segmentation in order to get much closer to the target audience. An innovative promotional strategy, proper public relation and an effective customer follow up will increase the brand awareness and brand loyalty among the customers (Jackson, 2006). By the implementation of marketing information and effective marketing strategy the step can be proved as a successful approach to the growth of Basil Construction. The clarification of target market ensures the transparency of revenue generation. Refocusing the business strategy Clarifying target market helps to refocus the discontinued products and services as the previous step provides several opportunities to the products and services by identifying the target customers. Refocusing strategies are the process of developing different strategic plan which drive the changes (Barna, 2002). These particular changes will reflect in the growth of Basil Construction and its growing market share. According to refocusing step some inadequate performance area can be imported. As a result the operation performance of the managers increased. Financial restructuring This strategy can be implemented in order to increase the market share of Basil Construction. Change in the capital structure is one of the financial restructuring (Parrino, Moes and Kidwell, 2011). Another strategy is raising the additional finance from bank or any formal financial institutions. This strategy of raising finance will help the company to fund in other projects also (Jain, 2004). A healthy relationship with creditors and banks will financially help Basil Construction in future crisis. Prioritisation of critical improvement areas The major weakness of Basil construction is noncooperation from government. In order to gain the advantages from the government, the top management of Basil Construction have to maintain a good relationship. Increasing of employment, less carbon emission and proper taxation, these factors should be taken care of the company management. Then only Basil Construction can get the green signal in all operation. Then only the company can lead the market place. Control Force-field analysis Control is last stages of strategic change after strategy formulation and strategy implementation. Degree of control on the strategic change measures the inefficiency of an organisation. Force-field analysis is one of the major tools of controlling major strategic changes in an organisation. It provides an insight of the outcomes from strategic change along with the problems from strategic change and this is the major benefit of this tool. There are major forces that react against the change which need to be identified (Neal & Taylor, 2006, p.17). This is the most difficult part of control. The company need to identify the major aspect of current situation that acts against the change. In two ways they overcome on it. One is the forces need to be considered in the way of change and another is the company need to change the strategy. These are also positive forces that aid the change and these also need to be identified to make the change faster (Balohun, Vaaily, 2007, p.35). To achieve overall control on the strategic change, Basil needs to focus on some key activities and these are necessary for control. The company needs to establish a sense of urgency on implementation of change throughout the organisation and these would be based on the market threats and opportunities. Second, it needs to develop powerful corporate relationship with the major stakeholders as they are directly or indirectly part of the change. Third, it needs to develop a clear vision and objective of change and this should be measurable (Beer & Nohria, 2000, p.135). Fourth, the company need to remove the internal forces to change and consider the external forces in the change. To encourage the change, the company need to ensure short term wins or benefit from the change (Feldman and Pentland, 2003, p.97). Finally, the company need to consolidate the improvements i.e. the outcomes from change and need to continue the strategies for next five years for substantial outcome from a strategic change. Strategic alliances are formed mainly for two major types of purposes like co-operative and competitive. The company also chose one of the two major types of alliance orientations. These are strategic orientation and operational orientation. Overall, strategic alliance is one of the most efficient strategic decisions that the firm can adopt for business expansion and long term sustainable growth of the firm. Strategic alliances Current trends of European businesses indicate some key characteristics of business environment. The industries are becoming more consolidated and concentrated to specific product and services with high demand. Inter-business circulations of goods have become easier and the firms have better access to new and potential markets. Therefore, the businesses are more focused on internationalisation and strategies have been made for the same. Multinational brand are becoming “Multi-Local”. Supply has becoming more competitive because of increasing market competitiveness among the firms. In the light of this competitive business environment, there are major factors that forces for strategic alliances. These are globalisations of businesses and markets, scarcity of resources, barrier to entry in new markets, intensifying market competition etc. Alliances help businesses by covering wide fields like collaborative advertising, technology transferring among the businesses, efficient inter-firm participation in research and development, shared distribution channel, internal spin offs, resource venturing, cross manufacturing, cross licensing etc. The businesses under strategic alliances can enjoy these wide areas benefits. Therefore, there are substantial benefits for the businesses to come under strategic alliances. There are different types of strategic alliances or inter-firm collaborative relationships that the company can build. These are like outsourcing, joint venture, short or long term partnership, vertical integration etc. Strategic alliances have some key objectives, value creation and drivers. These are cross border diversification, opportunity learning new skill through skills transfer, financial co-operation etc. Through strategic alliance refers to inter-firms co-operative agreement but it may not involve in share transfer. Alliances can be formed between competitors for transferring or sharing of skills and resources. It can form in any specific part of value chain. It may be horizontal alliances or vertical alliances. It may be formed for strategic purposes or may be for tactical reasons. The relationship among the partners of a strategic alliance can be loose or tight and this depends on the nature of the of strategic alliance. Conclusion From detailed analysis of strategic planning or strategic change throughout the study it has been identified that the process of strategic planning is quite long terms basis. Basis Construction needs to focus on strategic planning on a continuous basis. This is one of the major areas of business activity that helps a company to identify the changing business environment and the necessary changes required in the organisation to cope up with the external changing forces. There are many external forces that have substantial impact on the company and therefore, Basil Construction needs to efficiently implement and control strategic changes in the organisation. References Balogun, J. and Vaaily, V. H., 2007. Exploring Strategic Change. Prentice Hall. Barna, G., 2002. A Fish Out of Water: 9 Strategies Effective Leaders Use to Help You Get Back Into the Flow. Brentwood: Thomas Nelson Inc. Beer, M. and Nohria, N., 2000. Cracking the code of change. 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