STRATEGY Stuart Tennant Presentation 2011

1. Business Management in the Built Environment STRATEGY Stuart Tennant Presentation 2011

2. Business Management in the Built Environment • Strategy Management • Strategy in Practice • A Model of Strategy Process • Auditing Environmental Factors • The Competitive Environment • Organisational Structure • The Built Environment • Summary Presentation Content

3. Strategy Management: Business Management in the Built Environment Strategy Primary Task: to match the organisations capabilities with opportunities and threats in the environment to achieve competitive advantage.

4. Business Management in the Built Environment Strategy in Practice Strategies are both plans for the future and patterns from the past However, effective strategies develop in all kinds of strange ways Realised Strategy Patterns - Plans

5. Business Management in the Built Environment Strategy in Practice Imposed Opportunistic Emergent Realised Strategy Planned Analysis Choice Implement Analysis Choice

6. Business Management in the Built Environment Strategy in Practice Planned Turmoil Realised Strategy Planned Time

7. Business Management in the Built Environment A Model of Strategy Process The Built Environment Environment Resource Capability Strategic Analysis Strategic Capability Identifying Options Strategy Implementation Strategic Choice Stakeholder Expectations Organisational Structure Selecting a Strategy

8. Business Management in the Built Environment Auditing Environment Influences Strategic Analysis STEEP ANALYSIS POLITICAL SOCIAL ECONOMICS TECHNOLOGICAL ENVIRONMENTAL

9. Business Management in the Built Environment SOCIAL values / demographics / life styles new products / innovations / technological trends TECHNOLOGICAL pressure groups / energy efficiency / resources ENVIRONMENTAL recession / interest rates / inflation / tax ECONOMICS election / policy / budget / legislation POLITICAL

10. Business Management in the Built Environment Auditing Environment Influences Strategic Analysis STEEP ANALYSIS • When Should STEEP be used? • Times of Uncertainty • Times of Information Overload • Times of Disorganization

11. Business Management in the Built Environment Auditing Environment Influences Strategic Analysis STEEP ANALYSIS • Comprehend the element of the environment • Assess interrelationships between trends • Relate trends to issues • Forecast the future direction of issues • Derive implications

12. Business Management in the Built Environment Auditing the Built Environment POLITICAL SOCIAL Strategic Analysis Affordable Housing PFI / PPP ENVIRONMENTAL TECHNOLOGICAL ECONOMICS Waste Management Systems Building Recession

13. Business Management in the Built Environment Auditing the Built Environment Affordable Housing Strategic Analysis PFI / PPP Systems Building Recession Waste Management

14. Business Management in the Built Environment Resource & Strategic Capabilities Strategic Analysis SWOT ANALYSIS THREATS STRENGTHS OPPORTUNITIES WEAKNESSES

15. Business Management in the Built Environment Resource & Strategic Capabilities Internal Audit STRENGTHS WEAKNESSES (Potentially) Negative Factors Positive Factors OPPORTUNITIES THREATS External Audit

16. Business Management in the Built Environment Resource & Strategic Capabilities STRENGTHS WEAKNESSES THREATS OPPORTUNITIES ECONOMY STAFF LEAVE TECHNOLOGY CASH FLOW STAFF POOR MARKET LOW PROFIT INNOVATION STAFF TURNOVER PROFIT GROWTH DIVERSIFY ALLIANCES SKILLS FUNDING SWOT Summary STEEP & SWOT Analysis / Interpretation

17. Business Management in the Built Environment STEEP & SWOT Analysis & Interpretation STEEP & SWOT Analysis / Interpretation Use in conjunction with other techniques Porter’s Five Forces Porter’s Generic Strategies Boston Consulting Group Matrix Diversification Analysis

18. Business Management in the Built Environment Potential Entrants Threat of Entrants COMPETITIVE RIVALRY Suppliers Buyers Bargaining Power Bargaining Power Threat of Substitutes Substitutes

19. Business Management in the Built Environment Porter’s Generic Strategies Competitive Position demand in the market market leadership Strategic Choice the relevant competitors FOCUS COST DIFFERENTIATION

20. Business Management in the Built Environment Porter’s Generic Strategies • Competitive Forces: • Drive down costs while maintaining average quality Cost Leadership / Cost Focus • Differentiate product or service in ways that are valued by the customer Broad Differentiation / Differentiation Focus

21. Business Management in the Built Environment Porter’s Generic Strategies Competitive Advantage Lower cost Differentiation Broad target Cost Leadership Broad Differentiation Competitive scope Cost Focus Differentiation Focus Narrow target

22. Business Management in the Built Environment Porter’s Generic Strategies Average Price PROFIT PROFIT PROFIT COST COST COST Average Player Cost Leader Differentiator Player

23. Business Management in the Built Environment Porter’s Generic Strategies (alternatively) THE ‘SQUEEZE’ Average Price PROFIT PROFIT PROFIT COST COST COST Average Player Cost Leader Cost Cutter

24. Business Management in the Built Environment Porter’s Generic Strategies (alternatively) SHORT-TERM STRATEGY Average Price PROFIT PROFIT COST COST COST Average Player Cost Leader Cost Price

25. Business Management in the Built Environment Porter’s Generic Strategies Drive down costs the experience curve Unit cost Organisational Learning Cumulative volume

26. Business Management in the Built Environment Porter’s Generic Strategies Drive down costs Economies of scale (X) Unit cost Manufacturing Process (Y) Scale of production

27. Business Management in the Built Environment 3. Hybrid 5. Focused Differentiation 4.Differentiation Strategic Choice 6. Increased Price / Standard Value 2. Low Price What is of value to the user of the product / service? 7. Increased Price / Low Value 1. Low Price / Added Value 8. Low Value / Standard Price

28. Business Management in the Built Environment Market Analysis: portfolio management Strategic Business Units (SBU) Relevant to Diverse Businesses (Construction?) Takes account of two factors : relative market share : industry growth rate Limitations: no other variables are included

29. Business Management in the Built Environment Market Analysis: the growth / share matrix Theoretically offer the best profit & growth Low growth in a poor market / weakness Profits best utilised elsewhere Requires large investment for development

30. Business Management in the Built Environment Market Analysis: boston consulting group matrix Market Share Low High High Market Growth Low

31. Business Management in the Built Environment Diversification Analysis: Matrix New / Unrelated Services / Products: New / Related Services/ Products: Existing Portfolio Services / Products: model Existing Strategy Existing Clients: Same Geographical Area Expansion Strategy Expansion Strategy Expansion Strategy Expansion Strategy Diversification Strategy Existing Clients: New Geographical Area Expansion Strategy Diversification Strategy Conglomerate Diversification New Clients: Same Geographical Area Expansion Strategy Diversification Strategy Conglomerate Diversification New Clients: New Geographical Area

32. Business Management in the Built Environment Organisational Structure “Structure follows Strategy” Chandler, 1962. Strategy Implementation

33. Business Management in the Built Environment Organisational Forms of Governance Hierarchies Markets make buy Forward / backward integration The price mechanism

34. Business Management in the Built Environment Organisational Forms of Governance Markets or Hierarchies? * For Markets if: * For Hierarchies if: * Commodity Products * Economies of scale * Market Mechanism * Temper Opportunism * Profit Maximisation * Thin markets * High Management Cost * Complex Situations * Routine Situations * Intellectual Capital

35. Business Management in the Built Environment Neither a Market nor a Hierarchy: Hierarchies Networks Markets coalition JV alliances make buy collaborate Forward / backward integration Economic & social equilibrium The price mechanism

36. Business Management in the Built Environment Networks and Competition • Traditionally, collaboration by firms has been frowned upon by economists as the basis for monopolies and cartels. However the fashion for alliances and network collaborations seems to be generating sophisticated new ways to compete and additional sources of advantage over traditional firms

37. Business Management in the Built Environment Networks and Competition • Flexible capabilities: equipped to assemble diverse / unique, set of capabilities. • Specialisation: networks can benefit from a division of specialisation • Learning: New alliances – new learning capabilities • Increased options: Networks can be a rich source of strategic options

38. Business Management in the Built Environment The Built Environment: The UK Construction Industry (GDP) STEEP ANALYSIS Public / Private (Spending) R & M Construction Housing Civils Strategic Direction (Markets / Portfolio / Competition)

39. Industry Statistics:(Companies / Employment) Client Involvement:(Novice / Enlightened) Characteristics:(Project-based / Sub-Contracting) Procurement:(Contractual Governance / Route) Modern Methods of Construction:(incl. Environmental) Future Strategies:(Consolidation / Merger / Acquisition) Business Management in the Built Environment The Built Environment

40. Business Management in the Built Environment Some UK Examples (acquisitions & mergers) GEORGE WIMPEY TAYLOR WOODROW TARMAC ASSET SWAP BRYANT HOMES WIMPEY HOMES CARILLION MOWLEM Acquisition & Merger TAYLOR WOODROW A. McALPINE Six – Two Companies Rationalisation of both company and portfolio. CARILLION TAYLOR /WIMPEY (House-Building) (Construction)

41. Business Management in the Built Environment Challenges for the Construction Industry Transaction MAKE BUY MARKET NETWORK HIERARCHY Procurement Traditional Partnering In-House Timescale Workload Relations Structure Technology Competition Learning Market Management Short-Term One-Off Adversarial Arm’s Length Craft High Low Recession Opportunistic Medium Repeat Cooperative Cordial Prefabricated Selected Moderate Positive Operational Permanent Continuous Shared Integrated Industrialised Low High Buoyant Strategic

42. Business Management in the Built Environment Strategic Analysis Summary: Strategy Implementation THE BUILT ENVIRONMENT Strategic Choice Analysis Choice Implement MARKETS, HIERARCHIES & NETWORKS STEEP SWOT ANALYSIS COST FOCUS DIFFERENTIATION

43. Business Management in the Built Environment Recommended Reading: Mintzberg, H. (1987) Crafting strategy. Harvard Business Review, 65 (5) pp. 66 – 75.

44. Business Management in the Built Environment Further Reading: Johnston, G. and Scholes, K. (1993) Exploring Corporate Strategy: text and case studies. Prentice Hall, London. Newcombe, R., Langford, D. and Fellows, R. (1990) Construction Management 1 Organisational Systems. Mitchell, London. Thank You