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West Ridge Construction Company

General Information:

The Company is committed to becoming an industry leader in the construction business, both in the Public and Private Sectors.  They are primarily focused on creating long term partnerships through world-class standards of services to their clients and shareholders.  The company’s strengths differentiate it from its competitors:

  • “Adopting an innovative approach to design and build
  • Subscribing to an ethos of partnering; and
  • Proving our capability through consistently delivering high quality solutions to complex challenges.”

Understanding of Requirements

            Below are the pros and cons of expansion into new markets versus expansion into existing market territories.

Pros & Cons of Expansion into New Markets vs. Expansion into Existing Markets

Expansion into New Markets

Expansion into Existing Markets

 

Extensive & costly research required for expansion into new markets Aware of expansion potential of existing markets

 

Unsure of competitors in new market Aware of existing competition

 

More choices Greater chances of market saturation
Greater risk factor Less Risk Factor

 

Greater profit Comparatively less profit

 

Greater investment opportunities Comparatively lesser investment opportunities

 

Greater expansion into newer markets results in greater diversity

 

Expansion into existing market does not result in greater diversity
Greater diversity implies that a loss (or a downward trend) in one aspect of the business does not necessarily result in a loss in rest of the business Expansion into the same market segment (industry) implies that a loss in one aspect of the business hurts the entire enterprise

 

 

Solution Overview

In accordance with the pros and cons mentioned above, the Company should diversify itself and expand into newer markets.  The main reason behind this decision is that through the process of diversification, a slump in one industry will not affect the rest of the business.  Through this process, the business conglomerate, as a whole, will remain relatively stable.  However, any new market that the Company decides to penetrate should “complement” the existing business, rather than be completely different from it.  For expansion purposes, three solutions are suggested.  Provided below is a brief overview of the markets that the Company should diversify into:

  • Power Generation Solutions
  • Used Equipment Solutions
  • Equipment Training Solutions

Proposed Solutions for Business Expansion

Power Generation Solutions

             When customers choose the Company’s solutions for their electric power needs, they should be provided with “support that includes a diverse range of quality products backed by technical expertise and full service solutions.”  To survive in this competitive market, the company should become an electric power solutions leader. The Company should offer “a broad range of products, including a complete line of generator sets for prime, standby and distributed generation; containerized power modules; environmentally compatible gas-fueled systems; heat recovery solutions and rental units to meet temporary or emergency needs”. Turner construction mission statement

Used Equipment Solutions

           The Company can diversify into the used equipment market. As a construction company, the new market will be related to the original industry. The following points should be taken into consideration when selling used construction equipment to customers:

Ø       A thorough inspection using the latest technology

Ø      Unmatched knowledge of Cat machines

Ø      Unbeatable service and product support

Ø      Extended coverage options available

Ø      Machine maintenance history

Diversification into such an area is expected to enhance the Company’s quality in work and projects. As technology progresses, newer machines are made that are designed to make tasks easier and require less manpower. Replacing older equipment with such new investments that are technologically advanced would result in improvement in the Company’s operations. Not only would it help the company to the trim wage expenses, it would also save time and speed up the work process.

Equipment Training Solutions

Another important area for diversifying the business as suggested in this plan is equipment training. This construction company has ample experience, as well as the expertise needed, for efficiently operating the equipment used in construction such as lift trucks, bulldozers, lifts, etc. Mostly, the labourers learn these skills on the job, after spending sufficient time in their respective jobs. If these workers come skilled to work and are trained either prior to getting hired or simultaneously, the speed and quality of work can be considerably enhanced.

            Exploiting this construction industry need and capitalizing on the company’s own competencies, which include its expertise in the construction equipment operation and long-time experience, expansion into equipment training looks promising. Human capital is a form of productive capital just as machinery and equipment are. It consists of skills, knowledge, experience, and judgment acquired by and residing in human beings.

Human capital is a central component needed to make physical capital work. In construction, at least, state-of-the-art tools and equipment do not run themselves. They require skilled workers to make them effective implements of production. Trained, knowledgeable, and experienced construction workers bring out the best in the materials bought for the construction process. Skilled, professional construction workers play a major role in ensuring that all of the construction ingredients come together properly.

“Operators control equipment by moving levers or foot pedals, operating switches, or turning dials. The operation of much of this equipment is becoming more complex as a result of computerized controls. Global Positioning System (GPS) technology also is being used to help with grading and levelling activities. In addition to controlling the equipment, construction equipment operators also set up and inspect the equipment, make adjustments, and perform some maintenance and minor repairs.

Construction equipment operators include: paving, surfacing, and tamping equipment operators; pile driver operators; and operating engineers and other construction equipment operators. Operating engineers and other construction equipment operators operate one or several types of power construction equipment. They may operate excavation and loading machines equipped with scoops, shovels, or buckets that dig sand, gravel, earth, or similar materials and load it into trucks or onto conveyors. In addition to the familiar bulldozers, they operate trench excavators, road graders, and similar equipment. Sometimes, they may drive and control industrial trucks or tractors equipped with forklifts or booms for lifting materials or with hitches for pulling trailers. They also may operate and maintain air compressors, pumps, and other power equipment at construction sites…

Construction equipment operators usually learn their skills on the job. They may start by operating light equipment under the guidance of an experienced operator. Later, they may operate heavier equipment, such as bulldozers and cranes. However, it is generally accepted that formal training provides more comprehensive skills. Some construction equipment operators train in formal operating engineer apprenticeship programs administered by union-management committees of the International Union of Operating Engineers and the Associated General Contractors of America. Because apprentices learn to operate a wider variety of machines than do other beginners, they usually have better job opportunities. Apprenticeship programs consist of at least 3 years, or 6,000 hours, of on-the-job training and 144 hours a year of related classroom instruction.

Employers of construction equipment operators generally prefer to hire high school graduates, although some employers may train non-graduates to operate some types of equipment. Technologically advanced construction equipment has computerized controls and improved hydraulics and electronics, requiring more skill to operate. Operators of such equipment may need more training and some understanding of electronics…” (http://www.bls.gov/oco/ocos255.htm)

            Contractors become reluctant to entrust expensive equipment to a lesser trained workforce. Lesser trained and lesser equipped workers have difficulty incorporating new, specialized and advanced technologies into the structures they build. Furthermore, a lesser trained construction workforce does not develop lasting ties to the construction industry. Having little in the way of industry-specific human capital to lose, a less trained workforce more easily slip away when industry downturn occurs.

Thus, not only do skills not accumulate, but also industry-specific work experience is cut short. In the long run, limited construction capabilities, due to lack of training and experience, limit the industry’s ability to build quality, technically advanced structures safely. This can come back to haunt the construction industry itself. Construction industries everywhere are dependent upon the health of the local economy. In a world economy where the capacity to generate and adapt to rapid technological change is a key to local success, local construction industries that are not capable of building and maintaining a dependable, technically up-to-date infrastructure can handicap overall local economic growth.

            This diversified expansion in the business will not only help this company develop a better skilled and capable workforce for itself, but will work to improve the whole industry. Reduced time in the completion of projects, lowering of the machinery breakdown and the subsequent repair and maintenance costs, reduction of insurance costs and improved equipment performance are few of the leverages that the construction industry will receive. Such solutions will bring earnings as well as improved goodwill to the Company.

 Other Expansion Options

 Other industries into which the Company can diversify are:

  • Forestry,
  • Demolition & Scrap,
  • Governmental,
  • Mining,
  • Marine, and
  • Financial Solutions.

Goals and Objectives

Goal # 1

Ø    Company aims to streamline all of its expansion process by March 2007.

  • Objective:

To develop the outline for a standardize market penetration and expansion plan.

 Lead Person: Target Date:

ü       Objective:

To review the entire financial and accounting situation of the company.

Lead Person: Target Date:

 ü       Objective:

To have detailed meetings with upper level management and receive their input regarding the Company’s expansion.

Lead Person: Target Date:

 Goal # 2

  • The company aims to develop a complete and detailed employee plan to determine the current human resources of the company. This will help the company decide which employees are better equipped to fill places in the new business. In addition, it will help the company to determine the induction and recruitment requirements of its new business.

 ü       Objective:

 Review the entire employee ACRs.

 Lead Person: Target Date:

 ü       Objective:

 Develop a business succession plan for current and future business.

 Lead Person: Target Date:

 ü       Objective:

Determine which employee(s) will be posted to the new expanded business and which will stay with the current business.

Lead Person: Target Date:

 ü       Objective:

Have detailed meetings with the human resource managers and staff.

Lead Person: Target Date:

 ü       Objective:

Inform the employees.

 Lead Person: Target Date:

 Goal # 3

 Ø       The Company aims to reinvest profits into the business and retain operating profits in excess of $100,000 (as of 31st December, 2006).

ü       Objective:

After each closing, 65% of profit will be deposited into the business account by each partner with appropriate documentation of those deposits.

Lead Person: Target Date:

Goal # 4

 Ø      Have detailed meetings related to all financial matters.

  • Objective:

 Have bimonthly meetings with the appointed banks.

 Lead Person: Target Date:
  • Objective:

 Have bimonthly meetings with the creditors.

Lead Person: Target Date:

Risk-Averse Approach

The Company operates in accordance to a ‘risk averse’ approach. A risk averse approach tells the customer that their project will be completed on time, professionally and be of the highest quality. In addition, a risk averse approach ensures that the project is completed within a certain budget.

Though there is no such thing as zero risk, it is important that, “… risk aversion specialists identify and analyze risk ahead of contract and, where possible, design pre-emptive solutions. Where this is not possible, the Company will guarantee a gross maximum price to cover any and all unforeseen cost-risks to the contract such as hidden site, design or construction problems.” (http://www.quarmby.co.uk/).

It is important for a company on the verge of expansion to have open and honest communication with its clients. Thus, the company can provide its customers with information with regards to the ‘new avenues’ that it hopes to explore in the future.

Marketing Strategies

With regards to the marketing strategies, the following should be considered:

  • Location/Distribution
  • Price/Quality Relationship
  • Promotional Strategies
  • Packaging and Customer Service
  • Public Relations
  • Advertising

Corporate Responsibility

 As a global entity, the Company should become actively involved in neighbouring. Employees of the organization should be encouraged to help the community at large. A responsibility of corporations is to enhance the lives of its neighbours around the world, both as a corporation and as individuals. The Company’s continued dedication to community enhancement would be the right thing to do. “Our communities rely on our help – and we rely on them for the resources and support they provide to keep our company stable and strong”. (http://www.cat.com/cda/layout?m=38723&x=7)

References

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Caterpillar: About Cat>Corporate Responsibility>Social>Communities http://www.cat.com/cda/layout?m=38723&x=7 Accessed October 25, 2006

Caterpillar: Industries>Power Generation>Products http://www.cat.com/cda/layouts/printerFriendly?m=37431&x=7 Accessed October 25, 2006

Construction Equipment Operators http://www.bls.gov/oco/ocos255.htm Accessed October 30, 2006

Miller Construction – Company Overview – Introduction – Text Only http://www.construction.miller.co.uk/textonly/comp_introT.htm Accessed October 25, 2006

 Starting a Business – Business Plans – RBC Royal Bank

Quarmby Construction Company Ltd http://www.quarmby.co.uk/ Accessed October 30, 2006

Sir Michael Latham, 1994. CIRIA Research Project RP455 (PROP 1224): Quality Management in Construction, Construction the Team, Constructing Quality, A Strategy for Quality in Construction, Department of the Environment Consultation Document, November 1995.

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