BLOG Strategic Management Tools James King Strategic Management Tools in the Construction Industry 1 Introduction

The aim of this blog is to research, define and evaluate the use of strategic management tools in the construction sector. Mintzberg (1987) reviewed the changing world and concluded the strategic process was more fluid and unpredictable then had been realised. He decided there was no one process that could be considered as strategic planning and concluded that there were five types:1. 2. 3. 4. 5. PLAN-course of action. PLOY-manoeuvring to outwit competitors. PATTERN-discern strategy over time. POSITIONING-locating an organisation in its environment. PERSPECTIVE-consensus of managers intentions over time.

These aspects of strategy can form the basis for planners in the construction sector and is applicable to both small and multinational organisation. Langford and Male (2001) developed Mintzberg (1987) theory of unpredictability with regards to the construction sector further they concluded long-term strategic thinking in the construction sector is possible and that indicators are present although short and medium term uncertainty is convincing. The key requirements for construction strategist are to develop skills that are not internal production oriented and short term but external and long term, which determines relationship between the organisation and its external environment. Strategist in construction concern themselves with these issues relating the organisation to the environment in order to survive and adapt where uncertainty is high and information is less, its ambiguous and unstructured. According to Langford and Male (2011) in a survey of construction companies issues that drove strategy formulation can simply be shown as follows; 1. 2. 3. 4. 5. 6. 7. Vision, mission and goals (stakeholders expectations) Core competency (the collective learning in an organization) Knowledge and resources (people, finance, technology, information) Education (explaining reasons for and means of strategic change) Finance and economics. Markets. Competition.

Despite the extensive literature there is no single unique definition of strategy but according to Ansoff (1985) its a systematic approach to position and relates the organisation to its environment to ensure continued success and security against surprises and according to Cole (1997) it basically concerns setting the organisation headline aims, choosing the most suitable goals for such aims and achieving both over time. 1|Page

BLOG Strategic Management Tools James King

It could be argued that in the construction industry it is not strategy that determine the organisations success but its effectiveness in using its capabilities and resources to implement the strategy.

Strategic Management Tools

In the construction sector strategic planners need to assess the significance of trends in the industry, the following tools maybe suitable for data analysis. 2.1 Benchmarking

This can be used in the construction sector to analyse top performing competitors product and processes externally and internally and compares with their own performance, areas of superior performance are identified and incorporated to improve the companys own performance. It identifies areas of best practice and adopts them, compares relative cost positions and identifies areas for improvement, focuses on capabilities critical to building strategic advantage, brings new ideas and allows experience sharing.

2.2

SWOT

This tool is relevant to a project or business ventures rather than the entire company, it measures a business unit, proposition or idea, enables comparison of current strategies relevant to changing environment and competitors, helps change of threats into opportunities and weaknesses into strengths.

Strengths-

Characteristics that gives advantage over competitors, its internal environment which they have control Characteristics that are a disadvantage to competitors, its internal environment

Weaknesses-

Opportunities- Chances to improve performance in the market, external environment ThreatsMarket elements that may cause trouble to the business or profit, external environment

According to Porter (1980) there are two forms of strengths and weaknesses facing a company; structural routed in economics of the industry facing the company, coupled with strategic positioning of the company relative to its competitors, this is external and relative stable and difficult to overcome. The second type is implementational, which is the companys ability to implement its chosen strategy, 2|Page

BLOG Strategic Management Tools James King the people and management capabilities. Porter sees these as transitory and comprise part of the internal appraisal of the company. 2.3 Porter 5 Forces

According to Porter (1980) the structure of an industry directly impacts the nature of competition between firms and the competitive strategies available to them. The five forces are: Rivalry between competitors - number of competitors and interaction between them. Power of suppliers construction relies on materials from other industries and these provide opportunity to influence input cost. Buyer power clients professional advisers can dictate rules of competition. Potential threat of new entrants new entrants to the construction sector depend on the presence or absents of entry barriers to overcome by new entrants if they are to become successful. Threat of substitution not an easy concept to apply to the construction sector, according to Porter (1980) a substitute undertakes the same function.

Michael Porter also developed his Porters Four Corners analyse, 2.4 Porters Four Corners This can be used in the construction sector to analyse competitors, the four corners refer to the diagnostic components that are essential to the analysis: Future gaols philosophy, finical goals and external constraints. Current strategy how and organisation creates value where it chooses to invest. Assumptions strengths and weaknesses, competitors goals. Capabilities finical strength, skills and training, marketing skills.

Has an advantage over SWOT in that it considers motivational factors that can be key drivers of competitive behaviour, these are often over looked.

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BLOG Strategic Management Tools James King 2.5 Balanced Scorecard

Translate Mission and Vision Statements into a comprehensive set of objectives and performance measures that can be quantified and appraised to see if management are achieving desired results. The measures include the following performance areas: FinancialMarketInternal ProcessesInnovationEmployee PerformanceCash flow, revenue, return on capital employed Market share, customer satisfaction, loyalty Productivity, quality measures, timeliness Rate of improvement, employees suggestions Morale, knowledge, turnover, best practice

Conclusion:

Research would indicate there exists no one best strategic management tool to suit all companies circumstances, company goals are what is important and strategies provide the direction on how they shall be achieved. All construction companies need to be aware of their environment to understand and react to their market place; opportunities, threats, changes, competition and the tools outlined in this blog may help their survival and ability to make money. However the tools should be viewed as a means to achieving strategic goals, whilst strategies are important they may stifle fluidity and creative thinking when utilised as a honed group thinking.

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BLOG Strategic Management Tools James King References: Interviews conducted with: Barrie King, Managing Director-Chairman, BRK Consultancy Ltd. 31/1/12 - 25/2/12 MR X , Company X, Wishes not to have himself or his company disclosed. Bibliography: 1 Langford, D. and Male, S. (2001) Strategic Management in Construction, 2nd ed. Oxford: Blackwell Science Ltd.

Mintzberg, H. (1987) Crafting Strategy, Harvard: Business Review, 65(4), 66-75

Porter, M, E. (1980) Competitive Strategy Techniques for Analysing Industries and Competitors. New York: Free press.

Ansoff, I. (1987) Corporate Study, 2nd ed. Harmondsworth: Penguin.

Cole, G, A. (1997) Strategic Management, 2nd ed. Glasgow: Letts Educational.

Lavender, S. (1996) Management for the Construction Industry. Harlow: Addison Wesley Longman Limited.

Bain & Company 2012 Management Tools & Trends [online] Available at: http://www.bain.com/publications/business-insights/management-tools-and-trends2011.aspx [Accessed on 5th February 2012]

Bain & Company 2012 Balanced Scorecard [online] Available at: http://www.bain.com/publications/articles/management-tools-2011-balancedscorecard.aspx [Accessed on 5th February 2012] 5|Page

BLOG Strategic Management Tools James King

Chartered Institute of Management Accountants 2012 Strategic Analysis Tools [online] Available at: http://www.cimaglobal.com/documents/importeddocument/cid_tg_strategic_analysis_tool s_nov07.pdf.pdf [Accessed on 13th February 2012]

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Construction Management Guide 2012 Implementing Strategic Management in Construction [online] Available at: http://www.cmguide.org/archives/1375 [Accessed on 13th February 2012]

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KEW 2012 Strategic Management part 1 [online] Available at: http://www.kgsep.com/project-id/3802-srategic-part1 [Accessed on 15th February 2012]

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Change Management Toolbook 2012 Benchmarking [online] Available at: http://www.change-management-toolbook.com/file.php/1/benchm.gif [Accessed on 11th March 2012]

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Lifecycle Performance 2012 Porters Four Corners Model [online] Available at: http://www.lifecycle-performance-pros.com/ [Accessed on 11th March 2012]

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Leadership Champs 2012 SWOT [online] Available at: http://leadershipchamps.files.wordpress.com/2008/04/swot-analysis.jpg [Accessed on 11th March 2012]

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Investopedia 2012 Porter 5 Forces [online] Available at: http://i.investopedia.com/inv/articles/site/IndustryHandbook1x.gif [Accessed on 11th March 2012]

Word count excluding References and Bibliography; 1068 6|Page