Takeover and Strategy Proposal

Takeover and Strategy Proposal The following strategy and takeover proposal examines the contracting division of Masters Building Company Limited. The proposal undertakes a SWOT analysis, used as the foundation for strategy in marketing, division structure, and teamwork. Each area of concern is examined based on what has previously occurred, what is proposed to occur, and what the expected outcomes are. The strategic initiatives seek to prompt Masters Building Company Limited into a new era of relationship marketing, decentralised managerial structure, and strong employee morale. The firm’s strengths are that it has a strong consumer base with a positive history and social status. This is assumed from the long tradition of the firm in its operative area. The firm has very low debt and is profitable. There is some growth in the contracting division. The firm’s weaknesses are the lack of new client contracts, the recent decision to open new offices requiring overdrafts for the new offices of the contracting division. The contracting division also has low employee moral. Another weakness is that there is little work in the Exerter area and low complexity of projects. The firm has opportunities in altering its managerial and team structures to create stronger employee moral. It has opportunities in creating more complex projects through regional marketing of the new offices. The firm’s external threats are the credit crisis and recession, increased pressure from creditors for early payment and delays in receiving stage payments. The firm can overcome these threats by focusing in its strengths of tradition and customer relationships which can be implemented through stronger marketing strategies. The construction industry is highly competitive, and the ability of management to use marketing as a valuable service is imperative to gaining contracts (Shutt 1995). The focus of the takeover proposal is to generate more complex construction work for the betterment of the company. In doing so, the takeover proposal recognises that Masters has the potential to increase its commercial bids through a stronger marketing mix. Commercial bids are preferred due to their work complexity, which generates revenue and knowledge based experience for the firm (Finkel 1996). Furthermore, commercial bids are understood to have mixed uses and are often allocated by internal funds, thus they have minimal effects of interest rates and public policies (Finkel 1996). Since the scale of major construction projects is a barrier to small firms, it is imperative that Masters be placed under a strong examination of capital requirements in terms of current and necessary tools and materials, as both time and money are required to create jobs in commercial markets (Shutt 1995). Specialty contract work in commercial industry is the focus as this allows for small to medium sized businesses such as Masters to enter the market, generating stronger income (Canter 1994). The focus will be on small, complex projects in renovation and alteration. The takeover proposal is to include the past customers with new potential in a stronger marketing strategy as the firm moves towards the development of new offices it will require more marketing resources in Plymouth, Bristol and Bournemout. The takeover proposal must include a strategic business outline as: Figure 1 Marketing Strategy The current structure is very linear and hierarchical. While this has worked in the traditional construction industry, it bars open communication. It is recommended that the structure be evaluated and redistributed to increase communication between areas of the contracting division. This is imperative as the firm is expanding to add new estimators and managers. The takeover proposal is not to remove Frank Burton, but to readdress his position as an authoritarian manager into one of quality leadership that allows for stronger determination of the firm’s detection of, allocation of, and income from, the contracting division. Deficiencies in structure occur when there are low knowledge flows, which constrict planning techniques and lessen control of the contractual position (Finkel 1996). Figure 2 Structure Strategy Under Frank Burton’s traditional authoritarian management, the contracting division has low morale. Change management is required to rejuvenate the team. The contracting division has multiple intricacies that are dependent on the ability of management to integrate capabilities (Shutt 1995). The contracting division has a discontinuous business environment due to temporal bidding and allocation concerns, creating less efficient workloads (Shutt 1995). Establishing measures for efficiency is imperative to increase productivity, variables in staff periods, job roles, training incentives, and operations should be set to overcome staffing issues (Shut 1995). Figure 3 Team Strategy The impact of previous changes in the structure of the contracting and specialist service divisions have lead to a third reduction in overhead costs as staffing levels have been reduced, however turnover has increased. The contracting division has a turnover of 4,377,000Â £ with overheads at 9.5% and profits at 2.1%. Thus, net profits are only 91,917Â £, while overhead is 415,815Â £, which shows a negative cost efficiency strategy. Overhead costs are higher in Bristol and Bournemouth, where net profit is also lower, and that regional office has a smaller staff. This is likely due to the increased debt of the Bristol and Bournemouth locations. The common economic pathway for reducing overhead costs is not always to strategically move staff and relocate management or offices in new regions. This may lead to a false economy, since overhead costs were not lowered, just moved. Therefore, the takeover must consider strong evaluation of Masters complete economic position for the sake of reducing the high overhead costs. Market economic show that overhead cost reduction is found in low-cost production, availability of quality products and effective supply chain management (Rockley 1984). Cost concerns require a more efficient use of temporary and low-complexity work, and examining the markets in the regional offices to evaluate their cost effectiveness (Rockley 1984; Shutt 1994). It is not clear if the move to the regions such as Bristol was cost effective, however it is assumed that this was not an efficient move since it has higher overhead and lower profits (Rockley 1984). Therefore, it is likely that these regional offices ar e simply geographically out of place for the construction market (Shutt 1994). Furthermore, the construction industry itself is highly labour intensive, therefore it stands to reason that staff turnover and quality control as well as the product supply chain must be streamlined to lower costs and increase profitability (Shutt 1994). Activity name Project Leader Estimated start Estimated finish Market Analysis of Service Differentiation Len 4-Jan-09 4-Mar-09 Market Analysis of Relationship Management Len 20-Jan-09 21-Feb-09 Market Analysis of Marketing Mix Len 6-Feb-09 16-Apr-09 Restructuring from Hierarchical to Decentralised Gordon and Frank 24-Feb-09 25-Apr-09 Communication Pathways Open Door Policy Gordon and Frank 8-Mar-09 18-Mar-09 Communication Pathways Between Regional Offices Gordon and Frank 19-Mar-09 29-Apr-09 Examination of Job Roles Gordon and Frank 10-Apr-09 20-Apr-09 Examination of Training Gordon and Frank 10-Apr-09 22-Jun-09 Examination of Employee Resources Gordon and Frank 18-Apr-09 30-Aug-09 Supply and Production Analysis Sammy 30-Jun-09 30-Aug-09 Quality and Effectiveness Analysis Frank 30-Aug-09 21-Jul-09 Regional Market Analysis Frank 14-Jun-09 12-Aug-09 Figure 4 Milestones Canter M.R. (1994) Resource Management for Construction, London: Macmillan Finkel, Gregory (1996) Economics For Construction Industry. London: M.E. Sharpe Rockley L.E. (1984) Finance for the Non-Accountant, USA: Business Books Shutt R.C. (1995) Economics for the Construction Industry, London: Longman