Corporate strategies of Skanska Construction

collective strategies of Skanska buildingStrategic planning and strategicalal circumspection realise attracted continuing interest from two seekers and executives everywhere ancient decades. Strategic decision making although recently taken into account in the reflexion fabrication is one of the key drivers of victory. Since social organisation is a assure- imbed and super fragmented fabrication, somatic strategies ar difficult to develop. Studies so far school principal out the signifi offerce of end worry competencies in falling regarded externalises, unless the organizational execution of instrument heavily rely on the effectiveness of the strategic decisions made by the companies ground on their militant resources and the grocery conditions where they operate. In this work, a world-known social anatomical structure troupe, Skanska Construction from Sweden, is taken as a graphic symbol and its collective strategies together with its competiti ve resources be analyzed. Future directions for the company argon discussed in the light of the ch aloneenges faced by the company.Keywords Corporate dodging, locution industry, strategic analysis.INTRODUCTIONIt is in the main considered that modern organizations should develop retentive term strategies in the face of an increasely dynamic and competitive world. Porter (1980, 1985) suggested that a company aims to develop a competitive schema in army to achieve competitive proceeds in a market economy. dodging has grown from a practice of military commanders and corporate executives into the field of com relegation science. It has enjoyed contri neverthelessions from various disciplines such(prenominal) as economics, organizational sociology, political science and cognitive psychology (Rumelt et al., 1994). Differing perspectives of strategy study and writ of execution remove evolved, centering globally on ones view of the capacity and motives of individual(a)s and or ganizations (Whittington, 2001). Mainstream strategic studies, however, have not typically considered the edifice industry, and conventional thought at bottom the industry has often downplayed strategys signifi clearce. strategy is circumscribed as a plan, pattern, position, perspective, and ploy (Mintzberg et al., 1998). Its signifi hobot effect on performance is testd empirically in the books (Porter, 1980). Emphasizing the impressiveness of strategic decision, Child (1972) similarly stated that companies can achieve higher(prenominal)(prenominal) organizational performance by adopting different competitive positioning alternatives based on strategic decisions.Lately, crook industry researchers have changed this perception to nigh degree as publications regarding strategic counselling have increase. Warszawski (1996) outlined a methodological procedure for strategic planning in construction companies. function as somewhat of a primer to construction professionals on th e topic, he discussed the definition of companys mission, the significance of business environment, and a broad outline of the locomote assumed in analyzing a companys resources. His elaboration on the development of competitive strategy was based largely on Porters (1980) theory of generic strategy. Chinowsky and Meredith (2000) conducted a survey to identify atomic number 18as of strategic concern that construction organizations need to emphasize. Venegas and Alarcon (1997) were the offset printing to propose a simplified poseur of variables change strategic decisions sooner recommending a mathematical model to predict the impact of the decisions.In this paper, the corporate strategies of a precise hearty known Swedish construction company, Skanska Construction, provideing be analyzed. In doing so, scratch of all the components of corporate strategy impart be investigated based on a literature review. The performance models that examined the grandness of strategies a nd competitive resources will as well be allowd as a part of this study. The major section will deal with Skanskas succeeder based on its corporate strategies and competitive resources. Besides, the external plaintors including the market conditions together will be discussed on with the future directions of the company.CORPORATE STRATEGY IN crook INDUSTRYCorporate StrategyCheah and Garvin (2004) developed a framework to define corporate strategy. The model divides corporate strategy into vii strategic field as shown in bod 1. All strategic fields justly ar give way, major components within the echtm of corporate strategy. Whereas some strategic models such as Porters (1985) value chain concept treated activities interchangeable human resource (HR) forethought merely as supporting activities, this model casts these strategic fields as distinct aras since they have currently evolved into disciplines requiring separate planning and execution. As evidence, most busines s schools at present mountain pass separate courses for each of these fields after a general word of the topic of strategic centering.Figure 1 Framework for corporate strategy (Cheah and Garvin, 2004)The following sections summarize the dimensions of corporate strategy being HR strategy, fiscal strategy, business strategy, transactional strategy, IT strategy, selling strategy, and engineering science strategy.HR strategyIn essence, HR strategy is more concerned about the aspects of managing human assets of an organization. HR strategy deals with (Cheah and Garvin, 2004)personnel anxiety (e.g. training programs job rotation among functions and geographical regions)industrial relations (e.g. employment law union- concern relationship negotiation tactic and strategy)incentives and compensation policies and memorial tablets andrestructuring concerns (e.g. downsizing).The goal of HR strategy is to have an effective dodging for obtaining (recruiting), training, mobilizing and managing the human assets of an organization to systematically carry out business trading operations and vernal ventures. financial strategyThere are two primitive aspects in financial strategy investment funds decisions and support decisions. During investment decisions, firms are confronted with the challenges of seat of government budgeting and financial resource allocation. In swan to make advance decisions, managers must select the appropriate tools for project analysis and evaluation, which include, but are not limited to, the net present value (NPV) method, decision shoetree analysis, optimization, portfolio planning and real option valuation. Behind these tools lies a common and native principle of balancing risk and re originate (Cheah and Garvin, 2004). Financing decisions, on the early(a) hand, are concerned with issues of capital letter social organization. In providing the detailed mechanics, Grinblatt and Titman (1998) showed how investment and financing d ecisions could impact the corporate strategy as a whole.Business strategyBusiness strategy is defined as strategies adopted to ensure successful ventures of individual business units, whereas corporate strategy is concerned with operations of the sinless organization. This distinction is obviously consistent with the model, since business strategy is one of the seven core fields of the overall structure (Cheah and Garvin, 2004). Business strategy formally deals with the development of competitive favour and core competencies. In particular, Porters (1980, 1985) techniques such as the determination of uniqueness and cost drivers, the Five Forces model, and the market constituentation hyaloplasm are some commonly known concepts in formulating business strategy. working(a) strategyOperational strategy is primarily concerned with execution and execution of instrument how firms manage their operational deales to convert different inputs into final products and function. These act ivities might include inbound and outbound logistics, procurement functions, production processes for physical products such as precast components, and procedural functions for service provision. For contractors, these activities are analogous to most project management functions such as material procurement, construction of the physical structure, and management of labor and machinery. Likewise, service firms utilize their expertise and knowledge to assist clients in fulfilling their needs and goals, as in planning, design and engineering functions (Cheah and Garvin, 2004).IT strategyIn this conceptual model, IT strategy is separated from technology strategy. Specifically, IT strategy pointes principally on the use of technology to leverage information to the advantage of a firm. This contrasts with some former(a) types of technology development in general. This distinction is justified by the fact that information technology has grown into a separate market segment and researc h area since the mid-1990s (Cheah and Garvin, 2004).IT is often taken as the driver of corporate strategy. More appropriately, it should be treated as an enabler that connects the corporate strategy of a firm with its operational processes (Ross and Rockart, 1999). In some aspects, the current trends of IT investment and implementation within the construction industry still appear to follow very vague goals. Too often, participants from the industry investing in IT (at least during sign stages) have forgotten their original identity as firms that provide construction services, thitherby putting their core competencies at stake. In many cases, these investments are lacking in terms of establishing linkages between processes and corporate strategy in the long run (Cheah and Garvin, 2004).Marketing strategyIn manufacturing and other industries that interchange physical products, the Four Ps (product, price, place and promotion) in conventional market management remains relevant at present, though changes in technology and IT have redefined the boundary and meaning of these components (Cheah and Garvin, 2004). Although construction is mainly service-oriented (except suppliers or vendors who are selling physical products), many of these concepts can be applied to selected separate of the construction value chain. For example, in terms of promotion, marketing strategy is curiously important in signaling to clients the value stimulated from the design of products and services in order to demand a price premium differentiation is hollow unless clients are able to perceive the value added that suits their unique needs. To achieve this, firms need to identify both needs (demand) and resources (supply divisors), and choose the most businesslike actor of service provision. Some common corporate involvement in marketing strategy includes umbrella branding and reputation building logistics issues (a critical factor toward lean construction) and collection of info rmation about clients needs (e.g. to improve quick-wittedness operation and maintenance) (Cheah and Garvin, 2004).Technology strategyTatum (1988) illustrated that the digress of possible technology-based strategies for construction firms is wide. At present, choices and content for technology development still remain as the most basic questions in technology strategy. Three primary issues particularly nucleotide out.The first issue is the notion of pioneer versus follower. Not surprisingly, whether one should be at the bleeding edge of the technology wave as a first mover is always a tough decision to make. This is especially true when technological trends are shaped by uncertain environmental factors. The second issue deals with integration. Large Japanese contractors, for example, have their own research institutes and tend to develop their technology internally. Third, firms have to assess the relative immensity between basic and applied research in order to deal resources a ccordingly (Cheah and Garvin, 2004).Corporate performance in constructionBased on Isiks (2009) work, a construction companys performance is mainly determined by the strategic decisions made and resources and capabilities of the firm. External factors, strength of relationships, project management competencies, and project performance are the other factors of success. These variables are listed in Table 1.Since this papers major objective is to discuss the corporate strategy and competitive resources impacting on the success of a construction firm, the main emphasis is on the strategic decisions and resources and capabilities leading to success as defined by Isik (2009).Construction organizations have long been criticized for a lack of long-term strategic planning and management (Veshoskyi, 1994 Chinovsky and Meredith, 2000). The literature on strategic decision-making is spread over a wide range from an individual strategists perspective to strategic management techniques, to the i mplementation of these techniques in real situations (Globerson, 1985 Letza, 1996 Warszawski, 1996 Neely et al., 1997). The strategies adopted in Isiks (2009) work represent the characteristics of the construction industry as a project-based organization. These strategies are summarized in the following section.Table 1 Factors affecting the corporate performance for construction firms (Isik, 2009)Corporate strategies in construction firmsCorporate strategy can be seen as the linking process between the management of the organizations internal resources and its external relationships with its customers, suppliers, competitors and the economic and social environment in which it exists. The organisation develops these relationships from its abilities and resources. Hence, the organisation uses its history, skills, resources, knowledge and various concepts to explore its future actions (Adnan and Jusoff, 2009). The industry environment is the set of factors that directly influences a fi rm and its competitive actions and competitive receipt the terrors of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes and the intensity of controversy among competitors. An opportunity is a condition in the general environment that if, utilize helps a company achieve strategic competitiveness. A threat is a condition in the general environment that may hinder a companys efforts to achieve strategic competitiveness. The resources of an organisation include its human resource skills, the investment and the capital in every part of the organisation. Organisations need to develop corporate strategies to optimise the use of these resources.Differentiation strategies refer to the differentiation of products or services that provides competitive advantage and allows a company to deal effectively with the threat of new entrants to the market (Porter, 1980). Many new construction companies enter the industry every year because starting a new company does not require a large investment consequently the construction industry becomes more competitive and forces existing companies to seek advantages over competitors by subject matter of differentiation strategies.Market, project, client and partner selection strategies are related to the characteristics of construction projects such as the location and complexity of the project, environmental conditions, avail office of sufficient subcontractors, availability of materials, equipment and know-how locally, financial stability of the client, and effectiveness partners that have capabilities that the company does not possess.Project management strategies can be developed by referring to the mission of the company and the companys business environment. The managerial functions of a project include activities such as planning, cost control, quality control, risk management, safety management, to name but a few. In order to achieve project goals, adequate strategies have to be set up relative to these functions.Investment strategies occur along several dimensions such as capabilities of the company (resources), pricing (financial decisions), product (construction project related factors), and finally research and development (Spence, 1979).Organizational management strategies involve decisions pertaining to the companys reporting structure, planning, controlling and coordinating systems, as intimately as the management of the informal relations among the different parties within the company (Barney, 1991).Resources and capabilitiesThe strategic management literature defines resources and capabilities as the strengths of a company. Given the competitive environment among the rivals, resources and capabilities cannot be assumed to be identical in every company (Porter, 1980 Barney, 1991). match to the resource-based perspective mentioned by Barney (1991), a companys resources and capabilities have to be valuable, rare, inimitable, and should lack substitu tes to have a positive effect on performance. further if these conditions are met can resources and capabilities be transformed into a source of competitive advantage (Barney 1991). It follows that a construction companys equipment, manpower, technical, and managerial know-how should be efficient, cost-effective, rare, and sophisticated enough to prevent false by competitors.Financial resources indicate a companys strength in the market in terms of its capacity to carry out projects. Adequate financial resources ensure the company can get into risky situations that have a prospect of high returns. As a companys financial strength increases, its believability and reputation in addition increases among clients and suppliers (Warszawski, 1996). The majority of construction projects are funded by the owner who pays the contractor periodically, who in turn pays the subcontractors, the suppliers and other parties of the project for services rendered. The success of this routine depend s on the financial strength of the owner as well as of the contractor (Gunhan and Arditi, 2005).Technical aptitude refer to the physical assets of a company such as machinery and equipment and the extent of technical know-how available that is necessary to undertake specific projects. According to Warszawski (1996), a companys technical competency can be assessed by analyzing the companys preferred construction methods, the experience of its technical staff, the productiveness and speed of its construction activities and the quality of the companys output.Leadership involves developing and communicating mission, vision, and value to the members of an organization. A successful leadership is expected to create an environment for empowerment, innovation, discipline and support (Shirazi, 1996). Researchers have examined the links between leadership styles and performance. Fiedler (1996), have emphasise the effectiveness of a leader as a major deciding(prenominal) in success or fai lure of a group, organization, or even an entire country.Experience is highly related to a companys knowledge management competency. Organizational learning can be effective only if the lessons intimate from completed projects are kept in the organizational memory and used in future projects (Kululanga and McCaffer, 2001). Organizational learning is difficult for companies because of the fragmented and project-based structure of the industry. This difficulty can be altered by knowledge management activities and provision of a continuous organizational learning culture (Ozorhon et al., 2005).The anatomy of the company compared with its competitors is important. As in all market-oriented industries, contractors similarly need to submit an image that fits the needs of the market and the clients targeted. It gives an impression of the products, services, strategies, and prospects compare to its competitors (Fombrun and Shanley, 1990). Contractors in construction industry have to por tray an image that addresses the expectation and demand of the clients and users, analogous in all other market oriented industries. Moreover, image of a company may enable higher profitability by attracting conk out clients and investors and increasing the value of the product (Fombrun, 1986).Research and development capability is a response to increased industry requirements that occurred as a result of globalization and competition between the companies. Developments occur in all human bodys of the construction process and technologies emerge that are deemed to have a positive impact on competitive advantage. In contrast to the traditional conservative stance of the industry, construction companies are forced to develop and adopt new technologies in order to survive.Innovation capability is an important factor in achieving cost leadership, focus, and differentiation, because enhancing competitiveness as stated in Porter (1980). A companys ability to innovate is related to the industry in which it operates. The traditional characteristics of the construction favor cost leadership obtained through lowest bids and focus obtained through differentiation (e.g., tall buildings, sewage systems etc.) as the predominant competitive advantages. According to Arditi et al. (1997) innovations are rather incremental than radical in construction industry. The construction is a supplier dominated industry. Construction companies are dependent on other industries for innovations such as construction materials, equipment other than the technological innovations such as new construction processes and methods. Alternative corporate structures, financing methods etc. can also be added as the likely innovation areas in construction industry (Arditi et al. 1997).SKANSKA CONSTRUCTIONS CORPORATE STRATEGYSkanska AB is one of the worlds largest construction enterprises. With plate in Sweden, the Skanska group employs 54,000 people worldwide and provides construction-related ser vices and project development. They create sustainable solutions and aim to be a leader in quality, park construction, work safety and business ethics. They also aim to maximize the potential of Skanska with regard to returns. They are a Fortune 500 company and a member of the UN Global Compact. Skanska is one of the worlds ten largest construction companies.Background of SkanskaA brief history of Skanska is found in the website that reads (Skanska, 2010)The origin of the company dates fundament to 1887 when Aktiebolaget Sknska Cementgjuteriet was naturalised and started by manufacturing concrete products. We quickly diversified into a construction company and within ten years the company received its first international orders. Through the 20th Century we played an important voice in building Swedens groundwork, including roads, power plants, offices and housing.In the mid-1950s, Sknska Cementgjuteriet made a major move into international markets. During the next decades we en tered South America, Africa and Asia, and in 1971 the US market. The US is now our largest market and Skanska ranks among the largest in the construction sector. Today, Africa and Asia are not include in our home market concept. The company was listed on the behaveholm Stock Exchange A-list in 1965. In 1984 Skanska became the pigeonholings official name.During the 1990s, Skanska initiated its most expansive phase ever. Sales doubled in only a few years. age the major portion of this growth was organic, a string of successful acquisitions also paved the way for Skanskas growth into a global company.Since the beginning of the twenty-first Century profitability rather than growth is a strong focus. The operations are streamlined to construction and development of residential, commercial and infrastructure projects in selected home markets in Europe and America.Skanska offers construction services in all of their home markets Sweden, the US, UK, Norway, Finland and Estonia, Poland, Czech Republic and Slovakia and in Latin America. Skanskas management structure is shown in Figure 2.Figure 2 Skanskas management structure (Skanska, 2009)Skanska aims to be a financial and qualitative leader. Their financial targets polish the ambition to turn over the industry norm. In each of their geographic markets and specific segments, they have established what we call outperform targets.In addition to the financial targets and as representation to reach them they have also adopted qualitative targets. The qualitative targets are expressed in Skanskas five corrects vision (Skanska, 2010)Zero loss-making projects. Loss makers repose profitability and customer relationshipsZero accidents, whereby the safety of their personnel as well as subcontractors, suppliers and general public is ensured at and around their projectsZero environmental incidents, by which their projects should be executed in a manner that minimizes environmental impactZero ethical breaches, meaning th at they take a zero tolerance approach to any form of bribery or rotZero defects, with the double aim of improving the bottom line and increasing customer satisfaction.The qualitative targets, as expressed in the five zeros, reflect their core values. The five zeros as well as the financial targets also provide the basis for incentive systems at various levels within Skanska.Markets of operation and market strategies of SkanskaSkanska is active in selected home markets in Europe, the US and Latin America.In the US, which is their single largest market, they are a leading company within building and civil engineering projects. They are also targeting the US Public-Private Partnerships (PPP) segment. In the Nordic region, Czech Republic, Slovakia and Poland, their operations cover the construction and investment businesses. In Latin America, they are mainly active in the oil, gas and vigor sector and in PPP. In the UK, they are a leading fake in construction as well as within PPP.I n 2006, there were 67 891 companies operating in the construction sector in Sweden. The biggest companies are Skanska, NCC and Peab. There has been an increase in the competition from foreign companies over the last years. It has been a rising market in 2006-2007. During the last quartet years the investments have increased with 5-10 %. However, due to the current market weakness, there was a decline in 2009. There is no legislation in Sweden stipulating how construction work and services should be performed. Instead, there are general conditions which have been developed by organizations and parties operating within the Swedish Construction Sector.Figure 3 shows the geographical markets of operation of Skanska including Sweeden, Norway, Denmark, Finland, Estonia, Poland, Czech Republic, Slovakia, Hungary, UK, US, and Latin America.Figure 3 Markets of operation of Skanska (Skanska, 2010)Skanska attaches special splendor to metropolitan regions, which often demonstrate higher growt h than their respective country as a whole. Skanska offers many of the products and services that are needed in growing cities workplaces, schools, hospitals, sports and leisure facilities, as well as housing and infrastructure for transportation, energy and water. In individual markets, Skanska operates today only in certain segments, but by winning advantage of its collective expertise, the Group can enhance its opportunities for growth and higher earnings in these markets (Skanska, 2009).Competitive advantage of Skanska (resources and capabilities)In Isik et als (2010) work, resources and capabilities was found to be most influential on company performance. The critical importance of the resources and capabilities of a company was also emphasized in the literature. The strategic management literature defines resources and capabilities as the strengths of a company. Given the competitive environment among the rivals, resources and capabilities cannot be assumed to be identical i n every company (Porter, 1980 Barney, 1991). Skanskas classifiable resources that create competitive advantage for them are as follows (Skanska, 2009)Size world a market leader positions Skanska well with the most demanding customers. Its stature also provides access to the best suppliers, which can live up to Skanskas promises to customers regarding timely language and quality as well as safety and ethics. Skanskas size gives it an advantage in the most complex assignments, where it uses its collective experience and know-how to meet the demands of customers. Only a few companies can compete for the type of projects where, aside from price, comprehensive solutions and lifecycle costs are of crucial importance. The Groups size and international profile are also attractive qualities in the recruitment of new employees.Technical competency BIM, a computer-based method for detailed panning, coordination and more efficient execution shall be used in Skanskas design-build projects, i n which Skanska is responsible for both design and construction. BIM means great standardization and also improves Skanskas ability to utilize the savings potential of its corporate-level buying efforts.Human resources Skanskas skilled, dedicated employees combine expertise with the Groups overall focus on sustainable development in order to successfully deliver projects to customers. The Groups ability to transfer knowledge between different geographic markets also contributes to its strength.Image of the company Skanskas brand has been built up during more than great hundred years of working in many different countries. One component part of the brand is the Groups Code of Conduct, which includes policies on employee relations, health and safety, the environment and business ethics.Financial resources Financial strength is an important factor in maintaining the confidence of customers and capital markets in Skanska. It also enables the Group to invest in project development and assume responsibility for and invest in major privately financed infrastructure projects.Innovation capability Business units of the Skanska Group specialize in project development or construction but often collaborate in specific projects. This strengthens the Groups customer focus and creates the prerequisites for the sharing of best practices, while ensuring efficient utilization of the Groups collective competence and financial resources. To take further advantage of synergies and bring together the Companys expertise, a number of support services are available to all units. These include the Skanska Knowledge Map, a web-based intranet tool that visualizes experts and teams of experts from Skanska on a global basis in selected strategic areas, for example edifice Information Modeling (BIM), Green Business and Design/Build. By utilizing its narrow expertise in planning and executing projects, Skanska improves risk control, which in turn results in higher quality and profitabil ity. Global collaboration thus leverages both earnings potential and the Groups ability to satisfy the needs of its customers.In the Skanska Group there are both operational and financial synergies that generate increased value for their shareholders. By being a global player, Skanska generates operational synergies mainly due to the potential for taking advantage of the local specialized expertise found globally in various business areas. Shared purchasing activities and product development also boost efficiency and contribute to greater synergies in the organization. The Construction business stream operates with negative working capital and generates a positive cash hang up over time. This cash flow is invested in the Groups project development business streams, which have enjoyed very straightforward return on invested capital. These investments also enable Construction to obtain new assignments that generate a profit for the business stream. Figure 4 illustrates how this syst em works.Figure 4 Synergies at Ska