MBA 617 Strategic Management : Losses and Investments

Once KTC creates a strong foothold in the new host countries and forecasts a profitable business expansion, it must move towards localizing its operations. India, China, Australia, Brazil and many other countries can provide it cheap labour and natural resources. This model requires bigger investment but is opted by most of the multinational companies because these markets are profitable. The organizational chart of KTC needs to be expanded in order to able deal with the new markets efficiently.

The organisational chart of Samsung C&T shows that the company besides being a part of the Samsung Group has a structure which encompasses the all its business areas including the global business. KTC should utilize the resources of its host countries which includes the supply chain in these nations. The company can enter into joint venture with big players in these markets who can help it owing to their deep knowledge and expertise in the regional conditions. The company should be aware of the macroeconomic situations in these countries pertaining to projects, contractors, subcontractors, labours, environments, materials and so on. KTC should create a department to oversee the acquisition of resources from these markets like Samsung. Creating a strong supply chain in new markets will help KTC to acquire materials at lower rates and reduce its cost of production (Monczka 2015).

KTC can also enter with joint venture with a company to enter a different sector. This will help the company to gain expertise in a new sector using the resources of its venture partner. Joint venture results in sharing of the risks and profits between the venture partners. KTC can reinvest the revenue earned from the new sector to strengthen its position in the market of the new product.

Maintaining key customer relationship and improving productivity:

An established market player has to maintain a strong and steady relation with its stakeholders. KTC should concentrate on cementing its position in the market by making new joint ventures and taking on more reputed projects taking advantage of its goodwill. The company can start fully owned subsidiaries in these countries which will function as public limited companies listed on stock exchanges and capable of attracting capital from the markets. Thus, KTC will be able to capitalize on the markets of the host countries through its subsidiaries. KTC, unlike joint ventures can enjoy the entire profit and finance its operations. It can also attract a huge capital from these markets through its subsidiaries. The company at this stage should frame new environmental policies to confirm to Six Sigma and reduce waste (Furterer, S.L. ed., 2016).

KTC can earn huge revenue at this stage which it can invest in a variety of asset classes and participate in hedging to take advantage of the difference in exchange rates. The extended corporate structure can frame marketwise policies to meet the changing demand. The company take aim at further expansion, niche marketing and other techniques to gain more market penetration.

Section 2: Analysis

KTC group is a Singapore based enterprise that has enormous interest for the industrial growth of its business in varying domains such as infrastructure, earthworks, building development and many more. The values of the Company constitute of some important elements such as professionalism, integrity, people-centric and many more. It is indeed unsuccessful in achieving a full success on its business principles. Moreover, the unavailability of a sufficient number of skilled employees and a disturbed organizational management are all describing a different story of the Company. As per the learner, the Company needs to consider the restructuring of its business structure to attain the highest success (www.ktcgroup.com.sg 2017).

Internal analysis by McKinsey 7S Model

The McKinsey 7S Model constitute of seven most important elements for an organizational operation, which is immensely required for the achievement of maximum of possible opportunities (Hitt, Ireland and Hoskisson 2012). The seven elements are as follows:

• Making of Strategy
• Building the structure
• Constructing a system
• Crafting a style
• Sharing values
• Staff management
• Incepting skilled employees

Making of strategy

Constructing strategy for the business operation and management style is one of the most important factors of an organizational internal structure. It requires the study of certain established thoughts of trade experts, which are available in the form of popular books and online articles. Moreover, benchmarking is another very important tool in making the strategies for a concerned organization as benchmarking allows in gathering the internal available resources as well as examples of big organizations.

KTC Group had its mission to become a leader in the construction industry in Singapore. However, it has failed to achieve the same because of various factors of which their strategic planning is one of the most effective of the contributors. Their reliant on the labour workforce ignoring the digitalization have resulted in their lower than expected work performance. Indeed, the Company has an insufficient number of skilled employees, which is elevating their problem, as they are more labour dependent (Hill, Jones and Schilling 2014).

Structure Building

Structure building is another very important factor for an organizational operation as narrates the communication style of the particular Company. The organizational structure of the Company is divided into two sections such as Singapore operations & Indonesia operations. In Singapore, the Company is mainly focussing on its construction works whereas in Indonesia, it is concentrating in Coal mining industry. The kind of financial resources, which it has, it does not have a sound organizational structure that could bring diversity in their operations. For an example, Samsung has various presidents for different countries and industrial sector, which is not the case in the organizational structure of the KTC (Eden and Ackermann 2013).

Constructing a system & Crafting a style

System is another very important part of an organizational hierarchy of management. However, the KTC Singapore lacks in proper structuring of system as it has less competitive business structure, as it is evident from the example of Samsung.

Their style of working is more of industrial basis, which does not have any separate presidents for the different kinds of industries in Singapore and Indonesia. Sub-contractors mainly guide the construction sites; however, any operational failure would hold the contractors responsible for it. Indeed, the sub-contractors are paid highly but they are not held liable for any accidents at the sites (Barney and Hesterly 2015).

Sharing values

Sharing values are significantly absent in their business operation as it is evident that any accidental cases would hold the contractors only; however, sub-contractors are paid highly (Rothaermel 2015).

Staff management & skilled employees

The management of staffs at the KTC Group has some faults as it is evident in one of the examples of their working style that legally affect the contractors for any cases of accidents at the construction sites. The Singapore government has not taken any initiative to abolish such practices, which is hampering the business operation by bringing faulty consequences to the contractors.

Because of the employment problem in Singapore, the Company has devoid of skilled employees, which it could have in some other parts of world such as China, India, Japan and many more. The undesirable nature to work in Singapore has affected the staff management of the Company (Lasserre 2012).

External analysis by Porter’s Five forces Model

Porter’s five forces model contains five necessary elements that help an organizational operation. Five forces are as follows:

Power of Supplier

Supplier power is the one most effective elements of the porter’s model, which states that the power of an organization is more if it has a wide range of suppliers for it. However, KTC has a limited number of suppliers, which is not the same with some of the biggest brands of world such as Samsung and many more (Stead and Stead 2013).

Buyer Power

Power of buyer is also limited to the Company, as it can easily be understood by studying the buyer power of Samsung. A limited number of buyers can anytime play with the Company, as the choices are limited for the Company (Andersen 2013).

Competitive Rivalry

Competitive rivalry is less in Singapore as it has garnered some of the most significant & challenging business dealings in past. However, it would certainly face a large number of rivalries from big companies, once it plans to expand its business to some other parts of world such as China, India, Japan and many more (Hoenen and Kostova 2015). For an example, Samsung would come across as one of their rival Companies in terms of global procurement of products, which is necessary the subsidiaries companies to run their business without depending on the parent Company (Rothaermel 2015).

Threat of a substitution

Substitution threat is higher for the Company as the buyer & supplier power for the Company is limited (Lasserre 2012).

Threat of a new entrance

On a same note, threat of a new entrance is also high for the KTC Group as power of supplier & buyer are limited for the Company. According to the learner, the Company need to take some initiatives for expanding its business to other parts of world to enhance its organizational performance. Moreover, an insufficient number of skilled employees have already affected the Company in Singapore. Expansion of its business to their known parts of world such as China, India and many more might bring a sigh of relief for them from redundancy of skilled employees (Andersen 2013).

Restructured Organization

The above comparison in between the organizational charts of Samsung and KTC clearly reveals the area of flaws in the structure of the KTC Group. The business is limited to only two countries such as the parent country Singapore and Indonesia. Indeed, the structure of the Samsung looks more organized as it has separate division of CEOs for its different sectors in different countries. Most importantly, this is extremely helpful in maintaining an independent running of business into the subsidiary companies. Nevertheless, operating a business in foreign countries from the host nation is more costly and less effective (Lasserre 2012).

Conclusion

KTC Group is not as big a Company as that of Samsung, P&G and many more companies. It does not need to concentrate on achieving the same height of success as well; however, it needs to take examples from big companies to utilise its financial power to the fullest of possibilities. It would be fair to mention that the organizational structure of the Company needs some kinds of repairing. It has a wide range of machineries that allows them to conduct a numerous kinds of civil engineering related projects. It is already engaged in doing export business with some of the potential markets of world such as China, Japan and India.

As per the learner’s perspectives, the current position of the Company is not a healthy sign for the Company. The Company lacks in having a proper structure for their business, which could provide a global exposure to their business to justify the financial strength of the Company. It has so far failed in retaining its staffs because of employment issues in Singapore. The proposed structural guidelines to the KTC, which is a reflection to Samsung’s strategies looks effective as it would open a land of opportunities to the Company in some other potential markets. Moreover, the proposed business structure would certainly provide an independent working to its subsidiaries in other parts of world.

References:

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