SWOT Analysis of Jupiter - Report Example

SWOT Analysis of Jupiter By of [Word Count] Question a) SWOT Analysis of Jupiter Unit Issue CivilEngineering/Water Industry Spending plans by partners (s) Buoyant water sector (o) Aging water infrastructure (o) Framework retendering (o) Cost control (w) Risk management (w) Reduced profit margin (t) Building Construction skills (s) Limited experience on high value-complex projects (w) Monthly cash flow (s/o) Sector downturn (w/t) Limited work (t) Staff redundancy (w) Low (20%) turnover (w/t) Mechanical and Plant Installation Highly skilled staff (s/o) Innovativeness (s) Steep downturn of demand (t/w) JVAC Numerous awards (s/o) Good energy and carbon performance (s) Alliances (s/o) Global market presence (s/o) High manufacturing cost (t) Dropping profit margins (t) Setting up in China (o) Internal collaboration (s) Innovation (s/o) Niemans/Jupiter Joint Venture Shared equity (s/o) Nieman’s control (t/w) Preferred partner (s/o) High turnover (s) General and Corporate Sound balance sheet (s/o) Strong cash position (s/o) Economic downturn/depressed global economy (t) Shortage of experience (w/t) CSR, lack of control, poor risk management (w) Poor staff retention (w/t) Dissatisfaction with the reward system (t) Business Building (w) Cash reserve (s/o) Poor economic condition (t) High inflation/high interest rates (t) Availability of credit (t) Short term finance inaccessibility (w/t) Favourable exchange rate (s/o) Improved infrastructure (s/o) Difficulty in securing finance (w) Declining housing sector (t) (b) Strategy Unit Strategy Civil Engineering/Water Industry The company should take advantage of the opportunity presented by the optimistic water sector by initiating and tendering for water infrastructure projects. Jupiter should also exploit the spending powers and plans by its partners in the water sector. It should also seek opportunities to work on the aging water infrastructure, in collaboration with its resourceful partners. It should also utilize the retendering framework by Yorkshire, Northeast and Northwest frameworks. Jupiter must also improve on its cost control and risk identification, mitigation and management mechanisms to reduce risks and increase profit margin. Building The building arm of the company can increase productivity and profitability by harnessing its staffs’ construction skills. By harnessing its skills, Jupiter will overcome the weaknesses associated with its employees’ limited experience on high value and complex projects. To counter the low turnover and sector downturn and maintain its good monthly cash flow, the company needs to: (a) Have cash plans (b) Estimate delays in invoicing (c) Collect receivable (d) Give cash discounts to key accounts (e) Liquidate obsolete or unusable inventory The building arm of the company should also solicit and bid for more work to counter the threat of limited work, in the processes solving the problem of staff redundancy. Mechanical and Plant Installation The mechanical and plant installation branch of the company should exploit its strength of highly skilled staff in developing and implementing quality products/projects, thus acquiring a competitive edge over its competitors. The innovativeness in the branch can also be used to expand it brand quality to remain buoyant in the hard economic times. Thus, the steep downturn of demand will be reversed as products become more diversified and of high quality. JVAC The JVAC arm of the company should use its many awards to advertise itself and its products. In addition, the good energy and carbon performance record is also a strong publicity and advertisement points for the company. The likely alliance with Niemans should be harnessed to work in the interest of the company. This alliance is an opportunity for Jupiter to advance into international markets, further promoting its presences in the global market presence, increasing sales and profitability. Through these alliances and collaborations, JVAC will reduce the high manufacturing cost and increase its profit margins. JVAC must also speed up its plans to set up in China. It is not enough to form external alliances; more should be done to foster internal collaboration among the company’s designers and researchers to increase innovation and foster good workplace relations Niemans/Jupiter Joint Venture The proposed joint venture between Jupiter and Niemans should be used to share equity capital between the companies, in the process increasing the sources of capital for both companies. However, Jupiter must ensure that it does not lose the control of the joint venture to Niemans’ as this would reduce the bargaining and profitability powers of Jupiter. Luckily, the joint venture stands to be the globally preferred partner by Niemans, possibly translating into high turnover. Hence, the venture should be welcome, with Jupiter taking care of all its short- and long-term interests. General and Corporate Generally, the company should implement strategies to maintain its sound balance sheet and strong cash position, which are its main strengths and opportunity to increase the profit margin. It must also identify, define, mitigate, prevent and manage its risks better and improve its control to survive the economic downturn, occasioned by depressed global economy. To reverse the effects of shortage of experience, the company should further train its staff to add to the skilled personnel in its other departments. To improve its image and consumer base, Jupiter must engage in corporate social responsibilities that integrate the community into its activities. The company should retain its workers by improving its reward system, with which employees are currently dissatisfied, resulting in poor staff retention. Working conditions such as company buildings should be renovated or built a new to ensure the company is compliant with workplace safety, health and environment standards. Through joint ventures, the company will not only free finances but also access short- and long-term finance to survive the poor economic condition, characterized by high inflation and high interest rates. Generally, since the weaknesses of the company are mostly associated with its diversification measures, it is advisable that it combines its many operations and branches to merge its strengths. Question 2: Steps in Partner Selection for the Joint Venture Prior forming an alliance with Niemans, Jupiter should distinguish between its motivation for partner selection and motivation for the joint venture. Whereas the motivation for the joint venture is the expected outcome, the motivation for partner selection should be concerned with the processes and activities of achieving the objectives of the joint venture. Hence, Jupiter must differentiate between the “task-oriented and partner-oriented factors in the partner selection process. The factors by which the partner is to be selected should be accorded even greater importance that the task-oriented factors. It is also worth noting that choosing a venture partner with staff of compatible skills does not imply that a company has selected a compatible partner. Importantly, a partner should be selected based on its long term and non-transitional orientation. Jupiter should define the criteria to use for partner selection. The key guidelines for partner selection are operational policies, trust and commitment, compatible management approaches, communication, complimentary strategies, and operating policies. Others are financial capability, healthy mutual dependency, complimentary technical skills and the relative size of the partner. Skills and Resources The foundation of partner selection by Jupiter should be the ability of the partner organisation to offer the requisite technical skills and experience that would complement the expertise in Jupiter. In addition, the ideal partner should have the resources that Jupiter lacks or requires to complement its operations. If the proposed partner is not in a position to avail these complementary skills, experience, expertise and resources, then the viability and the sustainability of the joint venture may be jeopardized. The proposed partner must therefore have the resources and the technical wherewithal to qualify as a partner. To assess and ascertain the technical and resource viability of the proposed partner, the company should examine the past critical successes of the partner and the associated contributory factors. In this context, the factors that give the proposed firm its competitive edge should be identified and their effectiveness for the joint venture ascertained. Once these success factors are identified, their alignment with the long-term competitive position goals of Jupiter should be evaluated. The deficient areas in Jupiter should form the basis of the analysis of complementary skills of the proposed partner. Resources to be analysed include financial stability, human skills, machinery, plant and time. Relative Size of the Company The level of sophistication and size also contribute a great deal to the success of joint ventures. Thus, Jupiter must consider the size and complexity of the target partner and opt for a partner whose size and complexity are comparable to Jupiter’s. In areas where its operations are significantly low-level, the partners may join hands and magnify their operations. However, given that Jupiter is a large company, it should seek a partner of equal values, control systems, tolerance to losses and equal share of risks. Because they suffer few cases of short-term cash flow problems, big partners are ideal for Jupiter because such a joint venture can exist for long because of a stable resource base. Small- and medium size ventures also have their strengths and should be considered. For an illustration, highly specialized and skilled medium firms could have unique capabilities that would prove quite useful to larger firms with which they form joint ventures. In cases where one of the partners is exceedingly bigger than the other, it is of the essence that contingency measures are established for any potential problems such as domination by one partner. While considering a partner’s size, Jupiter should assess its respective business unit, rather than the partner’s absolute size. In other terms, it is not enough to consider only the business-level size but also the division-level size. Jupiter should also identify and establish that the potential partner has the financial base and the requisite appetite for success. Otherwise, as a partner, Jupiter may not realize the goals for which it entered the joint venture. Much as Jupiter should identify a partner with the right financial muscle, it is also important that it avoid a situation of financial dependency on its partner. Financial Dependency It is sufficient that a proposed partner is in a financial position to promote the realization of the venture’s efforts and objectives. The identified partner must be willing and ready to meet its financial obligations as far as the realization of venture goals is concerned. Otherwise, partners showing some form of laxity or reservation should be avoided. Notably, partners may have varying enthusiasm towards joint venture operations and objectives, especially if one of the partners does not have the financial muscle to meet its share of obligations. The consequences of such as scenario are operational hiccups and bruised egos. The company should thus assess the potential partners’ financial balance sheets, which is a key good indicator of financial performance. Complementary Strategies For the long-term success of the joint venture, Jupiter must assess whether the strategy of the target partner is complementary to Jupiter’s strategy. Much as size, skills and resources are important considerations in joint venture formations, they are secondary to the strategies of the partners. There must be a fit between the joint venture strategies of the partners. Each partner should evaluate and understand the other’s strategy and expectations of the Joint Venture (JV). If strategies and the expected returns from the venture are not aligned or complementary in nature, there are bound to be uncertainty, conflicts, dissatisfaction, and mistrust among the stakeholders. Divergent strategies may also result in difficulties in the formulation of mutual standards for operations and response to situations. Because of strategy differences between JV partners, there are bound to be power games as each partner fights to achieve its objectives, resulting in the collapse of the venture. Although it may be difficult to determine the other partner’s strategy and objectives with utmost accuracy, it is recommended that such as determination is done. It is only through the determination of a potential partner’s objectives, strategies and expectations that future power struggles, conflicts, suspicion and collapse of a joint venture are avoided. Besides, the proposed partner’s immediate situation and goals, it is important that its likely future position, expectations and strategies are anticipated and analyzed. The joint venture will only work well if each partner believes it is achieving its venture goals. Trust and Commitment For Jupiter to form and operate the proposed joint venture for a long term, it requires more than a cordial relationship between it and its partner. Commitment and trust are equally important to the success of joint venture, especially among the top managers. Trust is particularly important in joint venture matters that touch on proprietary and technological aspects of the partners, which grant them their competitive edge and profitability. Given that partners could turn out to be competitors, partners in joint ventures may treat each other with suspicion, as harbouring ill motives, Jupiter must ensure its potential partner’s ethical and legal practices comply with national and international standards. The company should also be careful while exposing its technological powers to its partner. In fact, all the legal protection systems must be in place prior to entering a joint venture. Otherwise, the company’s proprietary rights may be infringed and competitiveness jeopardized. To address this potential problem, Jupiter may seeking majority control of the joint venture and structure the agreement to address the entire imaginable contingency. Both partners must then accentuate and actually instil common understanding and trust in which the official written agreement becomes more of representation of commitment collaboration and not an actual working document. Mutual Dependency Jupiter must also seek a partner that has complementary resources and skills. This selection will ensure that each of the partners focuses on its key competence areas. At the same time, the partners will be able to diversify in other business areas in which they have interests in or that are profitable, familiar, and attractive. Hence, the joint venture partner selected must not be that intensifies Jupiter’s weaknesses but that which creates new and intensifies its old strengths. It is not advisable to regard dependency as undesirable per se; rather, in some cases dependency could be beneficial to a JV. Hence, dependency must not be avoided all the time. What Jupiter should do is to properly match itself with the right partner. Both partners must perceive each other’s interests as based on the survival and success of the joint venture. Such a perception would ensure that the partners do not engage in activities that would jeopardize the success and survival of the joint venture. Essentially, both partners should identify their mutual needs then avail their unique capacities and resources to strive towards the realization of these objectives. The individual and complementary strengths and weaknesses of the partners should foster respect and not conflict during the joint venture’s lifetime. Operating Policies Jupiter must also consider the operating policies of the target partner. Inconsistencies in the operating policies of the envisaged joint venture might result in conflicts and the eventual dissolution of the JV. The most harmful inconsistencies are those affecting the partners’ employee benefits policies, accounting systems, debt-to-equity ratios, and cultural biases. Jupiter should also consider the cultural differences among the partners, which are also key causes of differences in operating policies. Communication Communication is the other key ingredient in the management and success of joint ventures that Jupiter should consider. Miscommunication is normally brought about by cultural differences between partners. Communication barriers have detrimental effects on the operations of JVs because they make operation difficult, especially in multicultural, multilingual, and multiethnic work environments. Difficulty in communication translates into increased expenditures as it becomes more difficult even to deliver simple messages and directives. Thus, Jupiter should consider all the political, social, economic, ethnic, and linguistic barriers between it and its target JV partner. Once it selects a partner, Jupiter should conduct cross cultural training, especially for managers and employees to evade cultural, social, political and economic blunders and barriers to communication. Management Team Jupiter must also consider the management teams of both partners since management plays the most important role in the success of joint ventures. The decision makers should hit a rapport from the moment the venture is formed through to its conclusion. Both sides of the management must have the same understanding of their roles and responsibilities as well as the success of the JV. The teams must also be compatible in their abilities. They must also be able to attain consensus when deciding on critical matters that may impede the JV’s from succeeding. Question 3: Managing Cultural Diversity for Improved Performance Once Jupiter goes international, the management of cultural diversity will become vital to its performance, profitability and survival. A framework that Jupiter may adopt to address the imminent challenge of cultural diversity and improve its performance is the Hofstede Model. The elements of the model that Jupiter can implement to succeed include masculinity versus femininity, uncertainty avoidance, power distance relationship and collective versus personal values. The Hofstede dimension of power distance requires Jupiter to be knowledgeable on the extent to which the followers and leaders in the host country accept the power plays in that society. The other dimension of national cultures in this model is uncertainty avoidance, which simply implies the extent to which a society accepts and tolerates uncertainty and ambiguity (Hofstede, Hofstede & Minkov, 2010). Jupiter must thus know the extent to which its international markets tolerate uncertain or new situations or products. Jupiter is thus required to ascertain how the target markets will tolerate and welcome its new, unknown and different products. Do the target countries have strict rules, measures or regulations against new entrants into their territory? It is also important that Jupiter ascertain the levels of individualism and collectivism in the new international markets. Whereas individualism refers to the extent to which people in a society are loose connected, collectivism refers to the extent to which people are integrated in groups (Hofstede, Hofstede & Minkov, 2010). Collectivism seems to protect people in groups, winning their unquestioning loyalty (Hofstede, Hofstede & Minkov, 2010). Evidently, it might be quite difficult for Jupiter to enter into such as market and penetrate it within a short period. It is also important that Jupiter establishes the extent to which gender roles are distributed in the new markets (masculinity versus femininity dimension of the Hofstede model). For instance, a study by IBM shows that men’s values include assertiveness and competiveness, which vary from women’s modest and caring values. Jupiter thus needs to know the values of each gender in the new markets to operate its business successfully. In many business ventures, cultural diversity often results in conflicts and non-performance. However, using the Hofstede model, Jupiter can reverse this trend and create synergy out of the cultural diversity it will encounter in its international expansion. First, Jupiter must be aware of the cultures of the countries it intends to venture into. Such knowledge is quite instrumental in the elimination of misunderstandings and misinterpretations associated with being ignorant about other peoples’ cultures. Jupiter can use the Hofstede model to improve performance by promoting international communication with its partners and customers. Through the Hofstede model, Jupiter will have an insight into other peoples’ cultures. It will be mandatory for the company to appreciate the cultural differences to achieve effective cross-cultural communication with its international partners and clients. The Hofstede model is also useful in international negotiations. Through the model, Jupiter will be able to select the best communication style, gauge its expectations and rank its issues and objectives for negotiation purposes. The model requires that negotiation skills, styles, issues and objectives change from one country or culture to another (Hofstede, Hofstede & Minkov, 2010). Otherwise, sticking to the same issues, goals, and tactics of negotiation could result in rejection or conflicts across cultures or countries. Jupiter can also use the Hofstede model in the international management of its operations. Moreover, the model is useful in cross-cultural leadership. In this context, the model calls on manager to make critical decisions based on each region’s or country’s values, norms and customs. Jupiter may thus be required to train its managers and subordinate staffs on cultural management and leadership. Such training should focus on sensitivity to cultural differences, culturally ethical business practices and business protocols as applied in the host country (Hofstede, Hofstede & Minkov, 2010). Jupiter can also use the Hofstede model to improve its performance in its international marketing segment. The international marketing strategy used by the company must understand the target market’s national values to determine its advertising strategies, branding options and consumer behaviour in the target market (Hofstede, Hofstede & Minkov, 2010). In other terms, Jupiter should ensure its products conform to the local preferences and habits. If the target country has a high uncertainty avoidance, Jupiter may advertise its products as of high quality, safety and durability standards. Yet, in other cultures, it may only require the products to be socially acceptable to perform well in the market. Jupiter can therefore use the uncertainty avoidance dimension of the Hofstede model to increase their market coverage, in the process improving sales, profits and the overall performance. Reference Hofstede, G., Hofstede, J. G., and Minkov, M. (2010).Cultures and organizations: software of the mind, third edition. New York: McGraw-Hill Read More