Without Strategies It Is Not Possible to Provide Direction for the Construction Companies - Research Paper Example

1 Defining Strategies It has been stated by Hamel and Prahalad that companies that desist from competing for future market opportunities are doomed and forgo corporate value creation that they had achieved in the past. (Hamel and Prahalad). Growth is dependant on momentum and it is an integral part of business strategy. Growth is also a very difficult decision as it involves investments; and an investment may become wasteful or encumbrance if there is no adequate return in a reasonable period of time. Corporate strategies have been divided into Five Ps by Mintzberg and they are Plan, Ploy, Position, Pattern and Perspective. While each is a separate type of strategy with its attendant qualifications, yet they are usually present in all strategies to some degree. The real difference lies in the fact that one of them will be dominant and others will play a supportive role. (Mintzberg). 2 Strategies Markets are heterogeneous and companies, irrespective of size and area of operation, need to remain competitive in order to survive and make profits for their owners. Companies need strategies following which competitive advantage can be gained. Environments have a great impact on companies. Strategy is the reaction or response to these external and internal situations. Ansoff et al (1976) state that, amongst other things, responsiveness to the problems is what strategy is all about. The aggressive response to competition, the sublime response to the customers, the firm but fair response to the managers and workers are but a few ingredients of strategy. Minzberg et al (1998) offer another concept of strategy which is that it acts as a mediation force between the organization and the environment. Strategy is the internal and inherent capacity of the organization to meet and face challenges posed by the environment. There are different responses that formulate strategies and they can be divided into three different prescriptive or narrowed down schools of thought. They are the Design, the Planning and the Positioning schools of thought. The Design school was proposed by Chandler (1962), Power and et al (1986), Andrews (1987) and Christensen et al (1987). They think of strategy as being a “fit” between the internal capabilities and the external environment. This is done by designing or forming the strategy to be adaptive to its environment and is usually the outcome of challenges thrown by environment. The cause is ignorance that needs to be filled with information. The strategy thus formed is followed by implementation. Action is to be preceded by thought (Chandler 1962; Andrews 1987). It is considered as task of the owner or CEO and is a behavioural response to situations. The Planning school of thought is propagated by Ansoff et al (1976) and Ansoff (1984) and (1987). Here too the strategic challenge is to acquire information but it is believed that complete information and expert analysis forms the basis of the response to the challenges posed by the environment, which requires more than one person, to understand, and therefore a group of internal planners or senior managers formulate the strategy after deliberation. It is not as spontaneous as is the case with the design school but is a considered reaction. The Positioning school (Porter, 1980; 1985; 1996) accepts the planning school’s concepts but carries them forward with analytical tools and concepts. To confront with the problems of ignorance and to remove the uncertainties of interpreting the environments it develops tools like the five force analysis to define the model of competitive advantage. The nucleus in this case is the outside the business analyst who defines the response using tools and other skills to read and understand the environment. This is an attempt to remove ambiguity of the situation through analysis by using tools and to bring in outsiders who are unbiased with motives. 3 Strategies and the Construction sector A construction company is no different from other companies and need to plan its strategies according to its external and internal environment. Construction is not just routine erection of assets. It is a method of devising safety and raising the quality standard by improving the site’s operational standards. Just erections and annual maintenance is not going to improve the assets performance but enhancements by improvement by introducing better systems of doing so are part and parcel of the project. The major objective any construction project is to plan its productivity and capacity for the shortest period and to eliminate waste. Operational planning and control is one of the major activities of any production and support services industry. 4 Literature Review & Critique 4.1 Operational Planning and Control In order to maximize one’s own production and profitability in business, it is essential that comprehensive planning is done to realize the benefits. Operational planning of labour, material, and machinery is necessary to achieve the best possible product mix ratios. Jatinder N D Gupta, et al., (5 June 2006) suggest that a number of systems and equations are systematically adopted and are used for maximizing production plans and control. Ansoff (1977) stated that formal planning systems have always existed in businesses and successful companies have always been practicing sound quality planning. According to Sord and Welsch (1958), poor planning will lead to failure in the organisations. Basically, the uncertain nature of firms creates a situation that will eventually warrant planning. Specifically, planning for the operational activities of the form is crucial in delivering the needed results. In a number of cases the operational planning is influenced by external forces and the internal systems have little control on the job being carried out. The influence starts with quantity requirement that has come from the marketing to the supply side failure that may have resulted out of a natural or human cause. There are also cases where the planning is affected by the quality of goods supplied to the company by the vendors especially in case of natural resources like minerals (A V Ahmetzyanov, et al., 2002). Designing the operational planning is an essential element of strategy. Indeed, a timeframe has to be established to accurately. More important, the operating cycle needs to be accurately assessed in such a way that crucial objectives are included. Besides, all activities pertaining to the operating cycle need to be identified. As a result, future events can be anticipated and the possibility of risks can be predicted (Camillus, 1972). Designing the timeframe requires the analysis of the functional areas operating in organisations. Normally, each department has different approaches in their operational plans. Operational planning is a component of the entire strategic plan that focuses on the immediate impact of the strategies introduced in the firm. Lawrence and Lorsch (1967) proposed that firms have to determine the normal operating cycle of the department before proceeding to the succeeding stages of operational planning. 4.2 The Theory and Practice of Operational Planning Operations planning and control exist in both the service and manufacturing organisations (Ram Ganeshan & Terry Harrison, 22 May 1995). However, in addition to the supply chain, OPC would also involve the Production Management. During the planning work, the decisions that are made in OPC are classified under two major heads; Strategic and Operational. Strategic goes with the creation of the plan for a long term objective looking forward to how and what needs to be done to ensure continuity of work and higher productivity which, over a period of time, would also establish supremacy over the competitors. In the case of the operational decisions, it is most often towards short term goals to ensure that the incumbent employees make full use of their skills (Cooper M C and L M Ellram, 1993). Operational planning starts with the procurement of materials and assembling needed people in time for the project. Most of the companies that come under this kind of an industry vertical tend to have a hierarchical structuring of their supply chain. Under this methodology, multiple levels in the organisation are established to take care of the entire operation irrespective of the overall organizational structure. This planning would essentially concentrate on the input materials and the output products at every stage of the process rather than on the over all process or structure of the organisation. In this context, every entity acts like a black box that performs operations on the input material transforming it into the needed output material (Scheneeweiss, et al.,2004). Organising the supply of the input materials and the needed manpower to have the work progress would therefore become the essential activity of the hierarchical method of operation planning. In many cases, many statistical modelling and theories are employed. Typically queuing theories are employed for machinery usage optimization (Xiao You, 2005). For optimal use of manpower to effect deliveries at the specific point of time, job compression and job rarefying techniques are employed. In addition to this, where there is a distributed management involved, there is always a need to provide for an effective decision support services (Hax and Meal, 1975). These decision support systems provide for effective aggregation of data linked to time, products, capacity and also targets and any other relevant data for the industry. Ideally models are built using the hierarchical theory for every decision unit, keeping solvability as the primary concern. Cohen and Lee (1989) brought out an integrated solution using a hierarchical approach for inventory, production, and distribution. 5 Operational Control Once the planning phase is done, Primary Control is exercised through the implementation of the plan. Secondary Control is through monitoring the implementation process. This brings forth deviations and shortfalls. This is the area where most of the plans go wrong. Attention has to be paid to the planning exercise and an equivalent amount of attention is required to monitor it. This has led to a series of new concepts on controls that are in practice today in various industries based on their suitability of specific activities involved. Kotler P, (1988) has described some of the typical systems and controls for operation monitoring and control. They are Bureaucratic Control, Market Control, and Clan Control. Bureaucratic control arises when a set of rules and regulations are stipulated for the operations in a company. Every division, functions, and individual employees of the company have defined roles to play (Ahmet Satir (ed), Sep 1991). There will be Standard Operating Procedures (SOP) clearly defined and everybody will be expected to adhere to the same. Clan control makes use of a company’s social or cultural norms or rules to ensure that everyone in the company follows the norm so specified. This is not thrust on the employees. Instead, it works towards bringing in the entire set of employees to take personal interest in the company and the organisation and works the way that is beneficial for it (Kotler P, 1988). Market Control (Kotler P, 1988) is used when price competition is used to evaluate how profitability of a company. Using the profit and loss statement, the company can be benchmarked against a number of other companies resulting in a picture that could help the managers to judge the market. When there are multiple companies producing the same product, and between them the price in the market gets stabilized, then the company that makes the best profit amongst the competing companies is the one that is working efficiently. This forms the core logic of the market control systems. Management control works in conjunction with all of the other techniques already discussed. Most of the companies adopt a hybrid of these three systems. Almost all of the large companies have clan control in terms of a culture that permeates the corporate body. In the same way, there are clearly defined rules specifically for repetitive where procedures are clearly laid out for better performance. A clear bureaucratic control is implemented in all those cases. This is particularly true of the quality department that works in most of the production units. Market control is always exercised discreetly to decide on quantity under production and the nature of quality to which the product need to match up. 6 Conclusions Like in any other company, without strategies it is not possible to provide direction for the construction companies. The most suitable strategy will depend on the external environments. However Planning and Control being the central activity, needs special attention in the strategy. 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