Strategy in Action: Davis Service Group - Essay Example

Topic: Strategy in Action Executive Summary This essay is focusing on the Sunlight textile maintenance services arm of Davis Service Group which deals with dry cleaning, laundry services, linen supply just to mention but a few. The subsidiary operates in the business-to-business sector mainly in the UK and with some international presence in other countries in the world. The company wishes to continue with its previous successful expansion programme of its geographical markets in the Far East (Foley, 2001). In this report therefore, the author presents an introduction to the essay and a background to the Davis Service Group. The report also offers the company’s mission statements and corporate objectives touching on certain aspects that challenge the company’s strategic plan. The report further presents the analysis of the company using various approaches as they appeal to the author. Finally, the report concludes by giving a summery of the pertinent issues that emerged through out the study. Introduction Research has shown that successful businesses always know when and how to adapt and change in order for them to remain viable and competitive. This adaptation involves growing some areas of activity and cutting back on less profitable areas through the utilisation of good strategies. Strategy has been defined as a long-term business plan that a company develops and implements (Bradford et.al, 2000). In this way, companies can often benefit from acquiring businesses operating in overseas markets for various reasons (De Wit and Meyer, 2004). In view of this, the top management team at Davis Service Group needs to come up with a water tight strategic plan proposing ways of how the company can enter and expand in Australia. This is in spite of the fact that the company has recorded some success in its expansion programme as shown by Haines (2006). Available studies show that Davis Service Group decided to expand its textile sector by growing organically in line with its strategic plan, which is proposed to be implemented within a five-year period (Haines, 2006). Background history The London-based Davis Service Group dates back to the early 1900s operating in three primary areas namely Textile Maintenance, Tool Hire, and Building Systems as cited by Moore (1995). Although the Davis Service Group provides overall direction, each of the three sections operates more or less as an autonomous business, each with its own board of directors and management (Foley, 2001). Among the three, Textile Maintenance is the company’s largest division in terms of revenue. The division is primarily active in the United Kingdom under operating company Sunlight Services Group according to Ostergard (2004) but also has operations in Ireland, Germany and in France (Scholtes, 2003). Sunlight Services is the United Kingdoms leading provider of textile and uniform rental and cleaning services and is also the historical core of Davis Service Group as explained by Ostergard (2004). All in all, Davis Service Group has grown strongly both organically and through a series of targeted acquisitions as illustrated in Appendix 1. Since its inception as a laundry service in 1900, Sunlight Services has developed into a leading provider of textile maintenance and rental services with an emphasis on uniforms for the hospitality, medical, police and fire services as well as other industries. By 1973, Sunlight had grown into being one of the UK’s leading services companies and found itself expanding beyond cleaning services to include security services (Richard, 1998). From 1987 all through 1989, Sunlight Services made some landmark acquisitions. It is in record that the acquisition of Practical Uniform Company and Co-operative Laundry Society both in 1989 boosted Sunlight Services with estimated revenue of £16.95 million as cited by (Gross, 2001). This acquisition extended the company’s textile maintenance operations into the northeast of England by acquiring Lakeland Pennine Group and Granada subsidiary Spring Grove Services Limited () specialised in work clothes for the food and pharmaceuticals industries. In 1998, it acquired Laundrycraft Ltd which operated primarily in the midlands region of England as explained by Jenkins (2003). Further, the company paid £30 million to acquire Midland Laundry Group in 1999. Jenkins (2003) further explains that the company made some presence in France by acquiring Blanchisserie Teinturerie de la Bièvre in April 2000. The final acquisition by Davis Service Group was in 2002 by taking over Berendsen, a company operating in Denmark, Sweden, Norway, Austria, the Netherlands, Poland and Germany (Schwartz, 2007). This was an ideal acquisition because like Sunlight, Berendsen was the market leader in providing textile services in its geographical area as cited by Jenkins (2003). Mission statement The Sunlight Textile Maintenance Services arm of Davis Service Group is dedicated in operating in its core mandate, first and foremost to the production of highest quality service to meet the needs and demands of customers while achieving an acceptable return on investment (De Wit and Meyer, 2004). This will be accomplished both internally and externally by employing good management and leadership strategies as well as fast tracking its expansion programme through rapid acquisitions. Davis Service Group key missions are to remain competitive in the market through innovation and having a skilful workforce capable of overcoming market challenges (Haberberg and Rieple, 2001). Corporate Objectives The Davis Service Group seeks to develop and expand the range of products and services provided through a combination of organic and acquisitive growth as stipulated by Lynch (2006). The Davis Service Group’s long-term objectives remain to be focused primarily on quality service delivery through new acquisitions and mergers according to ().The company objectives also remain centered in developing the business operation in order to maintain its leading position in the UK market and further create a sustainable expansionary value internationally (Lynch,2006).The company strives to maintain its employee base at a paltry figure of 17298 while at the same time raising sales to about £953.9 million by the end of 2008/2009 fiscal year (Newstrom, 2007). Finally, the corporate objectives include the improvement and commitment of structural operation by making the environment in the workplace favourable for innovation. The group wants to expand its competitive advantage by venturing into international boundaries specifically the Far East and eventually build up a strong business network and ultimately strengthen further its position in the international arena (Bradford et.al, 2000). Situational Analysis The Davis Service Group is found to operating in a monopolistic industry where there are no many players. The company’s listed subsidiaries are the only players found operating in this service industry. In view of available research findings, lack of legal and regulatory factors from the government has made success in this sector very practical. As far as environmental and ecological awareness is concerned, Davis Service Group cannot be blamed for any contravention and for this matter, the company has enjoyed an enabling climate for a long time (Foley, 2001). The company is also known to value skill development of employees of all cadres which ultimately motivates employee performance. This strategy has seen the company remain viable and relevant in the market share it operates in. Industry Analysis An industry, is defined by Lynch (2006) as “a contemporary operating environment where group of firms producing products and services that managers and/or consumers perceive to be close substitutes for each other, regardless of their technological process or geographical area of production, given that these products and services are freely available at the required market place”. Davis Service Group is the world largest service network operating within her three primary areas named elsewhere in this report. The company operates an industry that is somewhat not crowded thereby giving it an edge over the other companies located around the UK and internationally as far as the USA. Internal Analysis Davis Service Group is the UK major services provider majorly concentrating on textiles through Sunlight. The internal analysis of this company will entail the following approaches. Positioning Davis Service Group has managed to redefine its position in the market as a result of major company re-organisation in the face of liberalisation of the textile industry as illustrated by McGee et.al (2005). The company has been focusing on expanding its business operations by concentrating on rapid company acquisitions particularly in the textile service maintenance. Thus, Textile maintenance business remains the company’s exclusive activity in the market thereby becoming very competitive. By the end of year 2002, Davis Service Group had made tremendous acquisitions in the textile maintenance business to become an international company (Haberberg and Rieple, 2001). McKensey 7S Framework Davis Service Group should operate under the McKinsey 7S Framework whose premise is that there are seven internal aspects of an organisation that need to be aligned if it is to be successful. These seven aspects are Systems, Strategy, Style, Staff, Skills, Structure and Shareholders. Systems are very core in Davis Service Group in ensuring successful business endeavours (Haines, 2006). This is mainly facilitated by the introduction of Information Technology based on decentralised system of management in the company. Strategy is important because it defines the plan devised to ensure competition. Davis Service Group has greatly grown both in size and performance after designing and adopting its strategic plan. Style explains the style of leadership adopted where Davis Service Group tends to focus more on management style, leadership style of success throughout its activities based on team work (McGee et.al, 2005). The idea behind it is to allow Davis Service Group to offer a unique and efficient service through innovation, diversity and flexibility. Staff and Skills imply to the employees and their general capabilities in performing their duties in the company. As pertains to these two, Davis Service Group has been involved with the promotion of wider job training at all levels from management to ordinary workers. Structure on one hand appears to be decentralised at Davis Service Group but highly hierarchical where managers have the authority to give orders and make decisions which concerns the organisation performance (Monden, 2004). Like any other major organisation, it clear that Davis Service Group has a well founded structure which permits the promotion of good working environment with amiable employee relations. Finally, the company shareholders are both the employees and managers who work as a team for effective service delivery. A check list of McKinsey 7S model is provided in Appendix 3. External analysis PESTLE analysis To do a PESTLE analysis of Davis Service Group, it is imperative to analyse the Political, Economic, Socio-Cultural, Technological, Legal and Environmental factors that surround the operations of the company. The Political factors entail all the government and the foreign countries’ policies that may interfere with the operations of a company. Considerably, Sunlight is found to operate in a very enabling political climate. Economic factors on the other hand may touch on the global economic slump or currency differences present (Porter, 1980). It is notable that most countries within the EU use the Euro while the UK uses the British pound. Davis Service Group uses the Euro when the pound has a lower value for more profitability (). Similarly, Socio-Cultural factors have been found to impact negatively on business performance for Davis Service Group. It thus requires tactfulness to market the company’s products and services given the cultural diversity found in its market share (). Technological factors probably abide in Internet and technologies of the information, an area in which Davis Service Group has made great advances. To this end, Davis Service Group has attempted to develop the necessary skills in her employees (Mintzberg et.al, 2003). Legal and Environmental factors have been observed by Davis Service Group to the letter as laid down in the company’s strategic plans. SWOT Analysis A SWOT analysis indicates that Davis Service Group has been growing faster due to increased economic activities devoid of major threats. The company has curved its own monopolistic market share without much competition. In this sense, the company has seen numerous introductions of technologies that have enabled them redefine their position in the textile maintenance service market segment. The company strategy has been innovation and research coupled with job training to improve services delivery as cited by (Miles and Snow, 1992). But lack of competition has been seen as the biggest weakness for Davis Service Group because the company has not been vigorously involved in innovation and research which are both necessary for health business (). Opportunities have been found to exist in the exploitation of new markets particularly through acquisitions rather than setting up new business sites. As earlier established, Davis Service Group did not have major threats due to lack of stiff competition in her market share segment. But on the contrary, there are some perceived competitions from small upcoming companies in the industry according to Schwartz (2007). Porter’s 5 Competitive Forces Looked against these 5 fundamental competitive forces, Davis Service Group is seen to be safe as far as entry of competitors in the market is concerned. This is the company has had a head start in business without much competition in sector as explained by Porter (1980). There is also no perceived threat of substitutes in the products because the services offered by Davis Service Group are unique in a way and may lack alternatives (Porter, 1980). Market analysis of the services offered in this sector indicates that the bargaining power of buyers plays a very crucial role in controlling the market prices. In a similar manner, the supplier power is equally significant in either driving prices up or down, thus greatly affecting the survival of the players as stated by Porter (1980). As it were, there is no noticeable Rivalry amongst existing players in the industry because Sunlight Textile Maintenance Services subsidiary is operating in a monopoly. Furthermore, the company has really established itself in the segment commanding a deep rooted base (Porter, 1980). In order to compete with other potential competitors that may prevail, Sunlight Textile has lined up several strategies that may ensure company success. The most crucial strategy is to introduce strong organisational structures to cope with external and internal challenges and eventually employ new technologies to deliver quality customer services as illustrated by Wheelen and Hunger (2007). Ansoff’s Matrix According to Lynch (2006), Ansoff’s Matrix is a vital tool that helps business to decide their product, services and market growth strategy. Just like was the case with the competitive forces, it was necessary to look at the existing market because it offers the company a minimum risk over market penetration and new service development. This is clearly assumed to be due to the monopolistic nature of the services offered by Sunlight Textile. As regards diversification and product development, the company is making in-roads in this direction as evidenced by its successful acquisition programme as cited by Wheelen and Hunger (2007). Finally, Sunlight Textile needs to come up with a new product to cater for the diversified customers in the global market. Conclusion Research findings have shown that there has always been need for Davis Service Group to grow to. From the start, the linen hire and textile maintenance services provided by Sunlight offered the greatest opportunities for growth amongst the company’s original divisions because of the strategic fit factors as explained by Bradford et.al (2000). This is the reason why the Group’s other businesses were sold off as illustrated in the text. The strategy for this according to Haines (2006) was “to concentrate on the potential of the enlarged European textile maintenance business and to provide funds to invest further in this business”. As regards the strategy employed to make the company successful, it is evident that Davis Service Group has been giving local people responsibility for managing the markets they know best (Foley, 2001). Hence Local managers are posted to manage local companies using their expertise in their own markets. Finally, the company employs a very lean staff which is very efficient and highly decentralised in structure (Haines, 2006). List of References Ashelford, J., 1996. The Art of Dress: Clothing and Society 1500-1914. Abrams. Bradford, R., Duncan, P and Tarcy, B., 2000. Simplified Strategic Planning. Chandler House Publishing. De Wit and Meyer., 2004. Strategy: Process, Content, Context. Thomson Learning. Foley, S., 2001, ed. Davis Service. Independent Press. Gale, R., 2004. Dress in Anglo-Saxon England, revised edition. Boydell Press. Gross, D., 2001. Seamless Garments: Profitable Alternative for Knitters. Textile World. Haberberg and Rieple., 2001. The Strategic Management of Organisations. Prentice-Hall. Haines, S., 2006. Strategic Planning Simplified. Systems Thinking Press, San Diego. Jenkins, D., 2003, ed. The Cambridge History of Western Textiles, Cambridge, UK: Cambridge University Press. Lynch, R., 2006. Exploring Corporate Strategy. Prentice-Hall. McGee, J., Thomas, H and Wilson, D., 2005. Strategy: Analysis and Practice. McGraw-Hill. Miles, R and Snow, C., 1992. Causes of Failure in Network Organizations. California Management Review. Mintzberg., Lampel., Quinn and Ghoshal., 2003. The Strategy Process: Concepts, Contexts and Cases. Pearson Education. Monden, Y., 2004. Toyota Management System: Linking the Seven Key Functional Areas. New York: Productivity Press. Moore, M., 1995. Creating Public Value: Strategic Management in Government. Cambridge: Harvard University Press. Newstrom, J., 2007. Organizational Behavior: Human Behavior at Work, McGraw-Hill. Ostergard, E., 2004. Woven into the Earth: Textiles from Norse Greenland. Aarhus University Press. Porter, M., 1980. Competitive Strategy, Techniques for Analyzing Industries and Competitors. New York: The Free Press. Richard, H., 1998. Organizations: Structures, Processes, and Outcomes. Prentice-Hall. Scholtes, P., 2003. The Team Handbook. Joiner/Oneil, Inc. Schwartz, J., 2007. Masculinity and Fashion: Change and Continuity. Master’s thesis, University of California, Davis. Wheelen, T and Hunger, D., 2007. Concepts: Strategic Management & Business Policy. Prentice-Hall. Appendix 1: Davis Service Group Background 1900: Laundry Company Sunlight Services is founded. 1920: Godfrey Davis begins car dealership; becomes a prominent automotive rental and leasing company. 1957: A tool hire shop is launched, which later becomes HSS Tool Hire. 1959: Godfrey Davis lists on the London stock exchange, then enters portable building sales and rentals. 1963: Elliot Group is founded, which later becomes part of Falcon Industries. 1968: HSS begins catering equipment rentals. 1973: John Ivey is named CEO of Sunlight. 1981: Godfrey Davis sells off automotive rental business. 1987: Godfrey Davis acquires Sunlight Services for £8 million. 1988: The Company acquires Newbury Laundry Company; sells off Sunlights security services division; acquires Falcon Industries, including Elliot Group. 1989: The Company acquires Practical Uniform Company and Cooperative Laundries Society Ltd. 1991: Three of four Godfrey Davis car dealerships are sold off; the company is renamed as Davis Service Group; acquires Presco (Holdings) Ltd. 1992: The Company sells off Godfrey Davis Contract Hire to Bank of Scotland. 1993: The Company acquires HSS Hire Service Group PLC and enters tool hire market. 1994: The Company acquires Lakeland Pennine Group Ltd. 1995: The sale of Practical Uniform Company is completed. 1996: The Company acquires Spring Grove Services from Granada, which also includes operations in Ireland and Germany; HSS launches first test store in Florida, HSS Rental Stores. 1998: The Company acquires Laundrycraft Limited. 1999: The Company acquires Strumech Engineering Holding and Midland Laundry Group. 2000: The Company establishes operations in France with the acquisition of Blanchisserie Teinturerie de la Bièvres; acquires Redispace & Johnson from Initial Plant Services Ltd. 2001: The Company pays $46 million for 74-store chain RentX Industries, based in the United States. 2002: The Company acquired Berendsen, a company operating in Denmark, Sweden, Norway, Austria, the Netherlands, Poland and Germany. Source: International Directory of Company Histories, Vol. 45. St. James Press, 2002. Appendix 2: List of Principal Subsidiaries of Davis Service Group HSS Hire Service Group PLC; The Sunlight Services Group Limited; Spring Grove Services (Ireland) Limited; Spring Grove Services GmbH (Germany); Modeluxe Linge Services SA (France); Elliott Group Limited. Principal Competitors: Algeco SA; ARAMARK Corporation; ATCO Structures Ltd.; Ecolab Inc.; Hewden Stuart Plc; ISS-International Service System A/S; Rentokil Initial plc; The ServiceMaster Company; Steiner Corporation. Source: International Directory of Company Histories, Vol. 45. St. James Press, 2002. Appendix 3: 7S Checklist Questions The following are some of the proposed questions that can be used to analyze an organisation’s current (Point A) situation and then the proposed situation (Point B). Strategy: -What is our strategy? -How do we intend to achieve our objectives? -How do we deal with competitive pressure? -How are changes in customer demands dealt with? -How is strategy adjusted for environmental issues? Structure: -How is the company/team divided? -What is the hierarchy? -How do the various departments coordinate activities? -How do the team members organize and align themselves? -Is decision making and controlling centralized or decentralized? Is this as it should be? -Where are the lines of communication? Systems: -What are the main systems that run the organization? Consider financial and HR systems as well as communications and document storage. -Where are the controls and how are they monitored and evaluated? -What internal rules and processes does the team use to keep on track? Shared Values: -What are the core values? -What is the corporate/team culture? -How strong are the values? -What are the fundamental values that the company/team was built on? Style: -How participative is the management/leadership style? -How effective is that leadership? -Do employees/team members tend to be competitive or cooperative? -Are there real teams functioning within the organization or are they just nominal groups? Staff: -What positions or specializations are represented within the team? -What positions need to be filled? -Are there gaps in required competencies? Skills: -What are the strongest skills represented within the company/team? -Are there any skills gaps? -What is the company/team known for doing well? -Do the current employees/team members have the ability to do the job? -How are skills monitored and assessed? Source: Tom Peters and Robert Waterman (1980) two consultants working at the McKinsey & Company consulting firm. Read More