Essay: Genesis PM – Porter’s Five Forces, SWOT and PESTEL

1. Preamble
In today’s era, the management environment is more complex and organisations continually have to face new challenges and adapt to the latest changes. In order to cope and survive, it is vital for Genesis PM to review its existing objectives, goal and strategies. With a view to becoming more effective and efficient, the organisation should devise new frameworks for coordinating its internal and external environment.
2.0 Introduction and Context
Since it inception in 1991, Genesis PM; a contracting company located in Port-Louis, Mauritius has been building featured residential and commercial spaces around the country. Our driving force has always been our exceptional craftsmanship and expertise.
At Genesis PM, we view the construction process as a partnership between clients, architects, and contractors and have proven that this approach leads to higher efficiency, superior product, and a rewarding process throughout the project.
At present, we are a team of 186 experienced staffs who lucratively combine detail oriented construction and project management into every aspect of our projects.
The below table indicates a detailed breakdown of our 186 staffs.

Details Age Group Total
Managers / Head of Departments 25-58 10
Subordinates 20-50 16
Front Line Officers 20-30 5
Attendants 25-50 5
Quantity Surveyors 25-45 10
Builders 20-50 65
Manual workers 20-45 75

Table 1.0

2.1 Mission and Vision Statement
OUR MISSION
To be a paramount provider of high quality construction services at competitive prices for the benefits of our clients by ensuring safe deliveries of projects.
OUR VISION
To be the world’s most efficient Contractor by constantly innovating and operating in an ethical way.
OUR CORE VALUES

• Quality
• Safety
• Integrity
• Excellence
• Trust

3.0 Environmental Scan
3.1. Industry Environment – The Microenvironment
The internal environment of business can be narrowly described as the internal factors that managers can influence.
The microenvironment is best described by the Porter’s Five Forces Model after Michael Porter(1980).The model measures Industry attractiveness by analysing the relative power of buyers, suppliers, competitors (current and potential) and threat from substitutes.
The industry refers to a group of firms offering products or services that are perceived to be close substitutes for each other. The firm in a given industry use a particular competence, technology, product or service to satisfy customer needs.
According to Porter (1980), the stronger any of the forces mentioned above, the more limited is the ability of the company to reap greater profit or achieve a better market share. Therefore a strong competitive force can be regarded as a Threat. Conversely, a weak competitive force can be viewed as an Opportunity.
Porter’s Five Forces Model (PFF Model)
Source: Hill. C. W. L. & Jones. G. R, Strategic Management Theory, 1995
3.1.1. Potential Competitors
There are companies which are not currently competing in the industry, but have the potential to do so in future.
In order to reduce the threat of potential competitors, the managers will have to emphasise on the following tactics:
1) Erect Barriers to Entry:
Erecting Entry Barriers in the industry implies that if any company wishes to join the industry, it will have to incur significant costs.
One of the various Barriers to Entry is Research & Development costs. Surpassing Genesis PM can be difficult as we have advances in Research & Development.
2) Establish Brand Loyalty:
‘If people believe they share values with a company, they will stay loyal to the brand’ (Howard Schultz). Any competitor will find it either too difficult or too costly to break down well anchored consumer preferences.
Genesis PM managed to develop a level of loyalty among their customers which new competitors will find almost impossible to get any significant share.
3) Develop absolute Cost Advantages:
Genesis PM has developed cost advantage through optimally engineered production techniques and from supplier relationships. These include tight control on costs of inputs such as raw-materials, labour, debt finance (e.g. competitively negotiated interest rates) and so on.
4) Benefit from Economies of Scale:
These are also cost advantages but are associated with company size and mass production of a standard output. Genesis PM is benefiting from bulk discount in purchase of inputs. We are in a position to spread our fixed costs over a larger volume.
3.1.2. Rivalry among established companies
The fact that rivalry in the industry is strong, profitability of the industry as a whole is being affected. Competitive actions such as price wars, advertising battles, aggressive sales promotion campaigns and providing warranties have been formed.
The factors behind such rivalry are:
(a) Industry structure:
Due to the large number of equally powerful competitors, competition is more intense. The market has observed the formation of cartels which are collaboratively setting prices to the detriment of the customer.
(b) Growth rate of the market:
The market grows continuously, all competitors benefit from growth in total demand. However, due to recession, we have observed an absence of growth, thus, firms are growing market share by snatching same from competitors.
(c) Exit Barriers:
Though there is much economic turmoil, many companies persist to remain in the industry when returns are declining. This can be due to a number of factors like, emotional attachments, economic or strategic reasons.
3.1.3 Power of buyers
Buyers typically want better quality products and services at a lower price. They usually show bargaining power by threatening to shift to another supplier. If they can get what they want, they will force down profitability in the industry.
However, the fact that there are many institutional (large) buyers who buy in large quantities and demand bulk discounts, buyers have less bargaining power. Supply industries are not dependent on buyer as they do not produce customised products that other customers will not buy. Customers will not easily switch between buyers.
3.1.4. Power of suppliers
Suppliers usually influence the firm’s profitability by exerting pressure for higher prices. They are still more powerful if they can unilaterally increase their prices and impose their quality on the company.
The suppliers are powerful for the following reasons:

• The supplier’s product is of vital importance for Genesis PM and cannot be better sourced elsewhere or substituted for (Cement, bricks and so on).
• The suppliers have many buyers.
• Many suppliers can easily resort to vertical integration and become competitors.

3.1.5. Threat of substitute Products
The products and services of the industry are not likely to have substitutes produced by a different industry and which proves to be strength for the company.
Based on the above analysis, Genesis PM can overcome the apparent weaknesses by keeping track of changes in the competitive environment (e.g. any innovation from rivals) and adjust accordingly.
3.2. Analysis of the External Environment – The Macro environment
Genesis PM also exists within a broader environment that strongly influences its capacity to survive and grow, both nationally and internationally. The Managers have to account for this external environment in their planning to ensure that, beyond reasonable uncertainty, plans are realistic and achievable. The purpose of studying the environment in strategy is to achieve a fit between the firm’s internal resources and capabilities and its external environment.
Variably described as the PEST or PESTEL or PESTLE Model, the macro environment is conveniently divided into a series of influencing factors. Unlike the internal environment, the organization has little or no control over these strictly external factors.
We shall consider external business environment within the PEST framework. The other elements in PESTEL will also be dealt with, the legal aspects being treated in the Political and the Natural Environment (Ecology) aspects will be dealt with as they arise in the other areas of the PEST framework.
External forces can be broadly categorised as:

• Political( government policy related and legal forces)
• Economic(mainly macroeconomic)forces
• Social, cultural and environmental forces
• Technological forces

In order to survive and grow, Genesis PM have to recognize and take advantage of external opportunities as well as identify and consider threats when developing strategies.
3.2.1. Political, Governmental and Legal Forces
Following the recent general elections, the current political environment is changing causing some instability. The legal frameworks and government policies might be subject to change as well. Many important projects depend heavily on government contracts.
3.2.2 Economic Forces
The state of the economy has impacted on Genesis PM. Due to the recession, we are forced to lay more emphasis on cost effectiveness and survival, and less on the welfare of our people and overall quality.
3.2.3 Socio-cultural, Demographic and Environmental Forces
Social change refers to changes in the nature, attitudes and behaviours of people in a given community. Being a developing country, people are more educated and have access to various facilities. People are more open and less change resistant. People are now more concerned about environmental issues and are always keen to reduce their carbon footprints for the betterment of the world.
3.2.4 Technological Forces
In business, technology does not refer to mere’gadgets’. It concerns three main things and their interactions, namely: equipment, use of that equipment in conjunction with other equipment and the organisation of people and teams to make productive use of the equipment. The strategic importance of technology therefore does not only lie in the equipment solely, but on the existing infrastructure and the people.
The business operations in Mauritius are currently being revolutionised by high technology innovations such as robotics, fibre optics and wireless internet connectivity and satellite communications. These enable amongst others, e-marketing, e-commerce, electronic funds transfer and space communications.
Technological developments will dramatically influence the way products and services are designed and manufactured (computer aided design) and the way they are distributed and sold (e-marketing). They can ‘create’ new markets and change competitive cost positions in the industry, sometimes in a disruptive manner.
4.0 SWOT Analysis
According to Jauch & Glueck (1998), management performs internal analysis and diagnosis to identify clearly the current strengths and weaknesses of the firm. Management also examines the most probable future strengths and weaknesses.
As for the external audit, it was required to identify opportunities and anticipate potential threats.
Based on the internal and external scanning, the following SWOT analysis has been derived;
STRENGTH WEAKNESS
1. High Barriers to entry
2. Brand loyalty
3. Cost Advantage
4. Economies of Scale
5. Low power of buyers
6. No Substitute
7. People have a more eco friendly attitude
1. Strong Competition
2. Low market growth
3. Exit barriers
4. High power of suppliers
5. High labour turnover
OPPORTUNITY THREAT
1.Increased standard of living
2. Positive attitude of people
3. Improved technology
1.Political changes
2. Changes in legal frameworks and government policies
3. Recession and economic crisis
5.0 Strategy Formulation
Based on the previous analysis, Genesis PM has to develop new strategies with respect to strategic fit, which are feasible regarding resources available and which are acceptable, considering values and the culture of the organisation.
5.1. Key Objectives
Competitive Advantage
Stabilisation of workforce
Improve financial position
Increase customer responsiveness through innovation
5.2. Strategy Development
The Grand Strategy Matrix has proved to e a very useful instrument for developing alternative strategies. The matrix shows the relativity between growth rate of the general market and the firm’s competitive position in that market. The four quadrants categorise firms as being in:
A: Strong competitive position in a rapidly growing market.
B: Weak position in a rapidly growing market.
C: Weak position in a slow-growth market.
D: Strong position in a slow growth market.
Rapid Growth Market
Vertical Integration Horizontal integration
Divestiture or Liquidation
Joint-Ventures Turnaround or retrenchment
Slow Growth Market
Source: Adapted from Pearce.J & Robinson. R, 2007
Genesis PM is currently in the 3rd quadrant of the Grand Matrix which means it has a slow growth but a strong competitive position. Genesis PM can therefore diversify into new untapped markets by investing on new manufacturing techniques such as offsite manufacturing. By doing so, Genesis PM will be able to serve a new market, innovate as well as train and empower its staffs. This new method will help attend to the needs of clients in a efficient manner and will prove to be profitable to the organisation if successfully implemented.
6.0 Offsite Manufacturing
Off-site construction is a modern method of construction, based on off-site manufacturing of building elements. This method is widely used for housing and in the education sector offering economical, environmental and social advantages.
Modular construction involves the manufacture and fit out of steel framed building modules within a factory controlled environment, whilst ground works and foundations are prepared on site. The modular units are then delivered to site and craned into position to form the building. These simultaneous activities automatically compress the program and thus the project is delivered in less than half the time of a traditionally constructed facility.
(ModuleCo n.d.)
Standardisation and Modularisation
Standardisation is defined ‘as the extensive use of components, methods or processes in which there is regularity, repetition and a background of successful practice’ (Gibb and Pendlebury, 2006). This may include standard building products, standard forms of contract, standard details, design or specifications and standard processes, procedures or techniques. It can also mean generic, national, client, supplier or project standardisation (Gibb and Goodier, 2005). Hui and Or (2005), defines standardisation as a function of mass production and is ancillary to prefabrication. The authors argue that standardisation allows a high degree of specialisation within the production process. Deriving from the economic theory of ‘division of labour’, its advantages far surpass its disadvantages especially in companies that want to enjoy economies of scale. In addition, the UK construction industry is currently under performing; therefore, there is a need to eradicate waste, improve quality, efficiency and construct with precision in measurement to adopt standardisation in procedures as one of the possible solutions (Williams, 1996). There is scope for improvements through standardised components and off-site prefabrication (Latham, 1994). Seeley (1996) described a number of system building techniques to standardise methods, in order to reduce building costs and the risk of building failure, and to increase the degree of prefabrication to speed up the construction process. Over the past few years, McDonald’s UK reduced their construction cost by 50%through the use of standardisation and preassembly. They achieved this by adopting a modular approach to construction that initialises standardised designs and components that can be quickly and easily assembled.
OSM Classification Systems
As there are slight differences in the definition of OSM, and similarly there are different classifications of OSM systems. Off-site manufacturing can be classified in various ways and may involve key services such as plumbing and electricity. It can also be classified by the material (timber, steel, concrete and masonry) used in the production. Four different classifications are introduced, namely (Williams, W, Wallace,1996) (Modular Classification – WMCT) (Burwood and Jess, 2005), Gibb (Types of Pre-fabrication) (Gibb, 1999), Housing Corporation Construction classification (Cabe, 2004)and Keith Ross’s Classification (Ross, 2005). Different authors provide different semantics for each categorisation. The review covers all categories in off-site manufacturing classifications including descriptions in each of the category.
(Umit Isikdag n.d.)
6.1. Benefits of Offsite Manufacturing
It is less time consuming
Eliminates wastage
Easier to control the process and the quality
Increased flexibility and standardisation
Reduces pollution
Lower cost
Safer working environment
A more certain and predictable programme and output
6.2. Barriers to Offsite Manufacturing
Research and Development

• The fact that this manufacturing method is relatively new, Genesis PM will have to invest on research and development to have a deeper insight. No such previous records or benchmark exist which makes comparison more difficult.

Trust Issues

• One of the major issues remains trust. Due to its newness, clients will be more cautious. Genesis PM will thus have to create more awareness of the various benefits of Offsite Manufacturing (OSM).

Lack of Adequate skills

• Genesis PM will need to invest on training and development of its staffs to ensure smooth implementation and sustainability of this new method of construction.

Transport Cost

• The transport cost incurred might be quite significant.

7.0 Strategy Implementation
Once we agree upon strategies to be adopted, the focus changes to implementation of same, involving all the functional areas of the organisation, namely: Production, Marketing, Finance, R & D, Human Resources and so on. A number of steps are to be followed in the implementation process including identifying the short term objectives, defining the functional tactics, communicating policies for empowerment of people and designing rewards that align with company goals.
Being given that strategies tend to be structure specific, managers will have to design and develop new organisation structures that fit the chosen strategies. Changing structures usually requires a cultural change, without which the structural changes cannot sustain very long. Change is operated in a planned manner in a number of steps.
The Cummins and Worley five step Model can help define the main steps of strategy implementation.
7.1.0 Steps in Strategy Implementation
At this stage, Genesis PM will have to ensure success in the following:

• Identifying short term objectives e.g. the current year’s targets.
• Initiating specific functional tactics e.g. marketing, HR and Finance strategies.
• Communicating policies that empower people in the organisation, thereby reducing the time to decide and act.
• Designing effective rewards that align management and employee priorities with organisational objectives.

7.1.1 Short Term Objectives
Short term objectives help implement strategy in three ways:

• Firstly, they operationalise long term objectives.
• Secondly, discussing about short term objectives helps raise issues over potential conflicts that require coordination to avoid.
• Thirdly, short term objectives are accompanied by action plans which specify exactly what is to be done, propose a clear time frame for completion and identify who is responsible for accountability.

Genesis PM will have the following main objectives:
1) To increase its market share by 25 % within 2 years
2) To increase its net profit by 20 % within 1 year
3) To decrease its labour turn over by 75 % within 1 year
4) To bring in a minimum of 200 new potential clients in 1 year
In order to achieve the above mentioned objectives, we will require the efforts of each department of the organisation. For instance, marketing department may pursue prompt customer service while transportation may be opting for lowest cost routing. On the other hand, the Human Resource section can work on a better planning whilst the Finance unit build up forecasts and budgets.
7.1.2 Functional Strategies to support Business Strategies
Functional tactics are the routine activities to be undertaken in each functional area e.g. POM, marketing, finance, HRM and manufacturing.
A. Functional Tactics in Production and Operations Management (POM)
POM converts inputs into value added output. POM planning and control tactics involve the management of ongoing production operations and match production and operations resources with overall demand.
Genesis PM can use JIT (Just in Time) Delivery as a way to coordinate with suppliers to reduce inventory costs.
We can also use this supplier-customer relationship as a source of competitive advantage. JIT makes quality checking more efficient by empowering client staff to ensure quality at supplier premises.
B. Functional Tactics in Marketing
Clampitt, P., Berk, B. and Williams, M. (2001). Leaders as Strategic Communicators: Ivey Business Journal (2nd Edition, pp. 51-55).
Among the important traits of a great leader, being a strategic communicator stands out as the most important. Some leaders are naturally strategic communicators, most of us however, could always be much better. The difference between good and great is usually having a formula, a well thought out plan.
Marketing tactics guide sales and marketing managers will have to work on who will sell what, where, to whom, in what quantity and how. Marketing tactics normally address the Marketing Mix-product, price, place and promotion.
Marketing Mix Component Questions the functional tactics should address
Product/Service Which service image do we need to project?

• A modern and innovative company
• A customer-oriented organisation

Price Are we competing on price?

• Reduced cost will help being more competitive

What is our pricing policy?

• We shall opt for a price penetration strategy.

Can we offer discounts?

• Depending on the contract amount, we can offer commissions and discounts to the concerned parties.

Place Do we have to cover the market?

• Our aim is more specifically for housing projects, educational projects and so on.

Do we segment have to change our current location?

• Port Louis is the capital of the country. We are close to the harbour which will be beneficial to us. Thus, we have to maintain our strategic location. However, in the long term we can afford to have other offices in other regions of the country.

Do we need a warehouse?

• Having a warehouse / production unit specialised for offsite manufacturing (OSM) will be a determining factor for the success of the project.

Promotion What are the key promotion priorities?

• We will have to communicate our new method via different means (online presence, magazines, newspaper, brochures and leaflets and so on)
• We will need to participate in specific events such as exhibitions and fairs (Salon de la Maison for example).

C. Functional Tactics in HR
Porter’s Generic Strategies and HR
Organisational Strategy Strategic Focus HR Strategy HR Activities
Cost Leadership

• Efficiency
• Stability
• Cost Control
• Long HR planning horizon
• Build skills in existing employee
• Job and employee specialization efficiency
• Promote from within
• Extensive training
• Hire and train for specific capabilities

Differentiation

• Growth
• Innovation
• Customer responsiveness
• Shorter HR planning horizon
• Hire the HR capabilities needed
• Broader, more flexible jobs and employees
• External staffing
• Less training
• Hire and train for broad capabilities

7.1.3 Policies for empowering personnel
While functional tactics already initiate and guide action in implementing a strategy, this is considered insufficient in today’s competitive environment. Line managers being in the forefront of organisations are responsible for delivering customer value. It is therefore critical to empower line personnel to make decisions to fulfil customer needs.
Policies are guidelines designed to guide the thinking, decision making and actions of people in implementing company strategy. They increase managerial effectiveness by standardising routine decisions while still allowing some discretion. Policies achieve this in a number of ways:
1. Policies establish indirect control over independent action
2. Policies promote uniform handling of similar activities
3. Policies ensure quicker decisions
4. Policies institutionalise basic organisation behaviour
5. Policies reduce uncertainty in day to day decision making
6. Policies counteract resistance of members to strategies
Policies may therefore be both written & formal and unwritten & informal.
Genesis PM can develop the following policies:
1) Grooming and Dress Code
With a view to promote a professional image and contribute to an impression of a high-quality organisation, proper business attire is expected for all employees depending on their roles and responsibilities.
2) Equal Employment Opportunity
The same consideration will be given to all staffs regardless of race, color, religion, age, sex, marital status, national origin, ancestry, physical or mental disability, sexual orientation, genetic information, or any other legally protected class in accordance with all applicable laws.
3) Open Door Policy
It is advisable that employees bring out their issues. They can communicate to their respective supervisors.
4) Overtime
According to the employment laws and regulations of Mauritius,

• Overtime should be on mutual agreement (employer & employee). On expected future overtime, the employer has the duty to give a 24 hour notice to his employee (wherever possible) and the latter may refuse to attend such overtime work, with a 24 hour notice.
• A worker performing on a public holiday earns twice his hourly rate for each hour worked on that day.
• For each 4 hours of work, an employee has a right to 1 meal break of 1 hour AND to 1 tea-break of 20 minutes Or 2 tea-breaks of 10 minutes each.

7.1.4 Reward Plans
Since the relationship mentioned above is uncertain, it has become strategically necessary to link compensation plans with the successful implementation of strategies. Apart from normal reward policies for employees, much attention is now given to executive bonus compensation plans.
(a) Executive Bonus Plans
The purpose of an executive bonus compensation plan is to motivate executives to maximize shareholder wealth ‘ which is the underlying goal of private firms. However, investors and owners, being often absent from day to day management, expect (or at least wish) the firm’s executives to act concurrently with their own goals and executives.
An executive compensation plan can be instrumental towards orienting managers in the direction of corporate strategy. The success of such a compensation plan depends therefore on the match between the executive bonus plan and the firm’s strategic objectives.
James. E. Nelson, The Journal of Business Strategy, 1998, states that: ‘Companies can succeed by clarifying their business vision or strategy and aligning company programs with strategic direction.’
(b) Performance Bonus
Along with their normal salaries, Genesis PM can propose to offer special performance bonuses to its most effective employee. This can be done every 3 month.
8.0 Structuring of Genesis PM
Genesis PM currently has a functional organisational structure as show below:
In order to ensure the implementation of the new strategies, the company will have to adopt a matrix structure as follows:
The matrix structure superimposes a divisional structure over a functional structure. It combines the efficiency of the functional approach with the responsiveness of the divisional approach. Each employee in the matrix reports to two supervisors ‘ a functional manager and a project manager.
The strategic advantages of this new structure will be:
– Accommodates variety
– Good training ground for strategy managers
– Efficient use of functional managers
– Fosters creativity
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