Executive Summary
Before deciding on internationalization and growth strategies, conducting a strategic analysis for small and medium enterprises is necessary. This report has explained the analysis of an SME called W. K. Thomas & Associates General Contractors, a family-owned corporation based in the United States of America. The report is partitioned into four main sections; the analysis of the resources and capabilities of the firm using the VRIO framework, the Industry’s globalization potential using the Yip’s model of globalization drivers, critical analysis of the SME industry using the Prahalad and Doz modeland the action plans for entering chosen international markets. The VRIO analysis reveals that the resources and capabilities provide a resilient competitive edge because the resources and capabilities are valuable, rare, difficult to imitate and well organized. The analysis using Yip’s model of globalization reveals that the SME has the potential to get into the global market because the market, cost globalization and government drivers are favorable. The only challenge is the competitive drivers. However, they can differentiate their brand and attain a competitive edge. The Prahalad and Doz model analysis reveals that the pressures for global integration are cost and technology pressures, whereas there are no issues in local responsiveness. Finally, the best market that the SME can get into is the Japan and Mexico market using exporting, licensing and joint ventures as the market entry strategies.
1.0 Introduction
Conducting strategic analysis for every company is necessary. Abosede, Obasanand Alese (2016) recommends that both the local and international companies conduct strategic analysis at least twice a year. Reviewing a company’s strategy occasionally provides an opportunity to rethink the approaches and make sure that they match with the present ever-changing landscape in the ever-changing business environment. It is an essential analysis because it helps improve organizational performance, aligning leadership and the frontline and empowering every individual in a firm. Basically, strategic analysis is a method that encompasses investigating the commercial setting in which a company functions in. This means that the analysis is done in the internal and external environment of the company. This report aims to analyze a small and medium enterprise called W. K. Thomas & Associates General Contractors, based in the United States of America. Analyzing it will help the firm identify the sections that require improvement and those functioning according to the plans. W. K. Thomas & Associates General Contractors is a private family-owned Construction Company whose offices are based in Butler in the United States of America (W. K. Thomas & Associates General Contractors, 2022).
Since the company is an SME that may require applying the internationalization growth strategy to increase profitability, strategic analysis is necessary. It will help the company understand its current state internally and externally and define its future state (Abosede, Obasanand Alese, 2016). Additionally, it helps the companyidentify what it has and what is missing to attain a competitive edge in the market. Therefore, this report outlines the international growth strategy for W. K. Thomas & Associates General Contractors Company which is the small and medium enterprise company of choice. The report is partitioned into various sections. The first section describes W. K. Thomas & Associates General Contractors Company with a critical evaluation of its resources and capabilities using the valuable, rare, inimitable, and organization (VRIO) framework. The second section highlights the industry’s globalization potential. The tool to be used is Yip’s model of globalization drivers. The third section analyzes the construction industry, which is the industry that W. K. Thomas & Associates General Contractors Company belongs. The analysis will be done with the help of the Prahalad and Doz model. The last section highlights the action plan for entering the chosen market. Later, a conclusion will be offered.
1.1 A brief explanation of W. K. Thomas & Associates General Contractors Company
The SME is a family-owned business that was started in 1974 by Bill Thomas. He was later succeeded by his son Brent Thomas in 1999(W. K. Thomas & Associates General Contractors, 2022). He has been the company manager for the past fourteen years to date. The company serves all the regions in western Pennsylvania and has ten employees. It deals with construction while offering services such as Butler pre-engineered steel buildings and construction management.
1.2 Analysis of the company’s resources and capabilities.
Dethine, Enjolrasand and Monticolo (2020) highlight that analyzing the resources and capabilities of a firm helps them identify what they have and what is lacking for them to accomplish the organizational objectives.Resources are valuable possessions that help a company function accordingly. There are four main categories of resources; human, financial, material and non-material resources. On the other hand, capability refers to the skills, knowledge, expertise and experience that a person has to carry out a certain task. The valuable, rare, inimitable, and organization (VRIO) framework will be used to analyze the company’s capability.
1.2.1 VRIO framework
As the name is, VRIO is the short form for value, rarity, imitability and organization. Simply, it is a strategy tool that assists corporations in pinpointing the resources and capabilities that help them attain a competitive benefit (Pesic, Milic and Stankovic, 2013). The resources in W. K. Thomas & Associates General Contractors Company are construction constituents, construction plants, implements and gears, employees, space and facilities and financial resources. The capabilities are operations management, marketing expertise and other types of management. Their assessment using VRIO is done below and further presentation in Appendix 2.
1.2.1.1 Valuable
Pesic, Milic and Stankovic (2013) define value as the ability of the resources and capabilities to help a company exploit opportunities or alleviate threats in the market. The resources and capabilities of the SME are valuable. They are readily available at cheap production costs which maximize profitability. Additionally, the ten employees have the required expertise, skills, experience and competence in the construction industry, which gives the firm more advantage in attaining a competitive edge. This provides a solid competitive edge for the company.
1.2.1.2 Rarity
Rarity entails a firm having resources or capabilities that are valuable and exceptional in the presence of existing and potential rivals (Ariyani and Daryanto, 2018). The resources and capabilities in the SME are rare because it has highly skilled employees who lost of the competitors’ lack. This provides a solid competitive edge for the company.
1.2.1.3. Imitability
Imitability refers to being easily copied by others (Pesic, Milic and Stankovic, 2013). The resources and the capabilities of the SME are valuable and rare and thus rare to imitate. The highly skilled employees use the available resources to generate exceptional construction designs that are difficult to replicate. This provides a solid competitive edge for the company.
1.2.1.4 Organization
Ariyani and Daryanto (2018) define organization as the ability to exploit resources and capabilities. The SME manages its resources effectively, making its organization effective. Some of the areas it significantly considers are human resource management and financial management. This provides a solid competitive edge for the company.
2.0 Industry’s globalization potential
Going international requires a company to follow a certain process because it is a gradual procedure that requires the company to go through various stages. Voronkova, Punchenkoand Azhazha (2020) highlight that each stage offers various opportunities and threats that need to be addressed for the company to achieve a competitive edge. The phases are market entry, Goods specialty, value chain disaggregation, value chain reengineering and the formation of markets. To analyze the Industry’s globalization potential ofW. K. Thomas & Associates General Contractors Company, the tool used is Yip’s model of globalization drivers.
2.1 Yip’s model of globalization drivers.
Yip points out four industry internationalization drivers that cover every industry’s situation to develop the possibility of such corporations becoming more international (Zvarych, 2017). The four drivers that he identifies are the market drivers, cost globalization drivers, competitive drivers and government drivers. Further explanation is offered below and in Appendix 1.
2.1.1 Market drivers
Zvarych (2017) highlights that the market drivers focus on the needs of consumers. W. K. Thomas & Associates General Contractors Company serves customers in all the regions in western Pennsylvania. It is a wide region that has twenty-five counties. In simple terms, the market drivers highlight issues such as the purchase behavior of customers in the world and the presence of a lead nation in which the companies can sell their products (Degravel, 2017). However, W. K. Thomas & Associates General Contractors has favorable conditions for going international because the customers of the construction industry have the same construction needs, there is a presence of global consumers, global channels and lead nations.
2.1.2 Cost globalization drivers
The cost globalization drivers highlight how concerns such as the opportunity for international scale, sourcing efficiencies, and technology advantages define the sector’s economics (Degravel, 2017). The cost globalization drivers for the construction industry in the United States of America are international economies of scale, tracking proficiencies and promising logistics. The negative drivers are variances in nation prices, costly brand development prices and greatly evolving technologies (Sun et al., 2017). Since the positive drivers overshadow the undesirable ones, W. K. Thomas & Associates General Contractors Company can get into the international market.
2.2.3 Competitive drivers
Zvarych (2017) explains competitive drivers as the operations of the competing organizations. These include factors such as the extent to which rivals in other countries enter the market, internationalize their strategies and develop interdependence with different markets. The competitive globalization drivers for the construction industry in the USA are high imports and exports, rivals from diverse continents, independence of nations and the presence of internationalized competitors (Sun et al., 2017). These drivers pose a challenge for the company to internationalize itself.
2.2.4 Government drivers
Government drivers entail factors such as trade regulations and technology standards (Zvarych, 2017). The construction industry has favorable trade guidelines, consistent technical principles, mutual marketing rules, administration-owned rivals and host administration alarms. Since the positive drivers outweigh the negative, W. K. Thomas & Associates General Contractors Company can get into the international market.
Based on the analysis using Yip’s model of globalization drivers, W. K. Thomas & Associates General Contractors Company has the potential to get into the global market because the market, cost globalization and government drivers are favorable. The only challenge is the competitive drivers. However, they can differentiate their brand and attain a competitive edge irrespective of the presence of competitors.
3.0 Critical analysis of the SME’s industry
The construction industry in the United States of America has experienced unmatched growth and expansion in the last decade (Sun et al., 2017). It contributes greatly to the nation’s economy and has more than seven hundred and forty-five thousand employers and more than seven million workers. It also generates about $1.4 trillion in construction structures annually. To analyze its global integration, the tool to be used is the Prahalad and Doz model.
3.1 Prahalad and Doz model
Prahalad and Doz developed the integration responsiveness framework that explains three building blocks in which corporations can be assessed (Westney, 2021). These are the global integration of operations, global strategic coordination and local responsiveness. Global integration of operations entails the centralized management of geologically distributed operations continuously. Bernecker (2017) highlights that the rationale for global integration is cost lessening and investment optimization. Second, global strategic coordination is the integrated management of resource obligations across different geographical locations. Its rationale is to ensure that there is a competitive and planned consistency of resource obligations. Third, local responsiveness is the level to which a corporation designs its brand and methodologies to meet the settings in other nations. The three blocks work together and by identifying the economic, technological and competitive qualities of a company, it can recognize the pressures placed on international integration and local responsiveness. Each building block has some pressures that affect them (Bernecker, 2017). In global strategic coordination, some of the pressures are transnational consumers, transnational rivals and investment power. Some of the pressures in global integration are technology, price minimization and energy and worldwide requirements. The main pressures for local responsiveness are varied customer requirements, differences in prices, promotion and the presence of alternatives.
The construction industry in the United States of America is faced with some of the pressures. In global integration, the pressures are cost and technology intensity from countries such as China which is among the leading nations in construction in the world. However, the construction company does not have issues with local responsiveness because it has well-defined local responsive strategies. Since it has pressures for global integration only, it would deal with the pressures through global integration strategies. Companies can use four main global strategies to respond to the pressures (Stallkamp and Schotter, 2021). These are export, standardization, transnational and multi-domestic strategies. However, the best strategy for the construction industry in the USA is the transnational strategy. It is often used when firms face cost pressures from global rivals but must also provide commodities and services that meet the local consumer requirements. It combines both the standardization and multi-domestic approaches. In this strategy, the corporations are expected to attain economies of scale by standardization and attend to the local needs(Stallkamp and Schotter, 2021).
4.0 An action plan for entering chosen markets
The markets that W. K. Thomas & Associates General Contractors Company should target are Japan and Mexico. The construction industry in these nations has been growing tremendously and is expected to continue growing. Additionally, they have many international customers who purchase construction commodities and services from foreign nations. Therefore, the SME will have a broad range of customers if they use the best market entry strategies. These strategies assist organizations to provide their commodities and services in the global markets (Shaw, 2015). The market entry strategies that W. K. Thomas & Associates General Contractors Company can use to get into the Japan and Mexico markets are exporting, licensing and joint ventures.
4.1 Exporting
Schellenberg, Harker and Jafari (2018) define exporting as the process of marketing commodities and services in nations that the company is willing to sell them.Exporting can be done directly by selling them one on one to the customers or indirectly through intermediaries. Since the SME deals with construction products and services such as; Butler pre-engineered steel buildings and construction management, it can easily expand its market to Japan and Mexico and sell its brand to them. Since it is a new company in the regions, it can start by using intermediaries. Normally, intermediaries understand the market they are working in and can help the SME to gain customers quickly (Schellenberg, Harker and Jafari, 2018).
4.2 Licensing
According toGrøgaard, Rygh and Benito (2019), licensing happens when a firm transfers the right to use or vend goods and services to another firm.A firm may select this method because it has goods and services in demand and the corporations that aim to license the brand have a big market. In Japan, it may license with Obayashi Corporation, one of its largest corporations. In Mexico, it can also license with Prodemex Company. Some of the advantages of licensing are getting into new markets that cannot be accessed through exportation and paving the way for future investments.
4. 3 Joint ventures
Most companies use joint ventures to enter the global market. They mainly do so to reduce the risks of entering the global market by developing joint ventures with other organizations aiming to vend in the international marketplace. Grøgaard, Rygh and Benito (2019) define joint ventures as an enterprise arrangement of more than two corporations who agree to work together to attain a certain objective. Joint ventures can earn more revenue than individual firms because they function like big and independent corporations. To enter their markets, W. K. Thomas & Associates General Contractors Company can create joint ventures with Obayashi Corporation in Japan and Prodemex Company in Mexico. Some of the advantages of joint ventures are access to new markets, wider capacity, risk and cost-sharing with partners and access to larger resources (Shaw, 2015).
5.0 Conclusion
Strategic analysis of a company is important to understand the current and future of a company to attain a competitive edge and survive in the ever-changing market. This report has highlighted the analysis of W. K. Thomas & Associates General Contractors Company, a small and medium enterprise in the United States of America. It is a private family-owned Construction Company whose offices are based in Butler in the United States of America. It is affiliated in the construction industry and deals with the sale of construction services and products in all the regions of western Pennsylvania. To understand the international growth strategy of the SME, the report has highlighted several sections. These are; the analysis of the resources and capabilities of the firm, the Industry’s globalization potential, critical analysis of the SME industry and the action plans for entering chosen international markets. The VRIO is the tool that has assessed the resources and capabilities. The results reveal that the resources and capabilities provide a strong competitive edge because the resources and capabilities are valuable, rare, difficult to imitate and well organized.
In terms of the industry globalization potential, the tool that has been used is Yip’s model of globalization drivers. The model assesses a company using four drivers. These are; market drivers, Competitive drivers, cost globalization and government drivers. The marketdrivers are favorable for the SME because the customers of the construction industry have the same construction needs; there is a presence of global consumers, global channels and lead nations. The cost globalization drivers are international economies of scale, tracking proficiencies and promising logistics, variances in nation prices, costly brand development prices and greatly evolving technologies. The competitive drivers are greater imports and exports, rivals from diverse continents, independence of nations and the presence of internationalized competitors. The cost globalization drivers are high imports and exports, rivals from diverse continents, independence of nations and the presence of internationalized competitors. Finally, the government drivers are favorable trade guidelines, consistent technical principles, mutual marketing rules, administration-owned rivals and host administration alarms. Based on the analysis, the SME has the potential to get into the global market. The Critical analysis of the SME’s industry has been conducted using Prahalad and Doz model which explains global integration and local responsiveness. The pressures for global integration are cost and technology, whereas there are no issues in local responsiveness. The international pressure can be dealt with by using the transnational strategy. Finally, the best market that the SME can get into is the Japan and Mexico market using exporting, licensing and joint ventures as the market entry strategies.
6.0 Reference
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Bernecker, B., 2017. Management of Foreign Sales Subsidiaries-Contributions and Outlook from a Case Study on the German Mittelstand. Journal of Management Cases, p.71.
Degravel, D., 2017. The Relationship between Open Innovation and globalization: Focused on collaboration modes of R&D in SMEs. In United States Association for Small Business and Entrepreneurship. Conference Proceedings (p. 590). United States Association for Small Business and Entrepreneurship.
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Pesic, M.A., Milic, V.J. and Stankovic, J., 2013. Application of vrio framework for analyzing human resources’role in providing competitive advantage. Tourism & Management Studies, pp.575-586.
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Shaw, K., 2015. ‘Foreign Market Entry Strategies. China-USA Business Review, 14(8), pp.395-398.
Stallkamp, M. and Schotter, A.P., 2021. Platforms without borders? The international strategies of digital platform firms. Global Strategy Journal, 11(1), pp.58-80.
Sun, C., Jiang, S., Skibniewski, M.J., Man, Q. and Shen, L., 2017. A literature review of the factors limiting the application of BIM in the construction industry. Technological and Economic Development of Economy, 23(5), pp.764-779.
Voronkova, V., Punchenko, O. and Azhazha, M., 2020. Globalization and global governance in the fourth industrial revolution (industry 4.0). Humanities Studies, (4 (81)), pp.182-200.
- K. Thomas & Associates General Contractors, W., 2022. [Online] Wkthomas.net. Available at: https://wkthomas.net/about-us/
Westney, D.E., 2021. MNCS and cross-border strategic management (pp. 301-318). Oxford University Press: New York, NY.
Zvarych, R., 2017. Alternative component of globalization.
Appendices:
Appendix 1: Yip’s model of globalization drivers
Appendix 2: VRIO framework
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