Challenges for Construction Project Planning

Challenges for Construction Project Planning 2.1 Introduction This chapter will review the literature which has been used for this dissertation. A number of important aspects will be covered , including an overview of Construction Planning as well as determining what challenges are faced on a daily basis by construction planners. This chapter will also review research relating to Planning techniques used and software packages available within the Construction industry. 2.2 Construction Project Planning Project Management can be seen as the application of tools and techniques utilised to guide the use of resources towards achieving a n intricate task within the const raint s of time, cost and quality. From conception to completion, a mixture of these tools techniques is necessary to fit the task environment and project life cycle. The British Standard for project management (BS6079 1996) defined project management as, â€Å"The planning, monitoring and control of all aspects of a project and the motivation of all those involved in it to achieve the project objectives on time and to the specified cost, quality and performance.† The UK association of Project Management (APM) have produced a UK body of knowledge UK (BoK) which also provides a definition for project management as â€Å"The planning, organisation, monitoring and control of all aspects of a project and the motivation of all involved to achieve the project objectives safely and within agreed time, cost and performance criteria. The project manager is the single point of responsibility for achieving this.† Project Management as we know today has evolved in order to plan, coordinate and control the complex and diverse activities of modern industrial, commercial and management change projects. (Lock 2007) To allow for effective planning and control of projects, a requirement for systematic and logical methods should be applied along with proven techniques, thus ensuring a successful project outcome for all concerned parties, particularly the client. Without planning it is difficult to envisage the successful conclusion of any project or the effective control of time, money or resources. Planning is also essential in order to deal with construction risks and devise safe working methods. (Cooke 2008) Project Planning is defined as the establishment of a set of directions in sufficient detail to tell the project team exactly what must be done, when it must be done and what resources to use in order to produce the deliverables of the project successfully. (Zwikael 2008). Construction planning is an essential and challenging activity in the management and implementation of construction projects. It occupies the choice of technology, the description of work tasks, the estimation of the necessary resources and durations for individual tasks, and the identification of any interactions among the different work tasks. Hendrickson (1998) believes a good construction plan is the basis for developing the budget and the schedule for work. It is therefore common to adopt a conspicuous importance on either cost control or on schedule control as illustrated in Figure 2.1. Walker (2007) considers that by having a project schedule to work to and sticking to it, you will well be on your way to delivering successful projects. This would be dependant on effective communic ation and efficiency at all stages of the project and with an aim to reducing risk, time and cost. 2.3 The Construction Planner Construction project planning is receiving growing attention as the limitations of formal deterministic planning are becoming more widely recognised. (Winch, Kelsey 2004). There is growing concern over the failure of construction planning to achieve its goals in spite of the considerable resources allocated to it. Deficient planning techniques are commonly blamed for this state. (Laufer, Tucker, 1987) There has been considerable debate over the last decade or so on the effectiveness of construction project planning. However, there is remarkably little research into what construction project planners actually do. Laufer and Tucker provide a critique of construction planning. They protest that:- the planning and evaluation of planning processes are non-existent there is over-emphasis on critical path methods planners lack construction experience planners have poor information gathering methods planning is control-oriented instead of action-oriented Plans are been poorly presented with overly-complex information. In a subsequent paper (1994) Laufer and his colleagues look at the definition and allocation of planning work. They found that there was no clear system at work and planning was done in a multiplicity of ways. They call for the process to be properly co-ordinated by a single individual who will own the planning process and improve communication. Winch and Kelsey (2005) believe the specialist planner has the time to do the work but incomplete practical knowledge. The line manager has the practical knowledge but does not have the quality time to carry out the task. The specialist planner has better strategic decision-making skills than the short-term decision-making focus of the line manager. They then go on to say â€Å"Line managers see the delegation of key decision-making to another as a threat to their position†. These problems are confirmed in Laufer (1992) wider project management study and can result in: The planner preparing a plan which has incomplete information and in-adequate decision making authority. The line manager treating such plans as merely an irrelevant forecast prepared by another. Allen Smallwood (2008) believe Construction planners and the role they perform are little understood both within the construction industry and the wider environment where construction has a daily impact. Planning occupies a central position in the functions of the manager. His responsibilities may vary with organisational philosophy and contingency but planning invariably remains an essential ingredient of his duties. (Steiner, 1979). Much Research and Development effort has been made during the last three decades but progress with techniques has not removed the dissatisfaction with the application and results of construction planning (Choudhury 1981, Mason 1984, Morton 1983). Effective construction planning demands that it is carried out by competent and experienced personnel. While the estimator must remain in charge or pricing the work, most contracts, today, are too complex for the estimator to handle the technical content of pre-tender appraisal. It is here that the construction planner has a major function. 2.4 Planning Techniques Most planning techniques aim to express the work to be done, to a time-scale; some also include resources, and perhaps cost and value. In simple terms, they intend to help control time and cost. The other major factor in project control, quality, is controlled by its own family of control techniques; and quality is related to time and cost through the skill and judgement of the project management team. Neale (1989) believes the major components of planning techniques are: Activities: literally, being busy, expending energy, consuming resources, taking time; in construction planning, this means a job to be done; for example preparing a drawing, an order to be places, a hole to be dug, bricks to be laid in a wall, a flow of water to be diverted. Activity durations: the time required for the completion of each activity Project time-scale: the time structure of the project; it is usual to give each week in the project a number (this makes calculation easier), and these then have to be related to calendar dates, holidays, etc. Event: an occurrence at a specific point in time; for example, the granting of planning consent, of the start or end of a traffic diversion. Work method: the plan must be expressed in some logical way, indicating the sequence of operations, and which activities and events are interrelated; this may be implicit (as with bar charts) or exlicit (in network analysis, where work method is usually called logic.) Resources: often called the four Ms (men, machines, materials and money) but can include overheads (for example, site accommodation), and even such essentials as managerial skill. Costs: what the work has or will cost, often derived directly from the unit costs of the individual resources. Value: what has or can be earned by payment for work done derived from the bill of quantities, the estimate or an internal budget. The calculation of value-to-date can be used as an overall measure of project progress. 2.5 Four techniques are often used in construction planning Bar charts, Network analysis, Line-of-balance Linear programmes. 2.5.1 The bar chart/ Gantt Chart Drafting of a bar chart is popular because it produces results which are easy to understand and not too searching of the planner. Its use is limited to planning straightforward work with simple relationships between the activities. This graphical technique still forms the foundation for most resource scheduling. Its major drawback is that even minor deviations from it require extensive redrafting as a result making it more difficult to having to hand a contemporaneous bar chart that is a reliable indicator of future events. The main features of the bar chart are as follows: The activities are listed on the vertical axis Time is shown on the horizontal axis. This may be an appropriate time unit, such as months or days. Each bar is divided horizontally into two, with the top half representing when the activity is planned to take place, and the bottom shared in, as proportions of the activity are completed. A vertical movable marker line indicates the current time, thus enabling the observer to note if any activities are behind programme, and to what extent. Refer to Figure 2.2 for additional information. The format of the bar chart presumes that the end user (client) can involve the same judgment that was in the mind of the planner when he was compiling it. In highly repetitive or simple work it can be implied that the users will better understand the thought process of the planner. However as project complexity increases the user’s ability to monitor the project in relation to the programme is reduced unless it is understood: What work is important to progress? Of the activities currently behind programme what, if any, effect do they have on overall progress? On the contrary, if most of the actual work is ahead of programme, does this mean that the current prediction is that the project will be complete in advance of the targeted completion date? The answer is definitely not an automatic yes. To provide an informed response, an understanding of the relationships between programme activities is crucial. Neale (1989) consider these deceivingly simple questions contradict issues which are at the heart of many construction disputes, namely considerations for extension of time. 2.5.2 Network Analysis Unlike a bar chart, activities are not shown on an axis of time. What the network portrays is the logical relationship between activities. Network analysis is a powerful, logical and analytical technique. It is most effective when used for complicated projects, especially those with external constraints and complex interrelationships. The technique is based on drawing the logical relationships between construction operations, and from an analysis of the relative durations, establishing which operations have the most crucial effect on the project duration. It can be drawn in a number of ways, the most well-known in the UK being the arrow diagram. The technique is sometimes known as the critical path method (CPM), and critical path analysis (CPA). A version which incorporates a statistical method for calculating the probability that a project will be completed on a specific date is called the programme evaluation and review technique. (PERT) The identification of a â€Å"critical path† focuses the attention of the individuals managing the project and highlights to clients and their advisors the tasks that require to be particularly well managed with regard to time. The duration of critical path represents the shortest duration in which the project can be completed. Delays to activities on the critical path transmit directly through to extend the project completion date. This provides advanced warning of the pending delay to completion and enables the contractor (or employer) to invoke recovery action at a useful point in time rather than waiting until it is manifestly obvious that the completion date is threatened. If the employer or his Architect/Engineer (A/E) instructs additional work which affects the activities on the critical path then the contractor has grounds for a claim for an extension of time. The term critical path is widely used in the construction industry; what is not fully appreciated is how easily the critical path can change. Network analysis has a good and inclusive logical basis, lends itself easily to computer processing, and can be used as an effective control tool. These exceptional characteristics are also known to be its principal weakness as it is easier for the planner to be drawn into a level of planning and analysis that is much to detailed and advanced for most construction projects. 2.5.3 Line of Balance Line of balance is a specialised technique used for repetitive work. It derived from the manufacturing industry and has been found to be effective in planning work truly repetitive. Examples of success applications include planning the construction of identical floors in high rise construction, and large housing developments. Line of balance has been found to be difficult to use on projects which have a high demand for trades or operations to construct each identical unit. The problems arise not from the technique itself, but from the difficult of showing all the information on one chart, particularly when using the technique to monitor progress. When used to plan, it can be an excellent means of relating resources, activity durations and the general pace of work on site. Neale (1989). Illingworth (1993) considers the line of balance approach has largely fallen out of use in today’s industry due to the fact it was designed primarily for housing and did not readily provide clear visual appreciation of the situation at a glance. 2.5.4 Linear Programme (or time-chainage chart) Linear programming is a specialised technique for linear work. This is a basic tool of UK road contractors. Other successful applications include the construction of a large canal in a developing country, and it is especially useful in tunnelling. Illingworth (1993). Similar to line of balance, this is a simple two- dimensional graphical technique and can show clearly only a limited amount of information and limited degree of complexity. Figure 2.6 – Linear Programme (Neale 1989) Linear Programme Activities (Neale 1989) 2.6 Which technique? The experienced planner in construction needs to be aware of the techniques available, together with the value of each, both in the planning analysis role and how then can be applied to give effective control and communication to management on site. Illingworth (1993). Like any other professional, the planner has to select the right tool for the job. To make the correct decision, it is therefore a requirement to examine what is wanted in a particular situation programme. Illingworth (1993) believes the main points of this choice are as follows: Does the method aid initial analysis of the situation and especially in establishing the best sequence of events? Are deficiencies in progress shown up as the work proceeds? Can visiting management obtain and immediate view of the contract situation on arrival on site? With the preponderance of subcontractors on site today, does the programme method give assistance in cash flow control? According to Illingworth, from these questions it is unlikely to be the answer to all desires. Therefore it is said to be better to consider the situation in two stages – tender planning on the one hand and the operational planning after the contract has been won, on the other. 2.7 Planning Practice In order to explore further the reality of construction project planning semi-structured interviews were conducted between July and December 2000 with 18 experienced planners from five leading UK construction firms. Most of the planners interviewed were currently involved in planning at the tender stage including assembly and presentation of the tender documentation. About half of those were also involved at the tender/ pre-construction stage. Only a few were further involved during the site works. (Refer to figure 2.7). Generally, although a number of the interviewed planners had on-site experience the typical pattern is that a planner works either at the pre-tender, pre-execution stages or on site but not simultaneously. The exceptions tend to be where planners work for some time on a single large project. In such cases it may make sense (from the employer’s point of view) for their work to carry on to the execution stage. 2.8 Programming Considerations at the Tender Stage Upon receipt of tender documentation, the contractor will appoint human resources tasked with compiling a tender submission based upon the tender enquiry. One of the main individual in this team is the person accountable for producing the tender programme, the construction planner. Whether or not the contractual terms require a programme to be produced or not should be irrelevant at this stage. The tender programme is an important document produced by the contractor which is used for measuring many risk and cost related issues. In particular, the assessment of cost of the contractor’s time related preliminary items as drawn off the content of the tender programme. For example, the anticipated on site durations for different members of staff, periods of scaffold hire and duration for site accommodation are items that cannot be priced by the estimator without reference to the tender programme. When compiling the tender programme, the construction planner must incorporate the information supplied with the enquiry noting any specified constraints contained in either the contract bills, specification or drawings. Conflict between documents often exists and a view had to be taken on how to proceed. Clarification may be sought from the employer or his agents, assumptions made and stated along with the submission or the conflict may be ignored and the information that best suits the contractor is assumed without qualification or statement. It is accepted in the industry that many bids are won or lost on the programme duration alone. This happens frequently where a bill of quantities is being priced and the experienced contractors tend towards similar prime cost for similar items. On completion of reviewing tender documents, drawings, specification and bills, which may be typically done over a period of one or two weeks, the construction planner will establish the work scope which will be addressed in the creation of a tender programme. The main objective is to be aware of the specified period for construction. Additional to the completed programme should be a schedule of resources which corresponds with the programme and a series of method statements signifying construction techniques and equipment to be employed in carrying out the work. 2.9 Programming on Site When the contract is won, the site planning is equally important. It is usually at this point that the site manager will have his first chance to examine the methods on which the job was priced. What is important to recognise, at this point, is that planning must be seen as an addition to management. Thus the site manager must have the right to question the planning methods on which the contract was priced. To do so, site manager’s require the technical expertise to assess what has been put forward. In so doing, the manager concerned must, for his part, accept that if he wants to change the method from that in the priced tender, he must demonstrate that his alternative is obviously cheaper, or at least as cheap, as that priced in the tender submission. When final agreement has been reached, the planning function can be established on site and develop the final method to be adopted. This, in turn, will lead to the contract master programme and such subsidiary programmes as may be necessary. On completion of all methods being confirmed the construction planner continues to have a significant role on site. First, in developing control and short-term programmes for all organisations contributing to the contract under the main or managing contractor. Second, the construction planner’s cherished knowledge of how the work was originally planned makes him uniquely placed to examine the potential consequences of alterations to what has to be built. In this area he is a valuable source of information to the site quantity surveyor when assessing where possible contractural claims may arise. Today, with the ever increasing use of trade sub-contractors as well as specialist service contractors, the experienced construction planner has the option of either seeing the role as satisfying its own right, or as an essential ingredient of experience for becoming a successful site manager. Illingworth (1993). 2.10 Purpose of a Programme The values applicable to the mechanics of construction planning are similar whether you are a main contractor submitting a quotation to an employer, a sub-contractor quoting to the main contractor, or even a construction manager providing programme assist to an employer. Common principles apply when compiling a construction programme, that of methodical analysis. The contractor’s construction programme is an important common reference. It shows how the planner they have interpreted the contract documents and other information from which the statement of intent for construction is issued. As the key programme for the construction work, its content is of the utmost significance to all parties charged with handing over to the employer a building fit for purpose within the contract time stated. A well prepared programme is vital to every construction project. Many activities have to be cautiously defined and given a time scale, and it necessary not only to assemble and list the information but also to display it visually in terms of the contract’s objectives and the calendar. The working sequences and the relationships between individual activities must be clearly conveyed in this visual presentation.† The Chartered Institute of Building (2001). They consider the construction programme to be a statement of intended actions, which when properly used provides management with its plan of campaign. It should communicate with ease, providing the common reference for the timing of all activities related to the project. 2.11 Construction Planning Software An expert planner faced with the task of producing and analysing a network for a project containing only few activities will undoubtedly produce the fastest results by drawing a freehand arrow diagram and analysing it mentally. Lock (2007). He believes it is likely to take longer when using a computer because of the formalities needed to set up the new project files in the system and enter the data. David Arditi and Ann Rackas compiled a short report in May of 1986 with an aim in ascertaining the need for computer software to assist is construction planning and scheduling. This report concluded, the individual needs of a given construction company are the primary reasons for choosing a particular software package. For example, one of the participating general contractor’s basic requirements was to have a 40-character activity description field: â€Å"a particularly individual need†. They continued to suggest if a program is to survive the inevitable shakeout that occurs after the initial development and interest have peaked; it must offer the features and capacities that are required by the user. In addition, every effort should be made to make computers less mysterious and confusing as they will be dealing with the construction market. Today there are many planning software packages available to the construction industry. Asta Powerproject, Microsoft Project, Primavera, PERT Master to name a few. Each package is commonly suited to the individual needs of the planner. Some programs present a blank Gantt chart on the screen as soon as they are booted up, and it is apparent to the user that task data can be typed in immediately. Most programs allow the user/ planner to establish project durations, critical path network, allocate resources, assign costs to tasks and monitor progress throughout the project. As a result, most construction planning professionals use such packages daily. 2.12 Construction Planning Challenges Lock (2007) considers anyone planning a project of significant size will soon find out that there are a number of factors, both inside and outside the project organisation that can have an effect on the planner’s intentions. These are as follows: 2.12.1 External Factors All projects are subject to risk, many of which can have an enormous impact on plans. Lock (2007) deems the following are just four from the long catalogue of happenings that can be categorised as Acts of God: An earthquake devastates a project organisations headquarters. A hurricane and flood put a project site under a metre of water and delay the start or ruin the work in progress. An influenza epidemic puts half the project workforce out of action. (Swine flu outbreak 2008 recorded thousands of people off work for over 5 days.) The project manager (a keen golfer) is struck by lightning. The national government can play an important part on the smooth running of a project. E.g. the project could be government-funded and is cancelled or abandoned through a political decision. Lock (2007) also considers less immediate concerns which are the wider and longer-term economic consequences of government policy leading to downscaling of projects, delays and cancellations in all sectors of industry. Decisions made outside the project team can also have an affect on many characteristics of planning. E.g. a decision is made at directorate level to carry out a project in a different company within the group from that initially anticipated or a strategic decision is made to cut short all new staff recruitment resulting in a lower number of available resources formerly expected to be available for projects. 2.12.2 Working Factors Lock (2007) These are items which are likely to affect the project team on a daily basis. Examples include availability of resources, materials etc. People are believed to be a construction organisations greatest resource. â€Å"Construction operations depend on the knowledge and skills of people planning and executing the work†. Muir (2005.) Research has been carried out to reveal that the construction industry is typically viewed as being one of the least attractive industries in which to work. Safety plays an important part in the running of a project. Construction by nature is unsurprisingly dangerous with a high degree of hazard and risk. The Health Safety Executive believe each year: Over 1 million injuries and 2.3 million cases of ill-health are experienced by workers; Around 40 million working days are to lost; and Over 25000 individuals are forced to give up work because of injury or ill health. These cost British employers on average  £3.3 to  £6.5 billion each year. Most organisations are oblivious of these figures and are often astonished to find out what the actual costs are. Recent HSE Examples (2009) An injury to a worker using an unguarded drill cost a small engineering company  £45,000. And that was not all. The managing director was prosecuted from which two employees had to be made redundant to  keep the company afloat. At the other end of the scale the Piper Alpha explosion killed 167  people and incurred estimated costs of over  £2 billion. Accidents in construction can account for 3 6 % of total project costs. 2.12.3 Contribution of effective Planning Effective Planning and scheduling influences the results of a project as is promotes well-organised working. Personnel who are not trying continually to overcome crises caused by bad planning can dedicate more time to achieving high quality standards. A well-planned project stands more chance of being completed on time and on budget. 2.13 Chapter Summary Description Author Source To allow for effective planning and control of projects, a requirement for systematic and logical methods should be applied along with proven techniques. Cooke 2008 Improving Construction planning through 4d Planning Project Planning is defined as the establishment of a set of directions Zwikael 2008 Critical Planning Processes in Construction Projects A good Construction plan is the basis for developing the budget and the schedule for work Henrickson 1998 Construction Planning Techniques Having a project schedule to work to and sticking to it, you will be well on your way to delivering successful projects Walker 2007 Project Management in Construction, (5th edition) Construction Planners and the olr they perform are little understood both within the Construction industry and the wider environment Allan Smallwood 2008 Improving Construction planning through 4d Planning Major Components of planning techniques are: Activities, Activity durations, Project time-scale, Event, Work method, Resources, Costs Value Neale 1989 Engineering Management. Construction Planning Four techniques often used; Bar chart, Network analysis, Line-of-balance, Linear programmes Neale 1989 Engineering Management. Construction Planning Experienced planner in construction needs to be aware of the techniques available Illingworth 1993 Construction Methods and Planning Likely to take longer when using construction planning software Lock 2007 Project Management, 9th edition, Planning a project of significant size will soon find that there a number

Philosphy and Science :: essays research papers

It is sometimes maintained that the conflicts of the twentieth century (war and international contests in general) might best be characterized as between the left and right political persuasions (e.g., â€Å"communism† against â€Å"fascism† or â€Å"democracy† against â€Å"fascism†). Defend or dispute such a characterization using the two socioeconomic and political systems that have been the central concerns of our readings and discussion: that of Sun Yat-sen (The Kuomintang on the Chinese mainland and on Taiwan) and that of Marxism-Leninism-Maoism (the Chinese Communist Party) in the People’s Republic of China. Your answer should include (1) ideological components (both domestically and internationally relevant), (2) structural features (leadership and political party properties), (3) economic strategies (both domestically and internationally relevant) and (4) general consequences. What are you prepared to argue are the major differences betwee n the two systems here discussed? Now, answer that question in a coherent fashion. Don’t try to answer each question in particular, except where the questions are numbered, for example, #1 ideological components, #2 structural features, #3 economic strategies, make sure that is clear so the readers understand that’s what you are answering. For example you say, as for ideological components, so something to indicate that you are answering that specific part of the question. Now, I think the question is relatively clear. It is a complex, but relatively clear question. I don’t know exactly what experience you have. You know again, as I told you, I am sort of visiting the planet sodospeak. I mean you are completely outside the range of my comprehension. I don’t know what you know, what you don’t know. Education nowadays has become so impoverished, I’m not even sure that you have the prejudices that we used to have. So right on this campus, my sense is, the world is divided between the left and the right. And so when they look back on the past experience of the preceding century, they think that the conflicts of the preceding century were on the left and the right, you see? And somehow the world is divided into the left and the right. Now, part of this, and if you read any of the material, again I am being very generous in my expectations, but if you read any of the material, for years, the second World War was characterized as a conflict between the left and the right. That carried over into Asia. Philosphy and Science :: essays research papers It is sometimes maintained that the conflicts of the twentieth century (war and international contests in general) might best be characterized as between the left and right political persuasions (e.g., â€Å"communism† against â€Å"fascism† or â€Å"democracy† against â€Å"fascism†). Defend or dispute such a characterization using the two socioeconomic and political systems that have been the central concerns of our readings and discussion: that of Sun Yat-sen (The Kuomintang on the Chinese mainland and on Taiwan) and that of Marxism-Leninism-Maoism (the Chinese Communist Party) in the People’s Republic of China. Your answer should include (1) ideological components (both domestically and internationally relevant), (2) structural features (leadership and political party properties), (3) economic strategies (both domestically and internationally relevant) and (4) general consequences. What are you prepared to argue are the major differences betwee n the two systems here discussed? Now, answer that question in a coherent fashion. Don’t try to answer each question in particular, except where the questions are numbered, for example, #1 ideological components, #2 structural features, #3 economic strategies, make sure that is clear so the readers understand that’s what you are answering. For example you say, as for ideological components, so something to indicate that you are answering that specific part of the question. Now, I think the question is relatively clear. It is a complex, but relatively clear question. I don’t know exactly what experience you have. You know again, as I told you, I am sort of visiting the planet sodospeak. I mean you are completely outside the range of my comprehension. I don’t know what you know, what you don’t know. Education nowadays has become so impoverished, I’m not even sure that you have the prejudices that we used to have. So right on this campus, my sense is, the world is divided between the left and the right. And so when they look back on the past experience of the preceding century, they think that the conflicts of the preceding century were on the left and the right, you see? And somehow the world is divided into the left and the right. Now, part of this, and if you read any of the material, again I am being very generous in my expectations, but if you read any of the material, for years, the second World War was characterized as a conflict between the left and the right. That carried over into Asia.

Virgin Mobile Usa Analysis

Virgin Mobile USA Analysis [pic] August 08, 2009 Table of Contents Table of Contents2 Introduction3 Internal Factor Evaluation (IFE Matrix)4 External Factor Evaluation (EFE Matrix)5 Porter’s Five Forces6 Porters Generic Forces6 Financial Analysis7 Competitive Profile Matrix8 The Marketing Mix-The 5 P's9 Key Issues10 Boston Consulting Group (BCG Matrix)11 GE / McKinsey Matrix12 Space Matrix14 Recommendations16 Introduction Virgin Mobile is a great company that has been successful based in the U. K. The company is well known for its brand extension and was the first company to introduce the Mobile Virtual Network Operator (MVNO) in the U. K. , where they leased network space form another firm instead of running a network in-house and as a result avoiding infrastructure and large fixed cost. The company was well known for its hip and trendy position in the U. K. , and catered to the youth market. Although they have had a couple failures in the past including launching the MVNO in Singapore, the company decided to venture into the U. S. Virgin Mobile positions itself to come up with an appealing offer and ensure a run rate of one million subscribers in the first year and three million by the fourth year. Keeping with the brand strategy and philosophy of making a difference, it enters areas, which are not well served which in this case is the age group of 15-29 due to their low frequency of usage and poor credit rating. While targeting this segment lifestyle and psychographics factors are important as usage is inconsistent, and based on school and, vacation periods. Virgin customers are attracted to the products and services because of the flexible monthly terms, easy to understand pricing structures, stylish handsets offered at affordable prices and relevant mobile data and entertainment content. Virgin offers products and services on a flat per-minute basis and on a monthly basis for specified quantities, or â€Å"buckets†, of minutes purchased in advance in each case, without requiring customers to enter into long-term contracts or commitments (Virgin Mobile USA). Internal Factor Evaluation (IFE Matrix) Internal Factor Evaluation | |Matrix (IFE Matrix) | |CRITICAL SUCCESS FACTORS |Weight |Rating |Weighted Score | |What are those factors in the internal environment which are critical to the future success of the |Relative |How well has the firm, | ; 2. 50 = the firm and | |organization? Importance of that|or its strategies, |its strategies are not | |Does management have control over them? (The answer should be yes) |factor in the |res ponded to the |capitalizing on | | |firm's industry |factor? |opportunities or avoiding| | |0=Not Important; |1 = poor response |threats. | | |1=Very Important |2 = average response |> 2. 0 = the firm, and/or| | |or Critical |3 = above average |its strategies, is/are | | | |response |responding well to | | | |4 = superior response |threats and opportunities| | | | |in its industry. |STRENGTHS |   |   |   | |Virgin brand name [Globally recognized brand name] |0. 25 |4 |1 | |Competitive Price of Phone Package |0. 03 |2 |0. 06 | |On-line Store 24/7 |0. 2 |2 |0. 04 | |Excellent Sales Promotions |0. 1 |3 |0. 3 | |Pro-active and quick to act |0. 12 |3 |0. 36 | |Friendly staff – Good at understanding and meeting customer needs |0. 04 |3 |0. 2 | |Targeting a narrow target market [less advertising costs] |0. 02 |4 |0. 08 | |50-50 joint venture with Sprint no worry for fixed costs or physical structure |0. 1 |4 |0. 4 | |An exclusive multiyear content and marketing agreement with MTV networks to deliver music, games and|0. 05 |4 |0. | |other MTV-, VH1-, and Nickelodeon based content to Virgin Mobile subscribers | | | | |Unique mobile features and extras |0. 02 |3 |0. 06 | |Channel strategy that is more closely aligned to its target market selection. |0. 02 |3 |0. 06 | |Unique image youth oriented other providers focus on business people. 0. 02 |3 |0. 06 | |Unique advertising strategy |0. 02 |4 |0. 08 | |WEAKNESSES |   |   |   | |Limited [Low] advertising budget |0. 3 |4 |0. 52 | |No contract option means that there is a chance of having higher churn rates. |0. 01 |3 |0. 03 | |New Foreign Brand associated with Music/Travel |0. 01 |2 |0. 02 | |CBD Location is busy/inconvenient for Suburb Customers |0. 02 |1 |0. 2 | |Mobile Coverage |0. 01 |1 |0. 01 | |Separate Billing/Account information (More Direct Mail) |0. 01 |2 |0. 02 | |Total |1 |   |3. 44 | |   |   |   |3. 4 > 2. 5 | Virgin Mobile exhibited internal weaknesses and strengths wit hin its environment rated above weighted score of 3. 44 on a scale of 1 to 4. This can be attributed to the good leadership that includes friendly staff, the market niche that is image youth oriented, unique advertising strategy, channel strategy on the other hand limited advertising budget, potential higher churn rates and poor mobile coverage expose Virgin Mobile’s weaknesses that must be addressed. External Factor Evaluation (EFE Matrix) |External Factor Evaluation |Matrix (EFE Matrix) | |CRITICAL SUCCESS FACTORS |Weight |Rating |Weighted Score | |What are those factors in the internal environment which are critical to the future success of|Relative Importance of|How well has the firm, or| < 2. 50 = the firm and its| |the organization? |that factor in the |its strategies, responded|strategies are not | |Does management have control over them? The answer should be no) |firm's industry |to the factor? |capitalizing on | | |0=Not Important; |1 = poor response |opportunities or avoiding | | |1=Very Important or |2 = average response |threats. | | |Critical |3 = above average |; 2. 0 = the firm, and/or | | | |response |its strategies, is/are | | | |4 = superior response |responding well to threats| | | | |and opportunities in its | | | | |industry. |OPPORTUNITIES |   |   |   | |Penetration among consumers 15-29 is significantly lower and the growth rate among this |0. 12 |4 |0. 8 | |demographic is projected to be robust in the next 5 years [this segment hasn’t been targeted | | | | |yet] | | | | |Revenue for mobile entertainment projected to increase steadily over the next few years. |0. 1 |4 |0. | |Open more Virgin Mobile Stores across Capital Cities/Regional Markets |0. 05 |3 |0. 15 | |Integrate into Music/Travel packages |0. 25 |4 |1 | |Wider Mobile Phone Coverage-National & International |0. 1 |3 |0. | |THREATS |   |   |   | |Market seems to have reached maturity |0. 14 |3 |0. 42 | |Market is overcrowded |0. 15 |2 |0. 3 | |Customers ages 15-29 are low value subscribers [don’t use their cell phone regularly] |0. 3 |2 |0. 06 | |Limited National Coverage |0. 01 |2 |0. 02 | |The age group targeted tends to have poor credit quality |0. 03 |3 |0. 09 | |Competition from A T & T, T-Mobile USA, Cellco and Verizon etc |0. 02 |2 |0. 4 | |Total |1 |   |3. 26 | |   |   |   |3. 26 ; 2. 5 | Virgin Mobile’s response to external opportunities and threats within its environment is rated above weighted score of 3. 26 on a scale of 1 to 4. There are wide opportunities for Virgin Mobile to open more Virgin Mobile Stores across Capital Cities/Regional Markets. Make the offers more attractive by Integrating Music/Travel packages. Provide wider Mobile Phone coverage-National & International. On the other hand there are threats that are looming due to the market that seems to have reached maturity and overcrowded. There is limited National coverage which needs to be expanded. There is also Competition from A T & T, T-Mobile USA, Cellco and Verizon etc. These threats must be countered effectively. Porter’s Five Forces Supplier power (Weak) – Lots of cell phone providers, therefore companies like Kyocera lower prices to contract with service providers. Buyer power (Strong) Current cell phone service providers are numerous, which allows for many options for buyers. Barriers to Entry (Weak) – There is nothing that will prevent Virgin from competing to an untapped market. The threat of substitutes (Weak) – There are very few substitutes available that offer mobile and immediate communication. Alternative like pagers are outdated & this target market cannot afford sophisticated PDA service. Degree of Rivalry (Strong) – Competitors have brand recognition in the US and have the majority of the market share. Porters Generic Forces Virgin Mobile applies the three generic strategies. Cost leadership strategy that seeks to minimize costs and maximize profits. For example the company had entered into distribution agreements with Target and Best Buy, both of which charged lower commissions than traditional industry channels $30 per phone, versus an industry average of $100. 6. They also sought to hire talented staff that is friendly and good at understanding and meeting customer needs. In terms of differentiation, the team decided that a key part of the Virgin Mobile service would involve the delivery of content, features, and entertainment, which they called â€Å"VirginXtras. To this end, the company signed an exclusive, multiyear content and marketing agreement with MTV networks to deliver music, games, and other MTV-, VH1-, and Nickelodeon based content to Virgin Mobile subscribers. Therefore Virgin Mobile focuses on unique image that is youth oriented while other providers focus on business people. Virgin Mobile also differentiated it’s service by good customer care. There are advantages and risks exhibited with each strategic option. Virgin Mobile’s opportunities in this market were based on determining the unmet needs and creating new ways or means for satisfying these unmet needs. And it had to be based on buyer types, buyers’ needs and the technological means of satisfying those needs. Virgin Mobile used a more concentrated approached; they identified buyers’ needs by focusing on the age group 15 to 29 with specifically those with no credit and may not have usage or a lot of minutes; The Company put an emphasis on usage of minutes, style, fashion, fun, honesty and great value for money. This segment represented a possible opportunities for market penetration. It identified two attitudinal and lifestyle markets in their chosen segment; those that had no credit and wanted a phone with no contracts but can indulge in text messaging, downloading information into the cell phone and they were more likely to use ring tones, faceplates and graphic and those that wanted a phone as a fashion statement. Even people with similar usage needs, often have differing lifestyles representing various value sets. For example some people have an active lifestyle in which sports and fitness play an important role, while for others, art, fashion and trends may be very important. Financial Analysis Virgin Mobile USA, Inc. Key numbers for fiscal year ending December, 2008: Sales: $1,323. 5M One year growth: 0. 8% Net income: $7. 9M Income growth: 88. 4% AT Mobility Key numbers for fiscal year ending December, 2008: Sales: $124,028. 0M One year growth: 4. 3% Net income: $12,867. 0M Income growth: 7. 7% Cellco Key numbers for fiscal year ending December, 2007: Sales: $43,900. 0M One year growth: 15. 5% T-Mobile USA Key numbers for fiscal year ending December, 2008: Sales: $1,323. 5M One year growth: 0. 8% Net income: $7. 9M Income growth: 88. 4% Verizon Key numbers for fiscal year ending December, 2008: Sales: $97,354. M One year growth: 4. 2% Net income: $6,428. 0M Income growth: 13. 7% Reference: http://www. hoovers. com/virgin-mobile-usa/–ID__156760–/free-co-competitors. xhtml The main competitors are AT&T, Cello, T-Mobile USA and Verizon. Initially, Virgin may have no great profits since they are trying to be the low cost provider. Although they were profitable i n the UK, they have no brand recognition in the US to fall back on. Based data, Virgin Mobile is able to compete effectively with their major competitors as far as sales are concerned. They are also able to do this will less employees, meaning low operating cost. The company’s ability to compete effectively gives a good indication on their ability to keep their current market share and expand operations into new target markets. Competitive Profile Matrix |Competitive Profile Analysis | |Competitive Profile Matrix | | |Virgin Mobile |AT & T |Cingular |Verizon |Sprint | |Critical Success factors |Weight |Rating |W. T. Score | |Overall Market Size |0. 20 |5 |1 | |Annual Market Growth Rate |0. 20 |5 |1 | |Sector Profitability |0. 12 |4 |0. 48 | |Competitive Intensity |0. 14 |1 |0. 4 | |Global Opportunities |0. 12 |4 |0. 48 | |Regulatory Regime |0. 05 |3 |0. 15 | |Opportunity to Differentiate |0. 04 |5 |0. 2 | |Technological Requirements |0. 5 |1 |0. 05 | |Entry Barriers |0. 02 |1 |0. 02 | |Distribution Structure |0. 06 |5 |0. 3 | |Total |1 |   |3. 82 | | | | | | | | | | | | | | | | | | |Business Unit Strength Factors |Factor Weighting |Business Unit Rating |Value | |Market Share |0. 2 |1 |0. 2 | |Share Growth |0. 2 |4 |0. | |Product Quality |0. 05 |2 |0. 1 | |Brand Reputation |0. 1 |1 |0. 1 | |Distribution Network |0. 31 |5 |1. 55 | |Promotional Effectiveness |0. 05 |5 |0. 25 | |Production Capacity |0. 2 |4 |0. 08 | |Cost Management |0. 01 |5 |0. 05 | |R Performance |0. 02 |5 |0. 1 | |Management |0. 04 |4 |0. 16 | |Total |1 |   |3. 39 | [pic] McKinsey model above shows us strong business attractiveness and that the business strength for Virgin Mobile is fairly low. The fact of the matter is that competition in the cellular phone business is strong with many competitors. Currently the top providers operate to benefit themselves and not the consumer with high prices and limited features for the money. Consumers have various choices as far as provider is concerned, but no company has differentiated themselves to benefit the consumer’s pocket. Virgin Mobile must strive to excel. Space Matrix Strategic Position & Action Evaluation [pic]    |   |   |   |   |   | |   |Internal Strategic Position |External Strategic Position | |   |Competitive Advantage |Industry Attractiveness | |   |Ratings |   |   |Ratings |   | | |(-6 worst, -1 Best) | | |(+1 worst, +6 Best) | | |   |-5 |Market share |   |5 |Market Growth potential | |   |-4 |Product quality |   |2 |Profit potential | |   |-3 |Produc t life cycle |   |4 |Financial stability | |   |-5 |Brand & Image |   |5 |Resource utilization | |   |-3 |Customer loyalty |   |2 |Capital intensity | |   |-3 |Technological know-how |   |2 |Barriers to entry | |  Total |-23 |   |  Ã‚  Total |20 |   | |Avg |   |AVG 3. 33|   | |-3. 83 | | | | |   |   |Total axis X score: |-0. 0 |   |   | |Financial Strength |Environmental Stability | |   |Ratings |   |   |Ratings |   | | |(+1 worst, +6 Best) | | |(-6 worst, -1 Best) | | |   |4 |ROI |   |-3 |Technological changes | |   |2 |Leverage |   |-5 |Demand Elasticity | |   |3 |Liquidity |   |-3 |Price range of competition | |   |3 |Capital required/available |   |-6 |Barriers to entry | |   |3 |Ease of market exit |   |-6 |Competitive pressure | |   |2 |Risk involved in business |   |-5 |Price elasticity | |  Ã‚  Total |16 |   |  Ã‚  Total |-28 |   | |Avg |   |Avg |   | |2. 67 | |-4. 67 | | |   |   |Total axi s Y score: |-2. 00 |   |   | With the given the Space Matrix data we realize that the company should pursue a defensive strategy. The implication is that the firm is operating within a market that is experiencing negative to stable growth and that Virgin Mobile is experiencing severe financial constraints. Virgin Mobile knows that the market is saturated and very competitive they went ahead and positioned themselves to pursue their niche in the market share. I recommend applying a combination of retrenchment, divestiture, liquidation and concentric diversification. Recommendations Virgin Mobile wants to compete within a new market and not have the competition beat them in this game. Several options as far as pricing were developed by the company. They can either clone existing prices, price below the competition, or create their own unique pricing strategy. Cloning the industry, will not allow them to differentiate themselves in order to stand out from the competition, although, it would be easy to promote. Pricing below the competition would still be copying the competitor’s strategy, but just offering a lower price. Their only differentiating factor would be that they were cheaper. I recommend a different strategy. Creating the new plan would bring about the changes that consumers want such as eliminating contracts, offering pre-paid services, lower priced phones, and eliminating hidden fees. Although this strategy could be risky, they will ultimately do what they set out do which was to gain the market share of the under-30 crowd. With the options that MTV, VH1 and Nickelodeon networks will offer, I believe consumers will see the added value in the product as opposed

International Business And Management Of A Multinational...

Introduction As the threshold of conducting business in foreign country becomes lower, it has been appealing to turn a local company into a multinational corporation. By leveraging and gathering resources from global platform, company will make leaping progress not only on profit, but also on brand building. However, the moment a company begins to consider paving its way into foreign markets and goes globally, it needs to take into consideration various kinds of transaction expenditure that rose in trading. Therefore, it has been critical for company executives to understand and utilize the Transaction Cost Theory (TCT) in order to find the most suitable method for company to supervise and minimize the transaction costs. Through analysis into TCT, one can have a deep comprehension on the extension of how multinational companies depend on each other, and how to choose between centralized inner supervision (within company) and outer surveillance (market) so as to diminish transaction costs. This paper analyzes the reasons that lead to transaction costs, what is the meaning and how to apply TCT in international business and management endeavor. Even though TCT is a renowned theory, it still needs revision and enhancement. However, scholars put widely different perspectives on to TCT theory scattering into diverse subjects, making the theory unable to receive progress as a whole. 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Background of the company†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..4 2. Starbucks’s expansion.†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦..4 3. Risks associated with expansion†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦6 4. Capital structure of the company†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦...†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦7 Conclusion†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 9 Reference †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦10 Appendix †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 11 Introduction GlobalizationRead MoreInternational Vs Domestic Strategies : International Marketing Model1326 Words   |  6 PagesInternational vs Domestic Strategies Strategies are the models of guiding companies from the existing position to where it owners would like it to be. 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