Contents

Introduction and Aims ............................................................................................................................ 2

Background of Balfour Beatty ................................................................................................................ 2
The Key Concepts of Strategic Management.......................................................................................... 3
What is Strategic Management? ......................................................................................................... 3
The Strategic Management Process .................................................................................................... 3
Construction Product Cycle ............................................................................................................ 3
Approaches to Strategy Formation ................................................................................................. 3
Strategic Process ............................................................................................................................. 4
Conclusion ....................................................................................................................................... 8
Introduction and Aims
The construction industry is seen as extremely competitive. In order to remain competitive in such an
environment, construction companies need to be well placed to exploit industry opportunities. This is
where the strategic management process comes into play. Strategic management is an extremely
important management function because it has an impact on an organisation’s future performance. It
determines the future direction of a company. Significant research has gone into understanding the
strategic management process which in effect has identified some of the best ways of achieving
successful and effective strategic management. (Pamulu, 2010) The evidence indicates the strategic
management is a complex process that is influenced and affected by many different factors. In order
to understand current practice, this report will identify and evaluate some of the best practice
regarding strategic management. This report provides a description and an evaluation of the stages of
the strategic management process as well as some of proposed processes frameworks used during the
strategic management process. Each stage is then followed by an explanation of the importance of the
stage to the growth of Balfour Beatty.

Background of Balfour Beatty

The company Balfour Beatty was chosen as the focus of this work due to its notoriety around the
world as well as the transparency and availability of information of the company’s market strategy.
Balfour Beatty was founded in 1909 and is currently made up of more than 50,000 workers
worldwide. Over the last century it has transformed itself into a major player in the international
construction and infrastructure market. It currently has major markets are in the United Kingdom and
the United States. Balfour Beatty is known for its diverse capabilities in the infrastructural market, its
functions include financing, building, managing and developing construction projects. The company
generates revenue in three main ways; construction, support service and investment infrastructure
investments. The construction service accounts for approximately 80% of revenue and includes
building, civil engineering, ground engineering, mechanical and electrical services, rail engineering
and refurbishment. Its support services provide 13% of revenue and comprises of installations,
upgrade and water maintenance, gas and electricity networks, highways network management,
operation and maintenance, rail renewals. The final 7% of revenue is provided through infrastructure
investments.
Balfour Beatty has worked on several reputable projects in recent years including Thames Tideway,
M25, Crossrail, Dr. Phillips Centre for the Performing Arts and New Parkland Hospital. 2015 saw a
major change for Balfour Beatty after experiencing a continued reduction in growth over previous
decade culminating in significant losses in 2014. As a result, the company implemented the “build to
last transformation programme” with the aim of improving its financial performance. In terms of
performance, Balfour Beatty appears to be recovering from difficult year prior to the 2016 year. In
2014 it made an overall loss of £59 million before worsening to a loss £206 million in 2015. The
company’s finances did improve to a profit of £24 million in 2016. Balfour Beatty has also had
contrasting performance indicators from the perspective customer satisfaction and employee
satisfaction. While customer satisfaction is currently extremely high at 92%, the percentage of
satisfied employees are 58%. This implies although the company is effective at meeting customer
requirements, a significant number of the employees are not enjoying working for the company in its
current state.
The Key Concepts of Strategic Management
What is Strategic Management?
“Strategy is the great work of the organization. In situations of life or death, it is the Tao of
survival or extinction. Its study cannot be neglected” SUN TZU, THE ART OF WAR
Strategic management is a broad concept and as a result in the last 30 years there have been several
attempts to provide a definition which captures the essence of its meaning. One way of describing
strategic management is that it is a process which involves making good decisions in the present
which has effective and successful long-term implications. For example, Wheelan and Hunger (2012)
described strategic management as “a set of managerial decisions and actions that determines the
longrun performance of a corporation”. Similarly, Miller & Dess (1996) described strategy within the
organisational context as “a set of plans or decisions made in an effort to help organizations achieve
their objectives”. Strategic management may also be examined from the perspective of the need to
consider internal capabilities and external environment. For example, Vasiliauskas, (2004) in
Dzemyda, (2014) describes strategic management as “an ongoing, dynamic and sequential process,
by which an organization adapts in time to the external environment changes and effectively utilizes
its existing potential” while Mintzberg (1979) described strategy within the organisational context as
“a mediating force between the organization and its environment: consistent patterns in streams of
organizational decisions to deal with the environment”.
In general, strategic management may be characterised as having the following qualities:
1. It is an ongoing process
2. Creates an objective and identifies the key decisions required to achieve those objectives
3. Considers the external environment of the organization and utilizes current resources and
capabilities
The Strategic Management Process
Construction Product Cycle
An understanding of the strategic management process involves considering the general life cycle of a
construction and infrastructural product or service. In general, a product goes through several stages
from its inception until its end. These stages may be described as the product life cycle. The product
life cycle may be divided into four stages according to Langford and Male (2001). The first stage is
the development stage involving the design and introduction of the product into the market, the
second stage is the growth stage which is characterised by an increase in profits, the next stage is the
maturity stage involving an increase in competition, a stagnation or reduction in growth and a
reduction profit and the final stage is the decline stage where the product struggle to produce profits
and a new product is required. Although the general product life cycle is relevant to the construction
industry the types of product or service provided in construction differs in the sense that the final
production is unique. For example, a building or road is designed and constructed for a unique client,
with unique design, at a unique location and has site requirements. So, when the product life cycle is
adapted to the construction industry the stages can be divided into concept, design, construction,
handover and commissioning, operation and disposal. (Langford and Male, 2001)
Approaches to Strategy Formation
Before a strategic management process is determined it is important to ascertain the most appropriate
approach to strategic management. Research over the last 50 years has produced several school of
thought when it comes to strategy formation. As demonstrated Pamulu (2010) examples of the school
of thought proposed by researchers include Design, Planning, Entrepreneurial and Culture. The
Design and Planning school of thought assumes strategy is a result of analyses while the
Entrepreneurial school describes strategy as an organisational decision process. The cultural school of
thought looks at the mindset and behaviour of the people affected by the strategy.
Strategic Process
The strategic management process involves a set of policies and procedures proposed which “guides
the scope and direction of the entity” and takes into account the environment. (Ritson, 2011).

The main components of a strategic process as demonstrated by the diagram above is applying and
deploying resources in consideration of pre-determined strategies in order to achieve a desired goal.
Wheelan and Hunger (2006) provides a comprehensive model detailing the strategic management
process. It comprises of fours stages the preplanning or environmental scanning stage, the strategy
formulation stage, the strategy implementation stage and the evaluation and control stage. Each stage
fulfils an important purpose. For example, the environmental scanning stage enables strategic
planners to gather vital information about the firm internally and externally. This information is vital
for establishing the position of firm or organisation within a competitive environment and this
therefore ensures the company is better placed to develop appropriate and effective strategies during
the formulation stage. The formulation stage involves establishing long term goals. It typically
consists of establishing significant details such as the company’s missions, objectives and policies.
With the aid of current resources available the strategy implementation stage in involves putting the
strategic plans into action. The evaluation and control stage consist of evaluating and tracking the
activities of the implementation stage. This enables the organisation to determine the success of the
current strategies implemented.

Environmental Strategy Strategy Evaluation

Scanning formulation implementation and Control
Analyses both Defines the Identify action Collect data.
external and missions, plans. Execute the
internal vision, guiding Communicate
identified
environments principles, and examine
strategies.
strategic goals results.
Deploys strategies
and objectives identified in the Assess
formulation performance
stage.

Makes use of
resources

Feedback and Changes

Transformation if necessary
Environmental scanning
This is one of the most vital aspects of strategic management because the effectiveness of the stages
which follow relies on the thoroughness and quality of the assessment of the internal and external
environment of an organisation. An effective environmental assessment is one that provides
substantial clarity on how to react to threats to an organisation’s success as well as exploit the
opportunities available. Without a good environment assessment, it will be difficult to identify
strategic goals and guiding principles. Ritson (2011) identified several benefits of an organisation
such as Balfour Beatty performing an environmental analysis. They are as follows:
- Increase in managerial awareness of environmental changes
- Increase in an understanding of the context in which industries function
- Improvement in resource allocation decisions
- Facilitating risk management
- Providing an early warning system
An environmental scan may be divided into two main categories; the external and internal
environment.
External environment
When assessing and analysing an organisation’s external environment there are two main focus.
These are the macro and micro environment. Macro environment refers to the factors affecting all
firms and organisations while the micro environment suggests a specific focus on factors within a
particular sector in which a firm operates. Two established methods of assessing the external
environment of an organisation are the PESTEL method and the Porter’s five forces. The PESTEL
analysis involved identifying the Political, Economic, Social, Technological, Environmental and
Legal factors of an organisation’s environment. The five forces method was developed in Porter
(1980) proposes five forces that indicates the profitability of an industry. The forces are the threat of a
New Entrant, Threat of substitution, Bargaining power of buyers and suppliers and rivalry between
industry competitors.
Internal Environment
This refers to the firm’s current capabilities particularly in relation to the available resources. The
internal environment and elements of an organisation must match the company’s objectives and
strategy. Otherwise the result may be costly, and it is therefore important to for a firm to perform an
internal analysis before determining its strategy. The internal analysis can be achieved using a SWOT
analysis. The SWOT analysis is effective as it takes into account logistics, structure, finances
operations, inventories and other resources to produce a snapshot of an organisation’s current
capabilities. The use of a SWOT analysis involves identifying the main strengths, weaknesses,
opportunities and threats of an organisation.
The importance of Environmental Scanning to the growth of Balfour Beatty
Balfour Beatty exists in a construction industry consisting of many competitors. Using an
environmental analysis tool such as the swot analysis, provides a snapshot of its capabilities. For
example, after a swot analysis it may become clear the strengths of the company are its diversified
business across many regions and industries as well as its huge workforce of over fifty thousand,
while its weakness may be its major dependence on the UK and US market. By understanding its
strength and weaknesses Balfour Beatty is then made aware of areas in which it can either focus its
resources to improve profit or areas it must fix to become more successful
Strategy Formulation
Strategy formulation is also known as strategic planning. It is a process which comprises of
identifying the organisation’s mission and vision, objectives, alternative strategies. This stage of the
strategic process which may be described as “a roadmap for the long-term success of a company” is
typically performed by top level management teams such as the executive board, department heads
and CEOs. (Kurien, 2004) It is a process of addressing the results of the environmental analysis by
developing strategies to order exploit external opportunities and internal strengths address external
threats and internal weaknesses, which considers the resources currently available to the organisation.
It is also a process which provides clarity and direction to the organisation’s employees.
Company’s Mission
The mission of a company can have a major impact on the long-term success of an organisation
particularly due to the effect it has on the employees within the organisation. One of the major
benefits of the having a collective mission is that it provides a statement of intent which aligns the
mindsets of each employees with the organisation’s. The collective focus of an organisation and its
employees on a mission is achieved using a mission statement. It is essentially a sentence or
paragraph which concisely captures the company’s purpose and expectations for its future. By
producing a mission statement, an organisation is able to ensure all its employees from senior level
workers to lower level workers possess the same mindset and philosophy. (Kurien, 2004)
Company’s Goals and Objective
Goals and objective have the same purpose as the company’s mission in the sense that it aims to
ensure each employee has the same philosophies and principles as the organisation. Objective are
used in the form of targets to be matched by workers within a set period. There are three main areas in
which company objectives are set; personnel, finance and profit. Problems in objective s can arise
when they focus either too much on the short term or are too general. In addition, when objectives or
strategies do not clearly align it may lead to conflict. For example, divisions within an organisation
might end up competing with each other instead of external competition. (Wheeler and Hunger, 2012)
Strategy
Porter (1996) described strategy as making decisions that enable a business to achieve competitive
advantage by being different or unique. This definition describes some of the ways in which many
companies have been able to establish themselves within a market place. That is by introducing
something new and unique. For example, the mobile phone industry was transformed when apple
introduced a smartphone which in effect strengthened apple’s position in the mobile phone industry.
However, being different is necessarily the most defining factor. It is impossible to control the future
as a result it is more important to have a clear understanding of the market. For example, John Kay
(2000) states that strategy is more about using analysis to clearly establish and understand a
company’s position within an industry in relation to competitors.
According to Wheelan and Hunger (2012) There are several different types of strategies that a
business can use to gain an advantage within an industry they include competitive strategies, where
the businesses focus on battling with competition to gain an advantage, cooperative strategies, which
involves working with one or more other companies to gain an advantage, corporate strategies where
the concern is the choice of direction and management of the organisation as a whole, directional
strategies which focus on the growth and stability of the organisation.
Why Strategy is important for the growth Balfour Beatty?
Balfour Beatty’s long term financial strategy is “optimising value through the disposal of mature
assets, whilst also continuing to invest in new opportunities and expanding the breadth of assets”. This
philosophy is demonstrated by the diverse work portfolio of the business. The positive effect of
having such this is it ensure all employees are focused on the same goals, which increases the
possibility of the organisation achieving its goal. The focus on providing so many services may prove
to be a weakness. It means the quality of the services may in fact suffer if there is a focus on quantity
rather than quality.
Strategy implementation
This stage initiates the actualisation of the strategies, mission statement and objectives developed in
the previous stage through the use of programs and procedures (Wheelan and Hunger 2012).
Successful strategic implementation can be difficult for several reasons. First of all, it relies factors
such as good communication of the strategy and a clear master plan. The implementation process may
be derailed if there are unrealistic expectations, lack of top management commitment, structural
problems and lost momentum.
Importance of implementation to the growth of Balfour Beatty
The main purpose of creating or producing a strategy is to put it into action. Balfour Beatty increases
its chances of achieving it strategic objectives by ensuring their objectives are communicated effective
through their leaders, seminars and training. Without clear and unambiguous communication Balfour
Beatty will struggle to achieve its objectives.
Evaluation and Control
Evaluation and control is the process of ensuring the implemented strategies are working. The aim of
this process is to make sure the company achieves its strategic objectives by comparing current
performance with the desired results. During the process feedback is gained taken from the evaluation
of the current performance and then the appropriate corrective action is implemented as a result.
Wheelan and Hunger (2012) provides a five-step procedure for completing evaluation and control.
They are as follows
1. Determine what to measure
2. Establish predetermined standards
3. Measure actual performance
4. Compare actual performance with standard
5. If results fall outside standard take corrective action
Importance of evaluation and control to the growth of Balfour Beatty
One of the ways Balfour Beatty evaluates it performance is through its annual statement. The annual
state provides details of the key information such as final performance, financial position risk
management strategy. The production of the statement enables the company to test its financial
performance in relation to the previous year and therefore the effectiveness of its business strategies.
Although the annual statement is beneficial it is important for Balfour Beatty to have an on-going
analysis that enables the company to test if it is on track with targets.
Transformation
Transformation is a way of adapting to an evolving market place. It is a process which results in the
redesign of an organisation from the employees to the structure, systems and processes. The need for
transformation arises when an organisation reaches a point of decline or plateau. However, it can be a
challenging process. For example, a study of firms in the UK showed that of the 215 that underwent
major transformational change only 8 did not experience decline. (Johnson et al, 2011).
Importance of transformation to the growth of Balfour Beatty
After having experienced significant financial losses during the 2014-2016 period Balfour Beatty
introduced the “Build to Last Programme” to drive improvement within the business. This highlights
one of the important aspects of business which is the need to adapt. After realising the trend, the
company was following introducing a transformation helped to increase profits and move the business
in a positive direction and ultimately extending the life span of the company.
Conclusion
Understanding the strategic management process provides a base for achieving success in a business.
Balfour Beatty is one of the biggest construction companies in the world. This report aimed to identify
the key activities of the successful implementation of strategy in business and then identified reason
each stage was important for the growth of Balfour Beatty. Some of the findings include the strengths
and weaknesses of Balfour Beatty having a diverse range of services and as well as how Balfour
Beatty has improved its financial performance by introducing the build to last programme.

References
Johnson, G., Whittington, R. and Scholes, K. (2011). Exploring corporate strategy. Harlow:
Financial Times Prentice Hall, pp.183-184.