Strategy Module - Assignment

1. Situation analysis (current situation of the unit from a performance perspective...) 0.5 page
2. Market/Industry analysis (2 page)
3. Resource Analysis (SW grid) (0.5 page)
4. Strategic Vision and SMART goals (10 lines)
5. Strategic Action Plan (1 page)
-a Segment focus
-b Positioning / Product service competitive advantage
- c Functional Strategies

International Corporate Strategy part

6. Assess the position of your unit in L&T corporate portfolio matrix. What is the recommendation in
terms of investment in that unit? (No need to build the entire matrix, just express your analysis in
half a page or so.

7. Use the Value Curve framework to assess the main gaps (positive or negative) between the
value proposition of your unit and the one of your main competitors. Show the two value curves in
a graph and express your conclusion about the gaps in 10 lines.

8. What are the main resources (tangible or intangible) that your unit needs the most from a) the
corporate headquarters and b) the other units of L&T. Describe that potential parenting advantage
in 0.5 pages.

Scenario Planning part

9. Select what in your opinion is the most uncertain variable that could greatly impact your unit’s
future in the next 5-8 years. What are the two extreme outcomes of that variable? Build two basic
scenarios using those two extreme outcomes. How does the current unit’s strategy need to be
adjusted to perform well in BOTH scenarios? (2 pages)
1. Situation analysis of Larsen & Toubro Construction “Buildings &
Factories” unit

Buildings & factories comprises of Residential as well as commercial buildings including Airports. The
detailed situation analysis of Buildings & Factories unit is as follows based on our product, competition &
environmental & political situation:

Product Situation:
This unit construct residential as well as commercial buildings for private as well as government clients. This
may include high end elite residential buildings also. Construction of Airports also comes under this unit.
We have constructed some of the best airports in the world.

Environmental & Political factors:

Currently we have some very good government projects for affordable housing in Andhra Pradesh,
Lucknow. The Andhra government is floating lots of projects under Pradhan mantra awaas yojna.

Secondly, all most all the airports of India are running over there capacity especially metro cities so the
government will come with expansion of airports very soon & we always are the favorite due to vast
airports construction experience.

Profitability & Liquidity Situation:

The profitability is going to improve of this unit as most of the projects we have are government projects &
the past history of many government projects has shown that profit & margins are always maintained in
government housing project as compare to private clients. Currently we are aiming for 12% PAT which is far
better than the 8% of previous projects which mainly comprises of private clients.

2. Market/Industry analysis of Larsen & Toubro Construction “Buildings &

Factories” unit
A key part of any business plan is the market analysis. The analysis needs to demonstrate both your
expertise in your particular market and the attractiveness of the market from a financial standpoint.

What is a market analysis?

A market analysis is a quantitative and qualitative assessment of a market. It looks into the size of the
market both in volume and in value, the various customer segments and buying patterns, the competition,
and the economic environment in terms of barriers to entry and regulation.

We are going to do the industry analysis by 5 force analysis which depends upon five forces:

1. The potential for new competitors to enter the market;

2. The bargaining power of suppliers;
3. The competitors and nature of competition
4. The threat to substitution; and

Ease of Entry
Ease of entry refers to how easy or difficult it is for a new firm to begin competing in the industry. The ease
of entry into an industry is important because it determines the likelihood that a company will face new
competitors. In industries that are easy to enter, sources of competitive advantage tend to wane quickly.

Ease of Entry in Buildings & Factories

In building & Factories Ease of entry is not very likely as new competitor need to make heavy initial
investment. Secondly, expertise is also an important factor which almost all the clients consider before
awarding the contract.

Power of Suppliers
This is determined by how easy it is for your suppliers to increase their prices. How many potential
suppliers do you have?

Power of suppliers in Buildings & Factories

In buildings & factories suppliers don’t have much powers as there are many suppliers due to which they
can’t increase the prices.

Competitive Rivalry
This looks at the number and strength of your competitors. How many rivals do you have? Who are they,
and how does the quality of their products and services compare with yours?

Competitive rivalry in Buildings & Factories

In buildings & factories rivalry is intense. Many contractors with huge financial support are available. They
lower the contract bidding value to get the new contracts

Threat of Substitution
This refers to the likelihood of your customers finding a different way of doing what you do.

Threat of substitution in Buildings & Factories

In buildings & factories threat of substitution is very low as almost all the client look for a contractor for
getting there job done. But some of client are coming with plan to carry the work on their own instead of
hiring a contractor for it, but the threat is still very low almost negligible.

Buyer Power
How easy it is for buyers to drive your prices down. How many buyers are there, and how big are their
orders?

The threat of bargaining power of buyer in buildings & factories

In buildings & factories the level of this threat is moderate as our buyer has enough power to drive the
rates based on competition. They can dictate terms sometimes based on their order value.

3. Resource analysis of Larsen & Toubro Construction “Buildings &

Factories” unit by SW Grid method
In resource analysis by SW-grid we will assess importance & relative strength

Resource Importance Relative Strength Comment

a) Good projects 8 6
b) Supply Chain Management 7 5
c) Labor Availability 7 5
d) Construction techniques 6 7
e) Quality Standards 7 7
f) Safety standards 7 7
g) Expertise 8 7
h) Brand 8 9
i) Management 6 4
4. Strategic Vision of Larsen & Toubro Construction “Buildings &
Factories”

L & T shall be a professionally-managed

Indian multinational,
Committed to total customer satisfaction
and enhancing shareholder value.

L & T-ites shall be innovative,

Entrepreneurial and empowered team,
Constantly creating value
and attaining global benchmarks.

L&T shall foster a culture of caring,

Trust and continuous learning
while meeting expectations of
employees, stakeholder and society.

SMART Goals of Larsen & Toubro Construction “Buildings & Factories”

“To increase revenue by 35% by improving order book & improving the EBITA
margins by 5 %”
5. Strategic Action Plan (1 page)

-a Segment focus
-b Positioning / Product service competitive advantage
-c Functional Strategies

Segment Focus:

BUYER TYPE
Segmentation of REGIONS
Buildings & Factories
Government
Private Client EPC projects
Client

Elite Housing Average Average Below Average

PRODUCTS
Affordable Mass Housing Good Below Average Average

Airports Average Not applicable Below Average

-Positioning / Product service competitive advantage

CUSTOMER REQUIREMENT HOW DO FIRMS SURVIVE COMPETITION KSFs

FASTEST DELIVERY TIME 1.Highly skilled Supply chain Management 1.Easy availability of quality vendors

C. Functional Strategies:
Higher & Robust level of marketing, HR, Production, Construction Techniques etc.
6.Position of Larsen & Toubro Construction “Buildings & Factories” in
Corporate Strategy Matrix
In corporate strategy matrix Buildings & factories unit will be “cash cows”.

Cash Cows- As leaders in a mature market, cash cows exhibit a return on assets that is greater
than the market growth rate, and thus generate more cash than they consume. Such business
units should be “milked”, extracting the profits & investing as little cash as possible.

Recommendation in terms of investment in this unit

More & more good projects are coming in affordable housing due to renewed government
policies, so the unit should take as much projects as possible & invest more in this unit as we have
vast experience in executing these projects & they have given some very good returns in past.
 7.Value Curve Framework
The value curve framework has been drawn for L&T & Shapoorji inconsideration of some
parameters.

The parameters which has been considered are explained below

1. Order Value: we have almost the same order value as our main rival.
2. Equipment’s: we have some better equipment’s as compare to shapoorji.
3. Material: Our material purchase system & quality is somewhat better.
4. Human Resource: we have better experience staff.
 5. Quality Standards: We have better standard quality parameters.
6. Safety Standards: our safety standard is higher than them.
7. Expertise: we have better expertise as far as these projects are concerned.
8. Brand: we have better brand value
Our order value is same because most of the project they won in bidding from us due to lower
rates quoted by them compare to our rates.

8. Resources which Buildings & Factories needs the most

Resources required from corporate headquarters
1) Tangible Resource
a) Contract & Billing- Competitive Contract to maintain the profit margins
b) Finance- Timely release of Funds for the Unit to avoid work delays
c) Human Resource- Competitive personnel fit for the work
d) On-time approvals- Timely approvals of all the materials & sub-contractors
e) Machinery- Sufficient machinery

2) In tangible Resource
a) Client Co-ordination- To co-ordinate with clients in case of disputes
b) Training- Necessary training to maintain corporate culture

Resources required from other Units of L&T

1) Tangible Resource
a) Materials- To promote material sharing in urgency

2) Intangible Resource
a) Expertise- To promote expertise sharing
b) Client Experience- To share experience for same client
c) Knowledge Sharing- Knowledge & ideas should be share for controlling wastage

Potential Parenting Advantage

You have to look at parenting advantage from the perspective of the businesses. The question is
not how you can control the operating units, but how you can best support them. And whatever
your parenting strategy is, establish clear rules for decision making. What are the decisions that
the parent makes, and what are the decisions that the operating units are responsible for? And
live by those rules.
9. Scenario planning part
What is scenario planning?
Scenario planning is making assumptions on what the future is going to be and how your business
environment will change overtime in light of that future.
More precisely, Scenario planning is identifying a specific set of uncertainties, different “realities”
of what might happen in the future of your business.

The most uncertain variable that could greatly impact our unit’s future in the next 5-
8 years
The variables are listed below
1. Labor
2. Dramatic changes in procurement philosophies
3. Material availability
4. Construction techniques
What are the two extreme outcomes of that variable?
1. Labor: The shortage of skill labor in construction industry is the most important factors. The
labor do the farming in some part of year & construction job in remaining part. They are semi-
skilled.
In case we are unable to produce such number of labors we have to depend on machinery for
doing the job. So we have to prepare ourselves for both the scenario.
2. Construction techniques: The urgency to complete the project on time is the first criteria of all
the companies.
But in future we have to prepare ourselves with other advanced construction methods. As the
material cost changes daily & lots of overhead charges are incurred in case of delays project.
Secondly client always prefer less construction time.

How does the current unit’s strategy need to be adjusted to perform well in both the
scenarios?
1. Labor: The unit should focus more on training & developing skilled workers & strategies to
retain them so that they add value to company in future. New training institutes should be
open to train workers.
Secondly, new schemes should be introduced to add more workers & encourage them to
take skill worker job.
2. Construction techniques: Proper R&D department should be introduced to study new
construction techniques & try to develop machinery to make them valuable in India.
Secondly, we should reduce our dependency on labor & should get more machinery
involve in our job.

AFFORDABLE HOUSING IN INDIA