LUCK COMPANIES: IGNITING HUMAN POTENTIAL

CASE ANALYSIS

  

Allam, Jerico

Constantino, Jhezarie 

Marcos, Zaira

Retirado, Rosalinda

Robles, Cherry Ann

I.                 Strategic Profile and Case Analysis Purpose

Charles Luck Jr. founded the Luck Companies in Richmond, Virginia in 1923.
They are the largest family-owned construction aggregate company as well as one of the
largest aggregate producers. In 2011, Luck Stone Corporation was renamed Luck
Companies. The corporate enterprise is referred to as Luck Companies. The term Luck
Stone only refers to the business unit that operates quarries and sells aggregates. Luck
Companies is a family-owned business that discloses only limited financial information. 
Charlie Luck IV was named President and COO of Luck Companies, a family-
owned business based in Richmond, Virginia, in 1995, and succeeded his father as CEO
in 1999. Charlie graduated from Virginia Military Institute in 1983 with a degree in Civil
Engineering before embarking on a three-year career as a professional racecar driver on
the NASCAR circuit. He hung up his racing helmet at the end of 1986 and began working
full-time for Luck Companies.
When Charlie was named CEO, the company had a long history of success in the
aggregate industry in Virginia, thanks to his father's and grandfather's commercial ability
and ideals. The company had grown steadily over the years, with little or no debt and a
steady but not quick growth rate. The company's activities were all in Virginia, and, like
many small firms, the management style was "top-down/command & control," although
the company's founders felt a paternal duty toward employees. The sector has seen
minimal competition and was dominated by family-owned enterprises. Luck Companies
rose to prominence as an industry leader by emphasizing ethics and customer service. By
the late 1990s, Luck Stone had established itself as a technological innovation and was
recognized as one of the top 15 crushed-stone producers in the United States. The culture
that had been so effective would not need to alter, but in the meantime, almost everything
else was changing.
The new century brought increased industrial consolidation and fiercer rivalry.
Markets expanded dramatically, resulting in quicker growth rates, a much larger
corporation, and greater debt to support the expansion. Charlie and his leadership team
understood in the mid-1990s that Luck Companies' "top-down/command & control"
management style was not appropriate for serving the demands of consumers or workers
since command & control management concentrated decisions at the top of the
organization. After much thought, they concluded that management choices should be
made closer to the client. To better handle the increasing complexity of sales prospects,
the organizational structure was dispersed and employee functions and responsibilities
were modified.
Under Charlie's guidance, the firm grew, but he recognized that he was in a
mature market and hence needed to diversify. Recognizing the growing individuality of
each business unit, the company's leadership decided to divide the company into four
companies with distinct brand identities. Throughout the strategic planning process, there
was an expectation that each would individually suit the demands of the marketplace,
which resulted in specific strategies, brands, and business plans for each.
Luck Companies has four unique strategic business units (SBUs), each with a
distinct character and administered under various brand identities.

Luck Stone 
Luck Stone, the largest business unit of Luck Companies, operates fifteen crushed
stone plants, one sand, and gravel plant, one specialty products operation, and four
distribution yards in the mid-Atlantic region. Success in the aggregate industry is directly
correlated with the growth and economic stability of the construction industry (both
private and public segments), and the ability to acquire desirable locations is a vital
competitive advantage. In 2014 the production of aggregates in the US totaled 2.17
billion metric tons and had a value of 20.3 billion dollars. In 2014 Luck Stone sold 12.9
million tons of aggregate in Virginia and had a 40% market share in this region. In 2014
Luck stone was the 15th largest producer of construction aggregate in the United States.
Even with the significant decrease in aggregate sales, Luck Stone remains the most
profitable business unit of Luck Companies. It uses a differentiation strategy based on
superior customer service and logistical excellence in an industry that sees more cost
leadership strategies amongst major competitors. Luck Stone has long been known as an
industry leader in technology and innovation, using in-house engineering resources to
build automated production systems and other value-added processes.

Luck Stone Center 

In 1976, Luck Stone opened its first retail showroom for architectural stone. By the
end of the 1990s, there were six Architectural Stone Centers. Charles Luck Stone Center's
rebranding shifted the brand from a contractor stone yard to an up-scale, design-oriented
architectural stone center.
 Luck Stone Center also employs a differentiation approach, obtaining stones from
throughout the world and launching new product lines through product innovations. In the
face of rising competition from rival contractor stone yards and big-box stores, the firm
continues to seek new ways to differentiate it and maintain profitability. As the economy
improves, the firm has relaunched, focused on middle- to higher-end consumers, and
expanded its product line to include manufactured goods.

Luck Development Partners 

Luck Development Partners was founded in 1993 to realize the development potential
of the real estate held by Luck Companies. Luck Development Partners creates unique
places by integrating and highlighting natural, historical, and environmental elements.
The long-range sustainable use of the land comes in the form of innovative real estate
practices.
This division was established to maximize the landholdings of Luck Companies in terms
of development and revenue. Property locations and closeness to population centers are
critical in the real estate development sector. Luck Development Partners works in the
same mid-Atlantic region as the Luck Stone division because of their affiliation.

HAR-TRU 
Har-Tru was originally branded Lee Tennis Court Products and was founded in the
1950s by engineer Robert Lee. The Luck Firms joined the tennis court surfacing and
accessories sector by acquiring the industry's two largest domestic companies, the HAR-
TRU brand name, and the manufacturing assets of the original surface material provider
connected with some of the world's most beautiful tennis courts. With an estimated 85-90
percent market share for clay tennis courts in the United States, the division's main
competitors are manufacturers of non-traditional clay alternatives. HAR-TRU is Luck
Companies' smallest segment, accounting for only 6% of total business net revenues.
Century Sports was bought and incorporated into HAR-TRU in 2013, expanding its
tennis court equipment choices and allowing the firm to promote "turn-key" tennis court
installations.

This case analysis examines a family-owned corporation through the eyes of its
most recent CEO, Charles Luck, IV, and provides an overview of the strategic
 management processes instituted under his direction, with a focus on the formulation and
implementation of value-based leadership initiatives he used to ignite the potential of his
workforce and impact the lives of Luck Companies' various stakeholder groups.

II.             Situation Analysis

 General Environmental Analysis

The primary factors that affect the general environment of luck companies are; 
 
1.  Political/legal factor- federal and state regulations for safety standards, federal and
state laws regulate noise levels, U.S. Mine Safety and Health Administration
(MSHA), U.S. Occupational Safety and Health Administration (OSHA).
 
2.  Economic - Luck Companies intends to grow its footprint in South Carolina by
purchasing undeveloped land and then constructing and operating a facility.

 
3.  Physical environment trends- Energy Conservation and Air Quality Tracking
Greenhouse Gasses Recycling and Reuse Helping Others by Recycling Responsible
Buildings and Environmental Products Water Quantity and Quality (Virginia
Environmental Excellence Program (VEEP) Environmental Management Systems
(EMS))

 
4.  Technological trends – Luck Stone has long been known as an industry leader in
technology and innovation, using in-house engineering resources to build automated
production systems and other value-added processes. It is the first automated lime
plant invention in 1977 of the aggregate industry in Augusta County, Virginia. It
was designed to eliminate machinery, increase safety, and promote sustainability.

5.  Socio-cultural environment/ demographic- workforce diversity, newly

industrialized countries, population growth, income distribution.
 Industry Analysis

Porter’s Five Forces

 
·       Power of Supplier
- Luck Stone supplies a wide range of crushed stone, sand, gravel, and
specialty stone called aggregate. In 2006 Luck Stone sold 27 million tons of
aggregate yielding a market share of roughly 30% in Virginia. In 2014, Luck Stone’s
largest competitors and the largest producers of construction aggregate in the United
States which are Vulcan Materials and Martin Marietta both operated which made
the sales of Luck Stone decreased.
- Supplier power is extremely high and the industry profitability is low as its
largest competitors begin to operate. Consequently, the high dependence on a
particular supplier due to high degree of product differentiation, leading to a lack of
available substitutes gives suppliers in this industry a high degree of power. 
 
·         Power of Buyer
- The power of buyers is low and the industry profitability is high. The
aggregate industry is directly correlated to the growth and economic stability of the
construction industry, consisting of both private and public construction.

·         Risk of Entry
- Threat of entrants is low, barriers to entry are very high and the industry
profitability is high. These kinds of businesses or companies in the industry are
operating on economies of scale and raw materials used are natural resources which
anyone cannot easily acquire which make it cannot be easily replicated.
 
·         Substitute of Product

          - Threat of substitute products is low and the industry profitability is high.
Lack of available substitutes since products are made from natural resources and
 customer’s high dependence on a particular supplier due to high degree of product
differentiation leads to lack of available substitutes of the product. 

 
·         Rivalry
- Intensity of rivalry among existing firms is high and the industry
profitability is low. In 2014, Luck Stone’s largest competitors and the largest
producers of construction aggregate in the United States are Vulcan Materials and
Martin Marietta both operated with an overall cost leadership business strategy,
while Luck Stone utilizes a business strategy based on superior customer service and
logistical excellence. In the same year, Vulcan Materials produced 11.8 million tons
of aggregate in Virginia while Martin Marietta Materials produced 3.2 million tons
and Luck Stone sold 12.9 million tons of aggregate and had a 40% market share in
the region and was the 15th largest producer of construction aggregate in the United
States.

 Competitor Analysis

 
·         Vulcan Materials and Martin Marietta and their other competitors will try to beat
Luck companies in the future, will try to outperform and take their crown as the
leading in the industry. However, Luck Company has a competitive advantage that
can make them the leading in the industry and these are; Value- Based Leadership
strategy that has raised their awareness about the importance of finding sustainable
solutions while positively impacting the lives of others and Luck Companies uses a
dominant-business diversification plan as a diversification technique. Luck Stone,
Luck Stone Center, Luck Development Partners, and Har-Tru are the four strategic
business units of Luck Companies. The dominant-business diversification method is
used by Luck Companies because Luck Stone generates over 80% of total net sales
and profit, and this sort of strategy is used when 70-95 percent of revenue comes
from a single firm. (Hitt, Ireland, Hoskisson p.177) In addition to that, Luck
Companies has diversified itself into other markets and have made several
acquisitions of other businesses.
 Internal Analysis

Capabilities

1. Distribution- Luck Company is noted for its excellent customer service.

Luck Company is the market's largest rail-served distribution yard, demonstrating
speedy and efficient product delivery through effective logistics management
practices.

2. Human Resources- The Luck Firm has been widely known since its start
for its "we care" approach, which promotes honesty inside the company and treating
all stakeholders properly, fair, and square. The company has also been successful in
establishing a program that has become a model in the aggregate industry and will act
as a training ground for employees. Before forming a strategic plan with the
management team, Charles Luck IV sent the company's officers to Executive
Business Programs that may improve their capacity and capability. Under the
administration of Charles Luck IV, there were an estimated 400 hired associates in
1995, but this number has risen to 1,200 in 2003 due to an increase in annual crushed
stone production.

Despite economic downturns and recessions such as the one that occurred in
2002 and the 1973 oil crisis, Luck Company was able to maintain a healthy sales and
production figure, and more crucially, no employees were laid off or retrenched as a
result of those crises. However, during the 2008 US recession, the company was
unable to support the big workforce and had to reduce the workforce to 125 people.
Luck Company, on the other hand, did not pick who to keep based on seniority, but
rather on their core principles, which they examined and reaffirmed. In addition, the
departing employee received a hefty separation package.

As part of its human resource empowerment, the officers of the Luck

Company established "Tool Training" in 2003 to learn about and determine the
diverse perspectives of employees. Charlie believed that in order to achieve the
organization's desired outcomes and performances, leadership should be instilled in
all associates and employees by integrating the Value-Based System, which will
ignite the potential of all associates and employees to become not only better
employees but better individuals holistically. Leadership, devotion, integrity, and
innovation are the focus of this value-based approach.

3. Management Information System- Luck Company took on the obligation

of restoring the environment (replanting) after removing the stones and gravel in a
certain land area due to the nature of its business. Reduce the usage of paper to
circulate data or information within and beyond the firm as part of its accountability
and environmental objectives. As a result, the corporation integrated Nektar as part of
its MIS, a paperless cloud-based data collection or storehouse of information
originating from various company segments. Rather than utilizing pen and paper, this
approach accesses information through electronic devices such as mobile phones and
tablets, reducing the danger of data loss and theft. 

4. Marketing- The Luck Company is divided into four divisions. Luck Stones,
which became known in the aggregate industry for its business strategy centered on
exceptional customer service and logistical excellence, accounts for 80% of its overall
profit. The Luck Stone Center changed its brand identity from a contractor stone yard
to an upscale, design-oriented architectural shop center as part of its marketing plan.
This new brand catered to design-conscious, wealthy homebuyers.

5. Manufacturing-The Luck Company has devised a novel method of

averting operational crises. During the 1973 oil crisis and recession, energy prices
surged, hyperinflation occurred, and the building industry experienced a huge
slowdown. Since sales had dropped, management used the time to reduce operating
costs, save energy, and enhance the operation.

6. Research and Development- Under the leadership of Charles Luck III, the
Luck Company became the aggregate industry's technical pioneer and was recognized
nationally as one of the Top 15 crushed-stone manufacturers in the United States, with
the invention of the aggregate industry's first entirely automated lime plant in Augusta
County, Virginia, in 1977. The first automated lime factory was built to run
unattended and shut down automatically when sensors identify operational
malfunctions and faults.The Luck Company has formed an engineering team to focus
on research and development and to allow the department to investigate potential for
innovation in order to run more efficiently and effectively. Luck Company's technical
team devised and implemented a segmentation and automation system that allows for
a continuous operation 24 hours a day, ten years after the initial operation utilizing an
automated lime factory. In addition, the Luck Company was the first to introduce
automated ticketing at sales offices in 1972, based on research. The Sunnyside Granite
Company, based in Richmond, became the first crushed stone plant in Virginia to
switch from steam to electric power in 1932.

Value Chain Analysis

The most essential value chain activities for Luck enterprises are its
operations, which have become the most successful in the aggregate industry, and the
fact that they are the top seed in technology. Their distribution practice has expanded
to include the delivery of products to clients. The availability of 9,900 owned logistics
let the Luck Company deliver the products on time, with no or no delays, thanks to
their great customer service. The company's human resources provide critical support
in these value chain operations, which are guided by the "value-based leadership
system," which aligns employee potential with targeted performance and financial
goals.

  Competencies

1. Valuable Competencies- By supplying quality products and exceptional logistics,

the Luck Company added significant value to the company and its clients. The
Luck Company's value-creating activities will assist it in achieving sustainability,
mitigating threats from competitors, and capitalizing on market possibilities.

2. Rare Capabilities- The Luck Company has developed a unique human resource
management system. Its "value-based leadership structure," which promotes
Commitment, Integrity, Creativity, and Leadership, is critical for the organization
to bring out the best in its employees. In this regard, the Luck Company has
become a model for the entire industry.

3. Costly-to-Imitate Capabilities- In terms of research and development, the Luck

Company has risen to the top (technology). The automated lime plant is one of its
technological inventions, which allowed the corporation to attain economies of
 scale. Other companies may try to copy Luck Company, but at a significant
expense. Luck Company has also established a difficult-to-replicate training
environment for its staff. Years of core value training have resulted in strong HR
capabilities across the organization.

4.  Non-Substitutable Capabilities- Luck Customer’s customer service and follow

up care is non-substitutable and unbeatable.

III.             SWOT ANALYSIS

·         Strength
·         We care about our people culture
·         Value- based leadership
·         Integrity
·         Commitment
·         Creativity
·         Leadership
·         Associate engagement
·         Weakness
·         Diversification
   (One of the reasons why they laid off 1200 employees in 2008)
   Cohesive leadership 
 Top-down management
 Only focuses on natural resources
·         Opportunities
·         Vision 2020
·         Threat
·         None
   Luck Companies is the industry leader in logistics and excellent customer
service. They used an acquisition strategy to firms that can be their competitor.
Just like when Luck Companies entered the tennis court surfacing and accessories
business, they acquired the industry’s two largest domestic companies which are
Century Sports and Lee Tennis Court and changed the name to Har-Tru. Har-Tru
 became the global leader in tennis court surfacing and their current focus is brand
image building.

IV. STRATEGY FORMULATION

1. Strategic Alternatives
Below are the identified strategic alternatives that Luck Companies has
implemented throughout its operation.

•Concentration
The growth of Luck Companies is anchored on horizontal integration. This
refers to a competitive strategy of businesses wherein a company buys or merges
with an initially separate entity that operates in a similar industry. Consequently,
this strategy may produce economies of scale and improve the market power over
the company's suppliers and distributors. In addition, horizontal incorporation
aids in the company's growth, specifically improving its size, boosting its
revenue, extending its market, enhancing its product diversification, and
minimizing competition. 

•Diversification and Stability

Diversification helps in the company's stability. Specifically, it aids in
minimizing the impact of the seasonal and fluctuating nature of the market and
the economic condition. In the case of Luck Companies, diversification is
required considering that the construction industry does not have a stable and
consistent state. Luck Companies focuses on implementing a horizontal
diversification strategy. This means that the said enterprise increases and
diversifies its product offerings by adding products within the same market. In the
case of Luck Companies, they have diversified into stone centers, tennis courts,
and land development. 
 As mentioned earlier, the prime importance of diversification is to improve the
stability of a firm. For instance, once something happens in the tennis court
industry, Luck Companies may still ensure non-zero revenue as they are not only
focused on the product mentioned above. Additionally, a diversification strategy
may also serve as a company's defense to protect itself from its competitors. 

•Turnaround
Turnaround pertains to the amount of time that must be taken for a particular
event to happen. This may be after the delivery of products or instruction in a
business setting.
Apart from this, we can also notice it when Luck Companies allows their
former customer, Home Depot, to be still provided by requested products for 120
days as their allowance while finding a new supplier. This was after Home Depot
chose to break off their transactions from the former Architectural Stone Division
(now called Luck Stone Center).
On the other hand, it was also apparent that turnaround is observed every time
the company transitions from an old policy or organizational structure to a new
one.

2. Alternative Evaluation
Below is the assessment of the abovementioned strategic alternatives of Luck
Companies.

•Concentration
Although Luck Companies concentrate on horizontal integration, which
provides them with substantial benefits, it is worth noting that the strategy, as
mentioned earlier, has drawbacks as well. One of these is the implementation of
regulatory scrutiny, wherein a stricter and more closely monitored regulation is
required to ensure that the company's expectations and goals will be maintained
 and ensure that the company is not violating any antitrust laws. Moreover, there
might be lesser internal flexibility and the possibility of value destruction.

•Diversification and Stability

Despite the seeming advantages mentioned earlier, horizontal diversification
also has its weaknesses. One of its downsides is the firm's dependence on the
same target market or one group of customers. Consequently, this implies that the
company must then ensure brand loyalty linked with the available products.

•Turnaround

Turnaround time is more favorable if minimized. Hence, it is recommended

that Luck Companies find or formulate appropriate techniques to reduce it to
ensure a more efficient yet still effective implementation of policies and chain
processes.

3. Alternative Choice
In the case of Luck Companies, it is easily observed that the best and most
appropriate strategic alternatives that they must continue to carry out include
horizontal integration and horizontal diversification. Based on their case and
provided history of financial performance, their acquisition and diversification of
products have been helping their companies maintain a good level of revenue and
improve it as their firm continues to operate over time.
V. STRATEGIC ALTERNATIVE IMPLEMENTATION

Horizontal integration and horizontal diversification increases the information

processing, coordination, and control complexities of the firm, as it enters new
lines of business. Effective management therefore requires an organizational
structure that supports the implementation of distinct SBU strategies and enables
corporate leaders to oversee various divisions.

The most suitable structure for Luck Companies is the SBU Form of the
multidivisional structure because it is appropriate when few linkages exist
between one business unit and another, using a moderate level of integration
mechanisms, a mixture of strategic and financial controls, and compensation
linkages to both corporate and divisional performance goals.

To overcome some of the potential difficulties associated with an acquisition

and diversification strategy and to increase its likelihood of success, Luck
Companies should seek complementary assets, markets, and products in its
acquisition targets, seek to merge with firms that have low to moderate debt
positions, sustain its internal emphasis on innovation and research development,
and remain adaptable as changes in the company progress. Luck Companies is a
high performance organization and its leadership team, structure, and strategies
are solidly in place to drive the firm into much greater success.