A corporation must continuously examine and assess its management, production, and marketing methods. Different tactics are used in the shipping and construction industries to achieve success. It's possible that tactics utilized in the building sector won't be effective in the maritime sector. For instance, shipping sector marketing techniques would not be effective in the building industry (Pahl & Richter, 2007). These would necessitate the use of two simultaneous business strategies. These two business lines in the same corporation would each receive a different amount of attention. To know whether the shipping industry's focus has altered after diversifying into building. As the operations manager of SPT explains they had to carry out several adjustments on their strategic objectives. This section would involve SWOT analysis of the company in order to explain the position of the company in terms of strategies.
Due to the challenges that the company was facing in the shipping industry diversification was the best. However, the SPT did not quit the shipping industry meaning they have to divide their focus between construction activities and shipping industry. Shipping industry is a major business venture which is dynamic and require constant monitoring and strategic planning. Moreover, construction industry is also another multimillion business venture which requires full attention (Fellows & Liu, 2015). Dividing attention between these two business ventures would definitely mean that the level of focus that was accorded to the initial business would decline. But SPT is a well-established multimillion company that has experience in megaprojects, therefore they definitely have a plan on how to handle these multimillion projects simultaneously.
Diversification into a new production line provides in most occasions provide an effective path to rapid growth of a business entity. The main reason behind the growth is due to the ability of such company making more sales. The increase in sales results from cross-selling of products to existing and new customers (Gunhan & Arditi, 2005). SPT have an existing market which is shipping. Under shipping they transported construction materials to various customers in Myanmar. Definitely these customers are involved in construction industry and if they can get all they need under one roof they would be more than willing to contract SPT. The major challenge in diversification is weighing of the risks that may exist for a company under such moves. As the operations manager of SPT put it they weighed several probable challenges and decided on construction. This decision meant that the company must have solutions to probable challenges in the construction industry (Helms & Nixon, 2010).
SWOT Analysis of SPT Diversification
In order to understand and decide on whether SPT company choice in diversifying into construction industry (a completely different industry) diluted the focus of the firm, SWOT analysis is discussed. SWOT is an acronym that stands for Strengths Weaknesses Opportunities and Threats (Kim & Jang, 2015). The tool has been in use for analysis of business strategies since the 1970s. Strengths are features of a business or a project or business decisions that give a firm advantage over competitors. Weaknesses (Limitations) are business characteristics that enable competitors to have an advantage of the business. Opportunities are external likelihoods that have the ability to improve the performance of the business. Threats are also external factors that are beyond the control of the business that may affect the business in negative ways (Korkmaz & Messner, 2008). For SPT firm SWOT analysis of the choice of diversifying into construction can be represented as below:
Strengths
The first strength that the company has is that it has the first-hand experience in transportation of raw materials such as sand, rocks, timber, cement and human labor all over Myanmar. These are the key ingredients in the construction industry. Second, vast knowledge of construction materials and market trends. The company has knowledge on suppliers of construction materials which is an advantage in cutting cost (Lu, 2010). Third, offering the self-made market, the company is able to create a market for their shipping department since they will be the consumer of the materials. This also increases customers confidence in contracting the firm for their shipping needs. Finally, the company has knowledge in dealing with heavy machinery which is another requirement in the construction industry (Mawhinney, 2008).
Weaknesses
SPT has little presence in the construction industry of Myanmar. Second, SPT staff have little knowledge in the construction industry, thus increasing the cost of hiring external skilled staff. Next, the company is susceptible to vital personnel’s leaving or taking sick. Finally, the company experiences early stage unreliable cash flows from the construction sector (Pahl & Richter, 2007).
Opportunities
The first opportunity is that major competitors such as Ah Yone Oo construction and Naing Group are slow in adapting to the new trends in the business environment in Myanmar. Next, the local government supports construction company due to the development strategies of the country. Finally, Myanmar is a developing economy with ever increasing demand in construction (Thomas, et al., 2014).
Threats
So far only two major threats have been identified based on the study of SPT. Technological development in the construction industry in Myanmar may change the construction market beyond the ability of SPT to adapt. And changes in the strategies of existing major competitor might exterminate any market achieved by SPT.The above analysis point to the same challenge to the company in diversification. The main challenge is dealing with competitors. In SWOT analysis the organization should decide on embracing new technology at a faster pace to keep the market edge in Myanmar (Porter, 2008). Second SPT must specialize in the provision of houses/buildings of good value to local businesses and local government. However, the choice to diversify into construction industry was the best choice for SPT. However, the construction industry is a major investment which requires full attention in order to be successful. For this, a substantial focus that was given to the shipping and logistics industry must have been diluted. However, SPT is among top performing companies in Myanmar meaning it has the ability to balance between the two businesses.
References
Fellows, R.F. and Liu, A.M., 2015. Research methods for construction. John Wiley & Sons.
Gunhan, S. and Arditi, D., 2005. Factors affecting international construction. Journal of construction engineering and management, 131(3), pp.273-282.
Helms, M.M. and Nixon, J., 2010. Exploring SWOT analysis–where are we now? A review of academic research from the last decade. Journal of strategy and management, 3(3), pp.215-251.
Kim, H.R. and Jang, H.S., 2015. Strengths, Weaknesses, Opportunities, and Threats Analysis of Korea Construction Companies in the Vietnam Market. Journal of the Architectural Institute of Korea Structure & Construction, 31(5), pp.87-96.
Korkmaz, S. and Messner, J.I., 2008. Competitive positioning and continuity of construction firms in international markets. Journal of Management in Engineering, 24(4), pp.207-216.
Lu, W., 2010. Improved SWOT approach for conducting strategic planning in the construction industry. Journal of Construction Engineering and Management, 136(12), pp.1317-1328.
Mawhinney, M., 2008. International construction. John Wiley & Sons.
Pahl, N. and Richter, A., 2007. SWOT Analysis. Idea, Methodology And A Practical Approach.
Porter, M.E., 2008. Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.
Thomas, S., Chie, Q.T., Abraham, M., Jalarajan Raj, S. and Beh, L.S., 2014. A qualitative review of literature on peer review of teaching in higher education: An application of the SWOT framework. Review of educational Research, 84(1), pp.112-159.
