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KCI Case study
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Prepared by:
Victoria Gnatoka
RBS, Riga, March 26, 2013
Porter’s 5 force analysis
External analysis
Internal analysis
SWOT
History of KCI
Problem definition and alternatives
Strategy selection and
implementation
$131 million revenues in 2009
900 employees
Operates out of 12 states
Provides consulting, engineering and environmental construction management services
Founded in 1955 in Baltimore County, MarylandIn 1977 and in 1987 the company was purchasedIn 1988 iniciated employee buyout and became a majority employee-owned companyIn 1998 became 100% employee-owned
Political and Legal Forces
• Tenders are highly regulated and government projects are very price-sensitive.
Economical Forces
• Engineering skills are already in short supply in many regions creating pressure on labour costs. •The economic downturns affect the industry very much.
Global Forces
• Rapidly increasing numbers of engineers from Asia and India in the global workforce, who work at lower cost.
Social Forces
• Demand for engineering services is growing rapidly and the human capital with the correct skills is in short supply. • Flexible high school education system.• Young engineers can not compete on a global level.
Technological Forces
• Infrastructure is aging, and needs renovation.• Technology development.
Capital productivity through deferred federal and state tax payments;Employee productivity through increased motivation as a part of the ESOP;Experience accumulated over 50 years;Broad range of management capabilities and expertise in each discipline;Full-service management – provides clients with a single resource for all their engineering and surveying needs related to building and infrastructure projects.
Chosen by customers not on low bid but on qualifications;Provides customer oriented compliance services because of: Vast knowledge of federal and state laws and environmental
regulations; Perfect and various technical skills; Analytical abilities;
A high qualified team of GIS experts, database analysts, enterprise system architects, programmers, technicians;Supported by state-of-art hardware and software
Project managers serve as an extension to the owners staff;Can offer customers better design and budget by: Identifying potential problems ahead; Providing effective solutions; Considering technical and budgetary alternatives; Anticipating and avoiding future disputes; Improving maintainability, operability and reliability
Innovative constructing process and methods for: Design-bid-build delivery system Public-private partnership
Cost effective strategies grounded in sound science;Top-high qualified team of environmental scientists and engineers in-house: Ensures scientific approach to subsurface, geophysical investigations,
soil/water permitting, environmental compliance; Specializes in environmental and land use planning, terrestrial and
aquatic assessment, wetland creation and mitigation design, stream restoration, permitting, fish passage design, environmental construction management
Differentiation and narrow specialization for each project
Helping to lower costs for customers through efficient processes and scientifically based technologies
Word of mouth and references from previous projects
Effective capital productivity and employee commitment to the company
Effective use of newest scientific achievements in compliance with superior quality to meet best customer needs and expectations
Unique capabilities in each discipline company is operating in
Strengths WeaknessesCompany’s 50 years experience and reputation Commitment to innovationStrong position in public sectorIntellectual capital: employees knowledge and expertiseQuality-focused , customer-oriented company
Low ROCE (5-6%)80% of revenues comes from public sectorBusiness processes are not standardizedVery technical marketing
Opportunities ThreatsCreate partnerships and expand in US and abroadAging infrastructure could create demand for KCI servicesMove to private sectorsCapture new talents from emerging economies
High competition within the industryReduced governmental and private sector spendingPrice sensitive customersCompetitors creates partnerships and alliances
Regions are very protective of their resources and don’t think for the good of the company
Employees do not quite understand the need in coming reorganization
Economic uncertainty
How to keep business sustainable in changing
environment
Change the company structure from geographical todiscipline based
Pros HQ is already functioning discipline based Accounting is discipline based Shared resources for the whole company
Cons Services provided are very local Might loose the local presence
Seek for new markets outside US
Pros Growth potential with current partners Can use current services virtually
Cons Different legislation in different countries Also other markets are mature
Grow by acquiring competitors
Pros Natural growth of market share Getting experienced employees
Cons Different company cultures Load to financial resources
Current market share of KCI is ~0.2% - no risk to become dominatingCan reduce company’s overheadsServices require local presence Easy way to get additional experienced resources
Mixed approach, but mostly growing by acquiring competitors
“Just announced that our stock price increased by 14% in 2012”
“Industry is recovering: 427 out of 500 firms reported domestic profits with 256 firms reporting increasing backlog”
“We had our best year in the last ten with revenues hitting $146 million and record profits”
“Our biggest changes were the acquisitions of two firms, one in Texas and one in South Carolina”