Opportunities For International Expansion: Strategic Management Report

Section 1: Strategic Audit

Strategic management is the process by which any company organise plan and formulate policies to achieve the objectives of the organisation. Management of organisations over the years use a number of theories and models which has been developed by scholars to incorporate them in the decision making process of the company (Bah and Fang 2015). Setting objectives for the business is also a part of the strategic management and achieving these objectives connotes the success or failure of the company organisation (Senge 2014). Based on these set of objectives a business organisation take decisions and with help of management concepts and models. In this assignment strategic audit will be conducted upon Cheval group of companies. The assignment will focus on providing strategic recommendations based on the analysis in order to understand the opportunities it has towards the global expansion. The area of expansion that the company will try to expand is Belgium. Following are some of the reason why this country is chosen for international expansion: first of all the strategic geographic position, there are facilities of high quality in terms of the availability of logistics and telecommunications infrastructure, there is a very highly skilled labour force (Santandertrade.com 2018). On the other hand the company has some of its distribution of services in the country.

External Analysis 

Analysing the external business environment of the company will provide an insight of the opportunities the company have in terms of aspects such as government support, economic condition, requirement of the society etc (Bah and Fang 2015). The PEST analysis will help in understanding these opportunities that the company have in terms of expanding the business in Belgium (Gupta 2013). The external environment of any organisation has to be analysed and monitored as the dynamics of these elements are not under the control of the management. The analysis will help in understanding the opportunities as well as the threats (Ho 2014). 

Political: Belgium has a constitutional monarch, the King is the head of the state and the prime Minister leads the government. The government of Belgium encourages trade and commerce in the country as well as have good trade relations with the UK government allowing investors opportunity in the country (Santandertrade.com 2018).  There is a bilateral relation in between the country in terms of import and export of goods and services. Due to Brexit there has been uncertainty in the trade relations but, the scope of business expansion still remains. Not only that the government of the country has set up infrastructure for more investment in the country. The introduction of the notional interest by the Government is an initiative to encourage trade (State.gov 2018). With the help of this measure companies subject to Belgian corporate tax in the case of long-term debt financing, will have the provision to subtract their taxable income an amount equal to the interest they would have paid on their capital (Santandertrade.com 2018). The current center-right government of Belgium ensures one key economic policies, which is to make the country more attractive for foreign investment (State.gov 2018).

Section 1.1: External Analysis

Economy: Belgium is one of the developed economies in the international platform, and the country has seen a growth trend in development after facing adverse impact of the global depression.  It country enjoys an open economy which is characterised by high foreign investment (Santandertrade.com 2018).

Figure: FDI of past three years

Source: (Santandertrade.com 2018)

The GDP of Belgium is recorded to be 209.21 USD Billion in 2017. World Bank has listed Belgium 52^nd out of 190 countries of prospective business areas (State.gov 2018).  

Social: The society of any country depends a lot on the nature of the economy as the economy of Belgium is developed the people have a high purchasing power, thus ensuring a high standard of living. The country has a very deep rooted heritage in terms of popular Renaissance architecture (State.gov 2018).  Not only that the there are a mixture of several languages that are spoken in the country like French, German and Dutch. The properties in the country have distinct architecture that is closely associated with the heritage of the country (State.gov 2018).

Technology: The people of the country have an inclination towards using latest technology as the government also provides the infrastructure for the people. There is increased usage of telecommunication and social media has provided several opportunities for investors (Kew and Stredwick 2017).

With the help of this model the company can understand the competition in the market and take decisions accordingly to gain an edge over the other players in the market. Michel porter introduced this concept in 1979 (Porter 2011). The industry in which Cheval group of companies operate is real estate and thus the analysis is going to revolve around the same.

Threat of new entry: Real estate is an industry that comes with comparatively large liabilities, the investment is also large, until the new entrants are backed with a large capital investment it is difficult to enter the Industry, another major aspect of the industry is building and working with contacts thus for a newcomer it would be difficult to operate. Thus it can be inferred that the threat of new entrants is low for the Cheval group as the company has been operating for a number of years and has created a reputation among the shareholders (Porter 2011).

Intensity of competitors: The real estate industry has intense competition some of the direct competitors are Mainstay Group, Savills UK, Blue Property Management etc. On the other hand there are also significant direct competitors in Belgium, therefore it can be concluded that the intensity is high.

Bargaining power of the suppliers: The switching powers of the suppliers are low as there is intensity of competition in the market. The suppliers can easily choose one company over another if they are not bound by any contract.  The bargaining power of the suppliers is medium (Porter 2011).

Bargaining power of the customers: The customers are usually regarded as the most important stakeholders of the business as they are the reason why the company is formed in the first place. Due to the high intensity of competition the bargaining power of the customers rises, in case they do not like what Cheval group has to offer they can easily switch to another company. Therefore the company has to always be in constant evolution of the policies to make it more attractive for the customers  (Dobbs 2014).

PEST Analysis

Threat of substitution: The substitutes to such an organisation are individual brokers or clients independently looking for properties.  The threat is low to medium in this case as there is also a trust factor that is important while operating in the real estate industry (Fiore et al. 2015).

McKinsey 7S Framework 

This model will help in analysing the way in which Cheval Group of companies achieve the objectives of the business. Developed in 1980, this framework will help in understanding the ways in which the performance of the company can be improved (Ravanfar 2015). There are seven elements discussed in the framework which are divided in two categories hard and soft. Following is the analysis of Cheval group’s internal resource and capabilities.

Strategy: To maintain an edge over the other players in the market the company has specialized in areas by limiting the operations to selected areas. This has given the company opportunity to explore the portfolio in terms of services (Chevalgroup.com 2018). Operating in a limited areas provide the company to offer focused high quality services to the clients. On the other hand this has also limited the operations to a large extent (Chevalgroup.com 2018).

Structure:  The company is led by the managing director Mohammed S Almarzooqi who is the managing director and the structure of the company is hierarchal when it comes to operations however there are individual leaders who leads there teams (Chevalgroup.com 2018). Director Mike Sadler leads the team of Property & Facilities Management, Asset management, Maintenance team. Finance director Louise Uys-Jones, leads the finance team under her visionary leadership, while Development manager Bill Reddrop heads the development team. This structure is effective as there is a clear point of contact for the people and this ensures effective communication (Chevalgroup.com 2018).

System: Each of the team mentioned above have their job roles and operations resulting on achieving the day to day operations of the business (Ravanfar 2015).

Shared values: the core value of the company is to provide the customers with a high quality service in terms of managing the property and reach out the right kind of place that the clients require. The company also believes in educating the customers regarding the trends and the requirements in the real estate market as well as providing them with information they are looking for (Singh 2013).

Style: The leadership style that will be adopted by the by the leaders of the company is transformational in nature as the company has evolved and has changed over the years to cater to the dynamic needs and requirements of the customers (Chevalgroup.com 2018).

Staff: The human resources of the company are not only skilled in their domain but are also experienced in their field and have knowledge about the job role and responsibilities that they have to perform. The company has posted experienced leaders in management posts to lead the company towards achieving success (Gyepi-Garbrah and Binfor 2013).

Skill: As the company operates in the service industry some of the most important skill among the people are efficient and effective communication, academic accreditation as well as understanding of the industry (Cross 2015).   

Porter’s Five Forces

To remain attractive in the industry every business organisation must device competitive strategies in order to gain edge over the other players (Rothaermel 2015). With the help of porter’s generic framework, the strategy that the company has undertaken can be analysed.

Figure: Porter’s generic strategy framework

Source: (Porter 1989)

The above image depicts the framework of competitive advantage that is suggested by Michel Porter. There are three strategies in which a company can incorporate policies to ensure competitive advantage. Low cost or leadership in cost, differentiation and lastly focus. The strategy that Cheval Group has undertaken in order to maintain the competitive advantage is Focus Differentiation (Banker et al. 2014). This is because the company has a niche market in terms of its distribution of services, the company focuses on a few particular areas of operation this allows the company to provide all the customers a customized service.

The portfolio of the company ranges from offices, retail and leisure, industrial and residential properties. The focus strategy of the company helps in building loyal clients and a reputation among the niche market regarding the high quality of services provided by the company. In the focus strategy the idea that the company incorporates is to put in an extra effort, in this case the company focuses on providing the customers with customized service depending upon the requirement of the customer, the company understands that in case of real estate the requirement of the clients cannot be categorised in common grounds as requirement changes with every customer (Banker et al. 2014)  

The residential segment of the group caters to more niche target market as they focus on luxury residential properties. This makes the company popular among the market in the areas of operation.

It can be concluded that the company considers the customers to be the most important stakeholder and in order to cater to all the requirement of the customers the company undertakes the strategy of focus differentiation (Tansey et al. 2014).

Figure: Ansoff Matrix

Source: (Hussain et al. 2013)

It has been observed from the above analysis that the company has a niche market in UK especially London area; however there are option of service from Belgium, France and Italy (Hussain et al. 2013). Considering the resource and capabilities that the company have they have opportunity to expand in Belgium, therefore the strategy that the company can employee is Market development in order to expand the business not in the geographical boundaries but in an international market.

Market development is important for the company in order to push the growth of the company; the company can use the same strategy of competitive advantage in the Belgium as well (Hussain et al. 2013).

Some of the recommendations to the company are as follows:

• Improve communication with the customers, as a service company, communication is the key to creating valuable customers. The company must focus on developing a customer service team as well
• The website of the company is the first look that any client perceives of the company. Therefore the company has to work upon the website and develop content and provide information regarding the wide range of portfolios that they cater to.
• In order to explore the international market the company should choose a market like Belgium where there is trade liberty for the investors. Belgium is chosen over any other country as the country already has some distribution in the country.
• The company must focus upon the values and principles while expansion to keep up the reputation and goodwill

Conclusion 

It can be concluded from the above discussion that the Cheval Group of company have resource and capabilities in terms of grabbing the opportunity to expand in the international market. The company caters to a niche market in UK and the similar approach can also be undertaken in the proposed country. The company has the opportunity to expand in Belgium owing to the political, economy, social and technical condition of the market. The company will finds its target market in the country as well.

References

Bah, E.H. and Fang, L., 2015. Impact of the business environment on output and productivity in Africa. Journal of Development Economics, 114, pp.159-171.

Chevalgroup.com., 2018. Cheval Property Management. [online] Chevalgroup.com. Available at: https://www.chevalgroup.com/index.php [Accessed 21 Jul. 2018].

Cross, J.C., Belich, T.J. and Rudelius, W., 2015. How marketing managers use market segmentation: An exploratory study. In Proceedings of the 1990 Academy of Marketing Science (AMS) Annual Conference (pp. 531-536). Springer, Cham.

1. Banker, R., Mashruwala, R. and Tripathy, A., 2014. Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision, 52(5), pp.872-896.
2. Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.

Fiore, A.M., Niehm, L.S., Hurst, J.L., Son, J. and Sadachar, A., 2013. Entrepreneurial marketing: Scale validation with small, independently-owned businesses. Journal of Marketing Development and Competitiveness, 7(4), p.63.

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Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), pp.6478-6492.

Hussain, S., Khattak, J., Rizwan, A. and Latif, M.A., 2013. ANSOFF matrix, environment, and growth-an interactive triangle. Management and Administrative Sciences Review, 2(2), pp.196-206.

Kew, J. and Stredwick, J., 2017. Business environment: managing in a strategic context. Kogan Page Publishers.

Porter, M.E., 1989. How competitive forces shape strategy. In Readings in strategic management (pp. 133-143). Palgrave, London.

Porter, M.E., 2011. Competitive advantage of nations: creating and sustaining superior performance (Vol. 2). Simon and Schuster.

Ravanfar, M. M., 2015. Analyzing Organizational Structure based on 7s model of McKinsey. Global Journal of Management And Business Research.

Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

Santandertrade.com., 2018. BELGIUM: FOREIGN INVESTMENT. [online] Santandertrade.com. Available at: https://en.portal.santandertrade.com/establish-overseas/belgium/foreign-investment [Accessed 21 Jul. 2018].

Senge, P.M., 2014. The fifth discipline fieldbook: Strategies and tools for building a learning organization. Crown Business.

State.gov., 2018. Belgium. [online] U.S. Department of State. Available at: https://www.state.gov/e/eb/rls/othr/ics/2017/eur/269880.htm [Accessed 21 Jul. 2018].

Tansey, P., Spillane, J.P. and Meng, X., 2014. Linking response strategies adopted by construction firms during the 2007 economic recession to Porter’s generic strategies. Construction management and economics, 32(7-8), pp.705-724.

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