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Objectives: At the end of the lesson, the students should be able to

Discuss strategic policies of construction companies.

Differentiate strategic and operational management strategies.

Aim: Strategic & Operational Management

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LO3: P5 & M3

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Corporate Governance

Definition of Corporate Governance: Corporate Governance involves the methods by which companies are governed to the achievement of their set goals

Power and Decision-Making: Corporate governance delineates who holds authority and accountability in a company and who is responsible for making decisions

Balancing Stakeholder Interests: It ensures businesses maintain processes and controls to balance the interests of various stakeholders, including shareholders, employees, suppliers, customers, and the community

Setting and Pursuing Objectives: Involves methods through which a company's goals are established and pursued, considering social, regulatory, and market contexts

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Corporate Governance

Role of Boards of Directors: In charge of company governance, including setting strategic goals, leading their execution, overseeing business management, and reporting to shareholders
Board Responsibilities: Encompass establishing strategic aims, providing leadership, supervising management, and reports to shareholders on their stewardship
Shareholders’ Role: Appoint directors and auditors and ensure a proper governance structure is in place
Governance vs. Management: Corporate governance focuses on board activities and company values, distinct from the daily operational management by managers

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The UK Corporate Governance Code

The UK Corporate Governance Code 2018 is primarily designed for the governance of listed companies and may not address the unique accountability structures of other types of organisations.

Focus on Relationships: Emphasises the importance of the relationships between companies, their shareholders, and other stakeholders

Corporate Culture and Alignment: Highlights the need for a corporate culture that aligns with the company's purpose, business strategy, and values diversity and integrity.

This can enhance trust levels, aiding investors in better understanding company governance, especially when explanations are provided.

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Strategic Policies

Definition: Strategy policies are organisational rules designed for informed decision-making to develop plans that achieve goals and objectives
Direction and Business Conduct: They establish the overarching direction of a company and guide business operations, functioning like a compass pointing towards the mission
Alignment with Vision: These policies ensure alignment with the organization's vision
Market Focus: They specify target markets for involvement and those to avoid
Mission-Driven Approach: Strategic policies should be based on the mission, not merely as responses to unexpected events or external pressures for change

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Strategic Policies

Focus on Eco-Friendly Opportunities: In business, these policies emphasise focusing on eco-friendly opportunities and value propositions that primarily benefit customers

Customer Loyalty and Value Creation: This approach leads to customer loyalty and generates lasting value for employees, shareholders, suppliers, trading partners, and other stakeholders

Strategic policies shape the organisation’s culture.

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Strategic Policies for Products/Services

Key Considerations: Defining the business scope and industry

Customer Identification: Understanding who the customers are

Customer Needs: Determining customer preferences regarding price, quality, availability, and service

Competition Analysis: Assessing current and potential competitors, their nature, and strengths

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Strategic Policy in Finance

Capital Constraints: Recognising that a company's expansion is limited by its capital, which can be owner-provided or borrowed
Key Questions for Strategy
Decisions on sourcing equity capital, either from the public or other external sources
Strategies for profit retention or distribution
Approaches to dividend distribution
Considerations for mortgaging or pledging company assets for loans
Selection of lenders and the terms of borrowing
Analysis of cash flow generated by the business
Sellafield Ltd Company Policy Template

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Strategic Policy in Marketing

Customer Analysis: Identifying who and where the customers are, their purchasing reasons and behaviours

Competitive Edge: Evaluating what sets the company apart from competitors, like innovation, service, or quality

Purchasing Dynamics: Understanding customer purchasing methods and strategies for customer acquisition

Pricing Strategies: Determining the most effective pricing policies

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Strategic Policies in Production

Make or Buy Decisions: Choosing between manufacturing products in-house or purchasing them, considering timing, labour, and capital
Production Stability: Strategies for managing fluctuating demand and optimising labour force utilisation

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Self-assessment Task

Research any construction company and briefly discuss any THREE of their strategic policies (See examples below). This should include any two of these corporate ethics: corporate social responsibility, sustainability, labour practices).
Policies | Walker Construction
Policies - Arup
Policies - Our Code of Conduct - How we work - Balfour Beatty plc

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Strategic and Operational Management

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Overview of Strategic Management

Focuses on navigating significant change, uncertainty, and complex scenarios that are non-routine in nature

Concerned with defining the organization's direction, purpose, and methodologies for achieving its objectives

Involves analysing organisational strengths and weaknesses, and identifying external opportunities and threats

Addresses the implementation of long-term organisational goals

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Components of Strategic Management

Environmental Scanning: Assessing external and internal environments to gather critical information
Strategy Formulation: Developing appropriate strategies based on the information gathered
Strategy Implementation: Executing the developed strategies in an effective manner
Evaluation and Control: Continuously monitoring and adjusting strategies as necessary for optimal performance
Figure 1 summarises the elements of strategic management
Terms like strategic management, strategic planning and corporate strategy tend to be used interchangeably

Figure 1. The strategic management process (Fryer, 1997).

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Environmental scanning

What effects do the external social , economic, educational , political and legal environments have on an enterprise?
PESTLE Analysis | Factsheets | CIPD
What effects do the internal factors such as organisational goals, tasks, technology, organisational structure, kinds of employee, reward system, kind of managers, and policies have on a company?
SWOT Analysis | Factsheets | CIPD
Outlines the organisation's approach to achieving strategic objectives
Ensures adaptability of the plan to accommodate unforeseen circumstances

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Environmental Scanning

Involves considering both internal and external factors that could affect the organisation's future

Entails active monitoring of both internal and external environments to detect new opportunities, strengths, trends, and potential threats

The objective is to gather dependable information and pinpoint key elements that will significantly impact the business

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Environmental Scanning

Internal appraisal focuses on assessing the company’s performance, financial health, organisational structure and systems, as well as evaluating employee capabilities and areas for improvement

External appraisal includes analysing future competition patterns and other events or trends likely to influence the organization’s success

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STRATEGIC PLANNING

Establish the mission of the organization
Decide long-term goals
Develop strategies to achieve the goals
Formulate policies

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Implementing the Plan

Requires widespread communication of the plan across the entire organisation

Essential for enabling coordinated and focused actions aligned with organisational goals

Involves breaking down the plan into specific segments assigned to different departments and teams

Includes detailed information such as objectives, action plans, allocated budgets, and implementation procedures for each segment

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Review and Control Performance

Constant oversight of the strategic plan is crucial, with adjustments made as needed
Establish systems for obtaining reliable performance feedback
There are several broad options open to a firm when reviewing its long-term plans
Containment: Focus on maintaining current workload within existing markets
Expansion: Aim to increase workload within current markets
Contraction: Strategically reduce the current workload
Diversification: Enter new markets, either as a replacement or in addition to current ones

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Seven Areas of Strategic Management in Construction Industry �(Chinowsky and Merdith, 2000)

Vision, Mission, and Goals: Essential as a guiding framework for organizational activities, providing direction for business practices

Core Competencies: Defines the organisation's strengths and primary areas of expertise, shaping its business scope

Knowledge Resources: The fusion of human expertise and technological assets crucial for successful project completion

Education: Emphasising continuous learning and adaptation to evolving business environments, both through formal and informal channels

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Seven Areas of Strategic Management in Construction Industry (Chinowsky and Merdith, 2000)

Finance: Broad focus on financial aspects beyond just budget and schedule management in individual projects

Markets: Analysis of potential business opportunities that align with the organization's core competencies

Competition: Detailed examination of current, emerging, and future competitors across both existing and prospective market areas

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Operational Management

Focuses on managing and optimising processes for producing and distributing goods and services
Aims to achieve higher efficiency in business activities through careful planning, organising, and supervising
Seeks to minimise costs and avoid resource wastage
Continuously looks for ways to enhance efficiency, quality, and customer satisfaction
Operation managers collaborate with marketing, finance, IT, HR, and other support departments for coordinated resource and infrastructure planning

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Operational Management

Operational management centres on ensuring efficient and smooth business operations on a day-to-day basis
It involves coordinating different departments to achieve common business goals

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Self-assessment Task

Differentiate between strategic and operational management. Then, discuss the strategies employed by construction companies.

Hint:

Strategic management strategies: (At least ANY TWO. Be specific): Corporate Social Responsibility (CSR) and Ethics, Market Analysis and Positioning (SWOT & PESTLE Analyses), Research and Development (R&D), Diversification and Expansion Strategies, Mergers and Acquisitions (M&A), Technology and Digital Transformation, etc.

Operational management strategies (At least ANY TWO. Be specific): Quality Management Systems, Inventory management, Human Resource Management, Customer Service & Satisfaction, Cost Control, Sustainability Practices, Performance Monitoring, etc.

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Reference/Bibliography

Chinowsky, P. S. & Meredith, J. E. (2000) “Strategic management in construction.” Journal of Construction Engineering and Management. 126(1).
Fryer, B. (1997) The Practice of construction management. 3 ed. Blackwell Science
Hunger, J. D. & Wheelen, T. L. (1996) Strategic Management. New York: Addison-Wesley.