SKK Company and Its Business Environment

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Introduction

SKK is a multinational company known for its influence in the land development and real estate industry. This essay seeks to provide a complete assessment of the Cambodian company.

For this purpose, the discussion shall focus on the various elements that define the company and the business environment that it operates in, pointing out the strengths and weaknesses. The profitability of the enterprise shall also be evaluated by giving a committed look at some of its financial figures.

Company overview

Vision

The vision of the SKK Company is to be the primary provider of land development and real estate services.

Mission

The mission for the company is to chart new frontiers as far as the development of high quality and affordable services is concerned, as well as the fostering of positive growth in the communities of operation. This will be achieved through:

Investing in research and investigation into the demands and needs of the market.
Studying and analyzing available material production processes, with the main aim being coming up with strategies that will reduce the cost of production and ultimately the cost of the final product.
Sourcing of skilled manpower from local communities and ensuring that the pay they get is enough to accord them decent livelihoods.
Ensuring that the production process and its wastes are not harmful to the environment through the establishment of proper waste disposal procedures.
Investing in technology that helps lighten the production and supply processes, ultimately cutting the time and cost of production.
Involvement in Community Social Responsibility (CSR) exercises and helping better the society by sharing the gains made.

Core Values

SKK’s core values underpin the institution’s desire to help foster a sense of purpose across all departments. They clearly highlight the company’s common desire to help encourage performance based traditions which are innovative and help encourage mutual trust and engagement.

The company’s strategy

The company’s operations are very Mechanistic in nature, with each and every department being interlinked with the others. Having been in the business for quite some time, SKK has come to develop a working strategy that helps attain a high level of success. The business model the company uses involves identifying a unique market segment and setting out to develop products that this particular section will find appealing. For instance, when the company was set up, the initial market was primarily made up of wealthy individuals setting up apartments of offices. This was a niche market and after a period of review it was deemed wise to diversify into the more popular single-unit residential construction. The approach to target the average constructor is very effective as it makes the company more profitable, besides meeting the mission and vision of the establishment. The long-term strategy for the company is to invest in the largest diversity of products with the primary aim being to ensure that clients have little or no room to try the competitors’ products.

PESTLE/SWOT Analysis

Political

SKK is one of the firms in the country that have an open administrative structure. Everyone from the Chief Executive to the office messenger is well known to the workers in the company, with promotion to major positions being by merit.

This has helped reduce the wrangles that are associated with not having a proper promotion and demotion structure in place, ultimately helping the company grow from strength to strength.

The only weakness that appears to be slowing down the process of development for the company presents in the form of not having established proper contact with state agencies leading it to lose out of the market that presents in government-funded construction.

As far as opportunities are concerned, the fact that Cambodia is now attaining stability clearly indicates that the potential market of real estate and construction services is bound to greatly improve.

Competitors are entering the field on a daily basis and if proper care is not taken they might soon gain ground. It is also only recently that Cambodia started attaining political stability.

Unfortunately it is taking some time for indicators of democracy such as free and fair elections to be given prominence. Because of the security threat that presents in the form of post-election violence, most people would rather shy from committed investment.

Economic

The SKK Company has already set base as the industry driver when it comes to real estate and property development. H

aving set base in the business, the company already has proper market approach channels, which give it an advantage over competitors as well as access to material and discounts from suppliers who have already developed confidence in it.

The good name in terms of quality that has over time come to be associated with the company also serves to boost customer confidence hence increasing the business’ profitability.

The company’s disposable income is still not very high and it, therefore, might be challenging to handle a very high number of projects at a given time. However, over time, and with profitability ascertained, this issue will be well tackled.

Even though the government is looking at new ways to increase income, taxation has been the primary way in which finances to drive the public sector are obtained.

The land development and real estate industry, being a fledgling sector, will over the coming few years be a key income earner for the company with an increase in taxation for all the products used being foreseen.

Social

The market segment, which the company is currently targeting, is gaining confidence in the quality of service delivered. This is an item that has helped boost the company’s growth.

The brand name has also gradually grown to such an extent that anyone who wants to build or buy a house first thinks of SKK before trying to explore other options.

Housing trends have also improved tremendously with potential home owners opting to go for professional assistance (Allen 2006, p.65, 77). This desire to get quality service has helped SKK, a company that has already built a name in the sector, continue to gain business.

As far as weaknesses in the social element are concerned, SKK’s initial market was made up of high earning individuals. Eventually the company had to look at the needs of the low-earning would-be home owners.

This sector had already attracted the interest of other companies and it, therefore, took some time for the business to pick up.

The population shifts to urban areas have increased the need for better and modern housing, something that ultimately SKK’s market. The company already has a base from which to work and therefore knows how to work around these demands by potential clients.

The major social threat to SKK is the far-reaching impact of marketing and advertisement, which has helped competitors gain some ground in the industry.

In addition, like with any other business, some competitors do not play fair with some using tricks such as dirt-smearing to help divert the attention of clients. However, this is a minor threat considering the number of real estate developments standing as testimony to the quality of SKK’s work.

Technological

One of the investments that SKK has made that have helped give it advantage over other companies is in technology and research. The company has committed a great amount of money to finding out the best and most cost-effective construction methods.

The company has also dedicated some part of its resources to technology for making quality checks in its processes. This has helped the company develop products that are of stellar quality, ultimately helping the company find favor amongst competition.

One of the weaknesses that the company has in regards to technological development is the failure to see to it that each and every member of the team is savvy as far as the usage of the internet and mobile communication technology is concerned.

Because of the limit in financial resources, the company cannot provide this king of training, something that unfortunately ends up slowing processes down.

As far as the technological opportunities are concerned, SKK has a broad playing field. New inventions are being made on a regular basis reducing the amount of material and time taken in construction.

A presence on the internet has also helped the company acquire new clients and broadening its market segment, ultimately increasing profitability.

Technological advancement has also come with its own disadvantages. With most of the studies that the company does being documented online, competitors are finding it easy to know SKK’s next step hence setting up measures to keep at par.

Legal

The policies and rules in place do not properly address the business of land development and construction. For example, there is a great challenge in terms of the implementation of architectural rules leading to some unscrupulous business people to take advantage of the shortfall and set up substandard.

However, SKK has made it a point to stay committed to established rules and regulations, further making demand for their products even greater hence boosting the company’s strengths.

SKK entered the industry as a monopoly. It, however, did not take time to establish competition rules, something that has made it difficult for them to counter any acts of unfairness by the now increasing competitors. This is a weakness that the company could have averted by setting down the ground rules when the chance was there.

With the construction and real estate industry being regarded a key public sector, the government is setting up regulatory bodies to oversee the processes involved.

This comes at an advantage for SKK because the company is bound to get back the clients it lost to competitors’ dirty tricks. Getting this kind of support from the government will help the company further increase its popularity in the market.

The major legal threat that SKK as a company faces comes in the form of employment laws which compel companies to pay workers a particular minimum.

However, the minimum wage that the state has set is higher than employers can afford, eventually forcing them to cut down on staff, which in turn reduces the productivity of the company.

Environmental

Through embracing renewable energy in most of its processes, SKK has come to gain favor from environmentalists. The positive mention the company gets in this regard has helped its name grow further.

The public is gradually becoming enlightened and potential home owners are now choosing to work with companies that appear to have their interest and that of the environment at heart.

One of the weaknesses that SKK as company has let plague them, in regards to environmental protection is not setting up a proper company culture that encourages their members of staff extend the conservation policies to their homes.

Some of these workers drive huge vehicles even when travelling alone and anyone making observations from an outsider’s point of view might end up viewing the various energy-conservation approaches being linked to the company as publicity stunts.

There are many opportunities presenting to SKK from using environmentally-friendly processes and energy. For instance, the use of renewable energy sources to power its electric equipment helps the company cut costs by a big percentage.

This cut-down in costs eventually reflects in the company’s financial records as profit. With environmental technology being very dynamic, the company is bound to make much more gains if it keeps embracing such positive change.

One of the environmental threats that SKK as a company in the real estate industry faces, is the reduction in land. Buildings are constantly coming up on available parcels of land and over time there might be very little or no land available for construction purposes.

Other natural resources such as lumber are also thinning out and it will come to a point where the company will be forced to invest in technology for the development of alternative material.

Balanced score-card

The business that SKK is involved in has four key pillars that govern its operation and which must relate to the vision and mission of the company in order for its objectives to have been met.

These pillars are financial, customer, learning and growth and internal business (Nils-Goran, Olve and Wetter 1999, p.25, Henry 2008, p.77) and are linked to the company’s vision as shown in Figure 1 below:

Balanced Scorecard Framework

The financial pillar is fundamentally the financial image that the government gives to shareholders and it has a set of governed objectives, measures, targets and initiatives, which must be attained for the company to be successful.

SKK’s financial objective is to continually make profits as well as sustain daily running of its operations (Cobbold and Lawrie 2002, 53).

For these purposes, the company ensures that it provides the kind of services that the customers want and through approaches that would reduce the production costs while increasing the income for the company (Kaplan and Norton 1996, p.78, 132).

By ensuring that its financial records are straight, SKK meets the demands of the stakeholders, while at the same time guaranteeing its sustainability.

When it comes to the customer pillar, SKK has a particular framework that determines how it presents itself to the customer. Again to satisfactorily meet the needs of this criterion, the company has to lay down its objectives and targets, as well as the initiatives and measures taken to reach this objective (Bull 2007, p.103).

The company has managed to maintain stability by ensuring that the needs of the customers are well taken care of. There is committed office to assess the demand and come up with strategies to ensure that this demand is effectively taken care of (Blais 201, p.89).

Any suggestions that are offered by the customers are taken into consideration whenever developing a new product and by making the customer feel appreciated the company in turn gets the positive review needed to keep it afloat.

When it comes to the pillar of learning and growth, SKK has a department dedicated to research and the acquisition of new technologies.

This department studies the changing pattern of the technology in use and recommends the change that needs to be made in order to make the company compete on a superior level.

For instance, the use of renewable energy to run some of the company’s machinery helps keep its operation costs down, while at the same time helps build a name as one of the establishments that is out to guarantee the protection of the environment.

Finally, for SKK to meet the needs of the shareholders and the customers, it must outline the core business it is involved in and clearly present the strategies it will use to ensure that these objectives are met.

SKK has built a name in the real estate and land development business by provision of quality and delivering in a timely manner.

The company’s workers are also well paid and appropriately rewarded for every gains made. This is part of the internal business strategy that the company uses to ensure that it is relevant in the industry at every time.

McKinsey 7-S framework analysis

For a complete analysis of the SKK Company, a 7-S framework analysis has to be conducted as shown below.

Strategy and style

The key business strategy for SKK, is the development of products that are affordable to the average citizen. This model is shaped on the fact that small projects done in large numbers are more profitable that huge projects done in small numbers.

The company has made gains by taking advantage of the fact that the country’s real estate sector is still very young and there is more room to experiment.

Products in the local real estate market are 20 years behind those developed in Singapore and 10 years behind those in surrounding south Asia’s countries like Vietnam and Thailand. SKK, by developing superior products, have been able to capture the interest of the masses.

Staff and Skill

SKK has built a good reputation in the real estate business. Over time, the company has come out to set a standard in the industry by maintenance of professionalism at all levels.

The company’s human resource department is very committed to hiring individuals with the best skill levels, effectively contributing to the success of the entire establishment.

However, in order for the company to meet the objective of bringing success to the people of Cambodia it must consistently ensure that most of the workers hired are locals.

Unfortunately, this has been a challenge because there is a scarcity of individuals trained in finance, accounts, engineering and project management.

Those that meet the qualification turn out to lack skills in planning, execution, monitoring and quality awareness, making it a challenge for them to properly handle large-scale projects on their own.

Systems and structure

The Company has also embraced cost reduction as one of its key approaches to profitability. In this regard, SKK has set up a mechanistic structure, which emphasizes on efficiency at all levels. In this system every process has to be well documented and analyzed in order to determine its efficiency levels.

Processes that do not meet the efficiency criteria are scrapped in favor of those that are more effective. The Stakeholders of the business have set up measures to deal with any challenges, including the lack of legislation and improper infrastructure, making the company operate at optimum efficiency.

Superordinate goals

Success for the company has come through the setting of goals. At the beginning of a financial year, the company’s administrators set up goals to be achieved in a specific period.

Meetings are conducted regularly to ascertain whether these targets have been met. It is this process of setting up goals and checking them off that gets the company to achieve more success that its competitors.

Financial Ratio analysis

Current ratio=current assets/current liabilities (Hill and Westbrook 1997, p.48)

=200,000,000/15,000,000

=13.3

Financial Ratio Analysis

The above Figure 2, derived from the ratio, indicates that the company is in a position to meet its short-term obligations, including the payment of debts. Being in the strong positives, the company’s financial health is perfect.

Leverage /Debt-to-asset ratio

This is computed by the following formula: total liabilities / total assets

15,000,000/200,000,000*100

7.5%

This figure indicates that the carrying value of the company is credible.

Rates of Return

Return on Assets=Net income/total average assets (Satya 2009, 52)

=125,000,000/200,000,000*100

62.5%

The company judging by the ROA is very profitable and therefore, a company that would easily attract the interest of shareholders.

ISO/GAP analysis

This is a set of questions used to determine whether a company meets the ISO standard requirements.

In order to perform an ISO/GAP Analysis, sets of questionnaires will be sent out to different department heads and their responses used to evaluate the quality of the services or product of the company (Armstrong 2006, pp.38-45).

However, the scope of the current essay does not allow for this extensive exercise.

EBIT analysis

The earnings before interest and taxes for SKK Company are calculated by subtracting the operating expenses from the sales. For sales of $150,000,000 and operating expenses worth $65,000,000, SKK’s EBIT is $85,000,000.

ROIC analysis

In order to find out SKK’s Return on Invested Capital the Net Operating Profit after Tax will be divided by the invested capital. Hence 63,000,000/100,000,000=.63 or 63%. This figure shows that for every unit of investment the company makes returns of 63%, which is a superior figure.

Change Recommendation

The company’s key business strength has been in cost minimization and in order to sustain profitability, company needs to take some key measures.

First, I will take the bold step of merging a number of offices into a common unit. This is because the changes in communication technology have made it easy for one individual to take charge of a number of offices.

In this regard, I will merge the administration, Finance, procurement and the contract departments because telling from the roles that the former plays, it can easily morph to take up the roles of the latter.

I will also merge the marketing and sales departments and use the available technology to ensure fluidity in the new office.

The design and construction departments will also be merged together in order to reduce the unnecessary complexity.

This strategy goes in tandem with the functional and situational theories of leadership, which demand that the operations of a company be constantly evaluated and the necessary tweaks in leadership implemented.

The difference between the organization and the start and after the change is indicated in diagrams A and B, respectively.

The basic company structure before change

Diagram A. The basic company structure before change

The basic company structure after change

Diagram B. The basic company structure after change

Conclusion

This essay had set out to provide a comprehensive analysis of the SKK Company, a company dealing in land development and real estate.

The McKinsey 7-S framework, Balanced Scorecard, SWOT Analysis, Financial Ratios and PESTLE have all indicated that the company is doing well in the business it is involved in and that it is maintaining a steady level of profitability.

It should be noted that for a more effective analysis to be conducted, a detailed analysis of the company’s financial records needs to be carried out.

Reference List

Allen, M 2006, Analysing the Organisational Environment, Select Knowledge Limited, Hertfordshire.

Armstrong, M 2006, A handbook of Human Resource Management Practice, Kogan Page , London.

Blais, S 2011, Business Analysis: Best Practices for Success, John Wiley & Sons, New Jersey.

Bull, R 2007, Financial Ratios: How to use financial ratios to maximise value and success for your business, Elsevier, Amsterdam.

Cobbold, I & Lawrie, G 2002, “The Development of the Balanced Scorecard as a Strategic Management Tool”, Performance Measurement Association, vol. 35 no. 1, pp. 37-56.

Henry, A 2008, Understanding Strategic Management, Oxford University Press, Oxford.

Hill, T & Westbrook, R 1997, “SWOT Analysis: It’s Time for a Product Recall”, Long Range Planning, vol.30 no.1, pp.46–52.

Kaplan,S & Norton, D 1996, The Balanced Scorecard: Translating Strategy into Action, Harvard Business Press, Harvard.

Nils-Goran A, Olve, J & Wetter, M 1999, Performance Drivers: A practical guide to using the Balanced Scorecard, John Wiley & Sons, New Jersey.

Satya , S 2009, Business Policy and Strategic Management, I. K. International Pvt Ltd, New Delhi.

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