In this course we learned about the initial idea and key concepts in strategic management in the construction, real estate and architecture industries. Market segmentation, vertical integration, competitive advantage, and industry transformation were several topics that also included here. It gave more understanding about business dynamics of real estate and construction, and practices the core planning tools as well.
In the very first place, we need to take notice and learn about strategy itself. Why strategy? It is because in the market world today, strategy is all about how businesses compete and how to earn above average returns. Besides, we would also expand our understanding about the selection of industries, selection of segments, choice of tactics and how to implement the strategies. As a graduate student, we are suggested to have the knowledge about strategy since the value and implementation will be needed in the professional environment we may involve. In business activity, strategic planning is a crucial activity in a concept phase of a business or a project. Some points that should be decided to do are what kind of markets, what services will be provided, where to dedicate our time, what kind of people needed, etc. Some of tools that will be needed in strategy planning are linear conversation, lots of information, organizing thinking, lay-outing assumptions, and planning action to be carried on.
The key concepts in strategic planning are the steps in planning, market segmentation, attractiveness which includes five important forces, generic strategies, and the firm value chain. Starting from the steps of planning there are eight critical steps to be taken, they are formulate the mission, external scan, internal scrutiny strategic analysis, estimating budget, doing it!, measurement, and the last revise and re-iterate. The question that must be answered firstly in the strategic level is what problems are we trying to solve? In the real estate and construction industry, we define the characteristics of this industry and the traditional implications of the business. There are some issues in real estate, design, and construction that must be determined as well, such as fragmentation, low barriers to entry, low economies of scale, single projects, hard to find the incentives to adopt new technologies that rely on many companies sharing information.
Two central questions underlie the choice of competitive strategy are the attractiveness of industries (and segments) for long term profitability and the determinants of relative competitive position. So then we can move on to select a segment in which to compete, based on how profitable the structure should be in the long term. We can also plan the strategy about how to compete, based on industry structure and the resources we have, and then we can shape our business so that we can execute on this strategy with deliberation and efficiency. Competitive advantage is widely known as the strategic advantage one business entity has over its competitor entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment. In this strategy, there is a matrix that can be arranged in so many ways that after the trial and error, the reduced final matrix is hopefully useful in helping us to think and explain about the industry and market planning. When mapping the segments, they may have varied attractiveness and in some way should be based on a combination of size, growth rate, competition, and the situation. Another points we should aware in taking this competitive advantage strategy are to consider buyer and seller channels in setting up the segmentation matrix and indicating competitor positions, growth rates, or changes in firm positioning on the matrix. Attractiveness of an industry or of a segment is a function of five forces model by M.Porter, and it can be the indicators of segment profitability as well.
The collective strength of the five competitive forces determines the ability of firms in an industry to earn high rates of return on their invested capital. The strength of the five forces varies from industry to industry, and can change over time. The five forces model can be applied to an entire industry, or to segments of an industry. The five forces determine the industry profitability because they influence the prices, costs, and required investment of firms in an industry – the elements of return on investment.The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller,Competitive Advantage: Creating and Sustaining Superior Performance. It is a chain of activities for a firm operating in a specific industry. The business unit is the appropriate level for construction of a value chain, not the divisional level or corporate level. Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of the independent activity's value. It is important not to mix the concept of the value chain with the costs occurring throughout the activities. With the firm value chain (within the firm), there are some actions we can do such as identifying key elements in the firm value chain for our situation, selecting which elements we should focus on as we concentrate our efforts. In using this tool, the resource allocation among cells is the key, and in particular over time based on the market strategy we want to pursue. We can use this tool to illustrate the changes in what we do internally.
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ps.1: Look, how lovely management when it is engaged with construction industry. :)
ps.2: No, I am not an MIT student btw, but my lecturers said that knowledge should be stolen and grabbed! Don't waste time waiting till somebody else told you first.
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