Aurecon's Singapore Market Challenges: PESTLE And SWOT Essay.

Question:

Discuss about the Management in Practice Of Aurecon.

Aurecon is an Australia based private company which gains profit from Engineering, management, technical services and private business sector. Employees in this company are a total of 6,490. It operates globally and the head office is in Victoria. It is a public company which ranks 422 out of the top 2000 companies in Australia (World, 2016). The maximum income is generated by this company from engineering services in Australia. It was founded in 2009 in the month of March when Africon, Ninham Shand and Connell Wagner announced about it (Aurecon, 2017). This report focuses on the challenges Aurecon faces in Singapore as a company. The pestle and swot analysis of Aurecon shows that it is at the growth stage and will have to take some measures to reach at the maturity stage of the industry life cycle. Aurecon seeks to do complex projects within Singapore and all over Asia (Khoo, 2015).

By the year 2021, it is expected that Asia should generate 44% of the world’s GDP. Singapore has added value of some $70.87B in the year 2016, according to the World Bank. The forecast is also to be of economical growth for Singapore.  There are anticipations that the competition in the coming years will grow day by day. In this situation, the management of Aurecon might face some challenges. There are always evidences on the construction and the engineering industries which have significant obstacles in the way of structure of economies (MENA, 2014). As the technologies will change, the workforce in E&C companies will also change. There might be less need of the man force. In this hyper competitive market, Aurecon is lying in the middle of such technologies.  The solution to this situation is that Aurecon will differentiate itself by providing the quality solutions instead of competing head to head with traditionally organized E&C firms. With the increasing market and the technologies, there is a need to put new strategies to make the firm grow and compete with the competitors (Babu, et al., 2016). Aurecon is already aware of that technology is an enabler of value but only when the right people have the access to it with the right skills. Aurecon needs to train and raise E&C workforce that helps in the positioning of the firm in the Singapore market. There cannot be the single solution to all these challenges. Giving a thought of all the management disciplines to bring the knowledge together will be helpful for taking out the solution.  Appropriate skills should be developed to compete with such challenges in Singapore market (Ali, 2015).

Macro Environment Analysis

The external analysis of the industry should always be done in depth because it is very important for the firm to know about the environmental factors or the opportunities and threats that might harm or help the company.  This can be done by doing implementing the PESTLE analysis and by going through the porter’s five forces.

PESTLE is that kind of the analysis which is used in order to identify the factors which are external from the organization but still influences it.

Environment is changing very fast these days for every organization. Now to analyze the implications of such kind of changes and to modify them in the way that organization reacts to them, business strategies are made.

Every organization needs to identify the external factors which comes in their environment and could have an impact on the firm. For doing that, the popular tool called PESTLE is implemented (Srdjevic, 2012).  This analysis includes Political, Economic, Technological, Legal, and Environmental issues.  

• Political Issues: It is advised to keep the policy changes in any government alongside. Even when the political situation is stable, there might be some changes in the policies at the above levels and this can prove to create some serious implications. Result will always be changes in the priorities of Government and at last there will be changes in the regulations and taxes(Atighechian & Maleki, 2016). Ultimately, all these above factors may include changes in the laws of employment, regulations in the environment, taxation regulations, health and safety policies and trade restrictions.

In case of operating the company in Middle East or in any part of Asia, the dimensions of the political factors might prove to be the most serious consideration. The entry might not be straight forward into the new territory could become the case of the policies that are official.

• Economic Issues: The economic issues include inflation rate, taxation, rates of exchange, regulations of trading and excise duties. Keeping in mind the operational efficiency, the firm should also keep in mid a few factors like unemployment, working practices, labor cost trends, availability of expertise and wage patterns. Such issues can be given a look when cost of living for the target market to determine economic viability(DanielFozer, 2017).
• Social Factors: There are a few factors that have an impact on the market. These are called as social factors. They can be population, employment levels, education trends, and statistics of income, culture and age distribution(Athanasios & Read, 2013). These factors play a very significant role in the international and global market and the success depends on the research in the area.
• Technological Issues: The speed with which the technology is growing is becoming rapid. Technological factors can be of two types: infrastructure and manufacture. Including activities like automation, incentives, cost savings and control costs, the company can attain strong advantage of becoming competitive. The firm which fails to keep the technological changes gives the opportunity to the new entrants in the market.
• Legal Factors: The legal factors include current and impending legislation which may affect industry in the areas of employment, competition and health and safety. Legislation changes that may occur should also be investigated (Bordo & Rosseau, 2006). Singapore is very strict with the laws so it would be good for Aurecon to stay within legal pressure to do anything new.
• Environmental Factors: Protection of environment has become important these days. With globalization increasing rapidly, this has become even more important. These factors are those which are relatable to the weather and climate changes. With PESTLE factors climate cycles and weather changing patterns can be studied. Aurecon may have the environmental factor as a threat as they are always unknown.(Ryvicker, et al., 2012)

Development of a business plan for the future can be done by assessing the current situation of any company. Porter’s five forces model should be considered by any company which is looking for growth or for sustainability in the market. A non impressive company would be the one whose profit is affected by these factors. Porter’s five forces are:

1. Buyer Power: It is actually the bargaining power of the customers. A buyer has a strong impact on the firm if the buyer has many options in the market.
2. Supplier Power: Same as the customers, if there are less substitutes, suppliers of raw material can raise their bars of prices for the firm.
3. Rivalry: It is important to keep all the information about the rival company or companies as they can prove to be a threat. The buying groups allow independent practices in order to gain advantage in competitiveness and these groups have grown to be 74% more(Guggenhein, 2016).
4. New Entry: The Company which is at the profitable side will definitely attract the new comers. The new entry threat of traditional practices is very low, although, opportunity for new business with capital access makes the new entrants to high risk. Also it is important to consider regulatory environment in future because that can analyze the nature of new entrants.
5. Substitution: There are a lot of substitute products in the market with fewer prices. Hence, the customers are likely to move towards them. This can be a threat to the company. In the future, technology being astute demand for convenience will be greater. At that time, any new company by giving new products or good services can become important for the customers(Dobbs, 2014). 

The industry life cycle includes 4 phases. They are introduction, growth, maturity and decline.

Introduction Phase: The emerging industries which originate from technological innovation are changing the relationship between new customer needs, economic and social changes and relative costs.  From strategy design perspective, the characteristics of phases of life cycle have no rules. Elements that characterize these phases are: Technological and uncertainly, high costs, customers who buy for the first time, subsidies, duration of the phases and new established industries (Verreynne, 2010).

Growth Phase: Innovations in the technology always allow the emergence of the new industries. With technology evolving, the cost of the product reduces and the quality improves, demand increase and the industry grow with the new entry and growth in the market. All the products now days are differentiated in terms of the technology and the performance. Reliability is the most important factor when it comes to the complex products (BinChen, 2013). Growth phase provides the company to transition to mass production.

PESTLE Analysis of Aurecon

Maturity Phase: Lots of industries experience the transition from high to higher growth level. The transition from the growth to the maturity level is always critical for all the firms in the industry. Fundamental changes take place during this phase. Number of trends also changes. Some of these trends are:

• If the growth is slow then the competition is more for market. Managerial attention is pointing towards attacking of competitors.
• In this phase, the product no longer remains new. The customer focuses to on buying new product instead of the one going through maturity phase.
• In low growth, knowledge of the consumer is increasing and maturity is greater of technology. Hence, the competition is becoming more focused on the prices and the quality of the product.
• Global competition is rising day after day.
• Probability of the industry is falling(Karniouchina, 2013).

When the transition tales place, there are changes that follow this transition. These changes are very possible changes in the structure of the company.  Major elements of the industry structure changes: such as intensity of the competition, mobility barriers and the specific barriers. The approaches by which the industry should respond to the structural changes are:

1.) Leadership of cost.

2.) Differentiation of quality

3.) By focus 

Decline Phase: In terms of the strategic analysis, the company which is declining will face decrease in the sales from the longer amount of time. The profit margins keep on falling, production is reduced and investments are lower. The competitors are also fewer. The strategy to be used in this phase of industry is harvesting strategy (Brookshire, 2010). It is decision for strategic management which reduces the investment in business in the hope of reducing the costs and improving cash flow. It eliminates all the investments and generates the maximum amount of cash flow. This strategy works when the company is at the peak of declining and there are a large number of competitors around to take over. 

The internal environment analysis of any industry is done for knowing about the difference the company makes in the market. It includes Strategic capabilities, SWOT Analysis and VRIO. 

Demographics changing, urbanization, technological changes and increasing customer expectations have become new trends in the market of today. All such factors put great pressure on the structure of both government and private sector industries (Kuratko, 2014). Aurecon aims that it will deliver products on which the communities rely and on which the returns come for sure. This is its organizational strategy.

Aurecon works for resolving the government challenge and work on the private projects which drives maximum value from the investment point of view. It focuses on the problem solving. The problems which are related with the infrastructure investment are given major focus on.  They define the service need and present a clear business case for the funds (Claudiu, 2011). It also helps organizations in understanding the links in between asset base and outcomes of the services. Aurecon takes the transparent and auditable approach.

SWOT Analysis of Aurecon

The foundation of the internal analysis is done by VRIO analysis. It includes four pointers.

Valuable:  This is about the resources being valuable. Only when the resource is helpful for the organization in meeting an external threat or an opportunity, it is considered to be valuable. It might not help the company to perform outrageously but still it will be considered as strength.  Aurecon has high profit generating revenue (Lin, 2012). The company is at the maturity stage where it is outperforming in Asia. It works on the process of the barriers to entry. Hence, it objectifies the new entrants or the competitors and makes the barrier to enter as its competitors.

Rarity: The resource is called rare when it is not possessed by any other competitors. Aurecon has bigger competitors like Jurong, BBR groups etc. These are very well known names in Singapore. Though, Aurecon has earned a good name in Singapore, still it remains as a not much known name there. Hence, it cannot be considered as rare (David, 2016). This can be considered as the weakness.

Inimitable: Only a resource becomes inimitable when it cannot be acquired by any other firm and not any kind of substitute can be placed at its place (Chatzoudes, 2018). This is the toughest criteria to examine. In a given span of time, any kind of resource becomes inimitable if it’s given good money. Mostly no company possessed inimitable resources as it is very difficult to maintain and the same is the case with Aurecon.

Organized:  Resource is organized when it is able to help the firm by coming of some use to it. Very rarely it is found that the company is not organized as all the organizations mostly have organized resources. Organized resources mean good profit margin and productivity (Joy, 2012). Aurecon’s main strength is its profit generation. Hence, this makes Aurecon an organized company.

SWOT analysis is helpful for the company to know about its strengths and weaknesses as well as the threats and opportunities. The strengths and weaknesses are the internal part of the organization while the threats and opportunities are the external one’s.

Strengths of Aurecon are:

• It has high profit generation and revenue.
• It works on the barriers to new entry feature which creates a barrier for the new entrants to enter in this industry.

Weaknesses of Aurecon are:

• Market Size: The market size of Singapore is going to grow with the passing time. Many engineering and construction companies are growing day by day and the economy is also rising in Singapore(Shi, 2016). According to the growing future market size, Aurecon will have to build a brand name till then.
• Branding: As Singapore has many famous engineering and construction companies like Jurong, BBR groups, Yongnam etc, Aurecon is not such a bigger name in this market. Being an Australian company, it will have to create a good brand portfolio for the future market.

Opportunities of Aurecon are:

• New Markets: The positive side of the future market would be that it will grow. With growing markets come the bigger opportunities for the growing companies to grow even more and reach their maturity industry cycle(KristinOnarheim, 2015).
• Venture Capital: Another bigger opportunity would be venture capitals. With the growing market, if Aurecon gives the funding to the new start ups, it can earn more profit and generate more revenue(Ng, 2015). Ultimately, the revenue is what makes the company look good in the market and the brand name follows. Venture capital can be helpful in creating a brand name for the company in Singapore specifically.

Threats for Aurecon are:

• Changes in Prices: Aurecon might have to make bigger changes in the prices of their products and even in buying the raw materials. Whenever the new entrant enters the market, it keeps its prices as low. Low prices attract all the customers in the market. Hence, prices might be a threat to Aurecon.
• Technology Problems: Technology is very important for any organization because it provides the wider range of opportunities to the organization to excel(Cook, 2003). Just because of the need of producing quality products, new technologies are used in this growing market. Technological changes are taking place in the economy of Singapore and this industry forces the company to produce advanced and compact machinery. This can be a threat to Aurecon.
• External Business Risks: There can be some external business risks to which can prove to be threat for Aurecon. Political and natural factors can be risks too(Barney, 2005). The rules and regulations of Singapore are very strict for every living citizen in that country. Hence, these factors are also threats and cannot be controlled.

Conclusion

Aurecon is the company which is at the growing stage of industry cycle in Singapore. This report emphasizes on the external and internal analysis of the Aurecon Company. External risks include the macro environment, Porter’s forces and pestle analysis.  Internal risks include SWOT and VRIO analysis. Industry life cycle is also focused upon to know as to where the company stands in the Singapore market. After doing all the analysis, Aurecon is proven to be on the growing phase of industry cycle and to reach the phase of maturity, it needs to be aware of the opportunities it will get in future in the growing market. Also it will have to be aware of all the threats that might come its way. By mitigating with all such threats and maintaining its strengths, Aurecon can make a good brand name in Singapore.

Industry Life Cycle

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