Strategy formulation is a phase of strategic management that incorporates planning and decision-making, leading to defining the goals and a particular strategic plan. To formulate a strategy for an organization, the director needs to review and analyze the internal and external aspects that impact the organization’s ability to compete in the market.
This article covers a detailed SWOT and PESTEEL analysis of a contracting organization named LECA, located in the Gulf Region. In addition, it identifies and discusses the potential opportunities for this organization during the new normal situation (COVID-19, Pandemic) and recommends the areas for improvement using the IRTOO table to clearly emphasize the recommendations that the organization should address.
1 Outline of the Organization
LECA is a well-reputed and largest construction organisation in the Gulf Region. LECA has operated the business in this region together with its related businesses over the last 20 years. LECA is a leading contractor with expertise in constructing iconic and landmark building projects. This company sustained its business position over two decades in the middle east and became as the most trusted contractor for leading clients. LECA consistently develops and offers construction solutions to clients that are always beyond expectations considering the client’s budget, product quality, timely completion, and safety aspects.
2 SWOT Analysis
Table 1.1 SWOT Analysis for the Construction Company.
| Strengths | Weaknesses |
| 1. Broad experience in the execution of large-scale projects over diverse divisions. | 1. Higher operating expenses reduce the profit margin. |
| 2. Strong capacity to offer an extensive turnkey solution to clients utilizing all in-house departments. | 2. Ignorance of undertaking small-scale projects. |
| 3. Pioneer in advanced technology-driven performance of construction works. | 3. Lack of intention to enter into an infrastructure sector construction business. |
| 4. Availability of committed, solid teams and well-advanced plant and equipment division. | 4. Higher rate of deployments of outsourced resources. |
| 5. Financially capable of undertaking and executing several projects simultaneously. | 5. Inadequate resources and facilities to start a production unit for the building finishes and furniture. |
| Opportunities | Threats |
| 1. The centre of the strategic business hub attracts many foreign investments. | 1. The current COVID-19 pandemic and fallen oil prices negatively influenced the country’s economy. |
| 2. Growing sustainable developments complying with the policies. | 2. Long time to initiate a new massive development project after completing a massive significant exhibition project. |
| 3. Increasing trends in renovating luxury condominiums adopting advanced features and technologies. | 4. The clients’ strong scrutinizing power and selecting the lower budgets without considering the best value for money output. |
| 4. Active in acquiring several companies which are complementing the construction business. | 5. Extreme competition in the industry causes uncertainty in getting projects sequentially. |
| 5. The good long-term relationship with important clients. |
3 PESTEEL Analysis
Table 2.1: PESTEEL Analysis for the Construction Company.
| Aspect | Key Favorable Factor | Key Unfavorable Factor |
| Political | Political stability and well-developed significant policies are in place to strictly adhere to them. The clear direction regarding the company formation procedures, no object certificates, and permits. | High rate of corporate tax for foreign oil & gas organizations. |
| Economical | Country’s better GDP growth rate over the last decade. Foreign Direct Investment hit a record last decade. | Uncertainty about oil prices influences the price fluctuation of construction materials, particularly steel products. |
| Social | Thriving business through workforce diversity from multicultural nationals. The cultural expectations of the nationals and the growing count of immigrants increase the demand for building units and infrastructure development. | The objective of implementing a localization program jeopardize high-skilled teams’ employment. |
| Technical | Improvement of performances through the effective utilization of innovative technologies in construction. Expansion of business through adopting technologically oriented construction methods. | Higher risks on capital investment for the advanced plant and equipment. Heavy depreciation on outdated plants and equipment related to the conventional method. |
| Environmental | Resolution of potential investments in renewable energy projects. Adopt Eco-friendly operations. | Higher carbon footprint, inadequate water resources, environmental pollution, imbalanced climate, and extremely hot weather have an immense impact on business operations. |
| Ethical | Mandatory requirement of strictly adhering to ethical standards on health and safety aspects accredited by professional bodies. | Jumping of high-skilled workforce from one company to another for personal benefit. |
| Legal | Strict legal regulations governing the companies. Strategies and policies should be compliant with the legislation. | Termination of contracts at any time at the client’s convenience. |
4 Improvements Required
LECA needs to develop a strategic plan and strategy formulation to start a new business division to construct infrastructure development projects. Since revenue diversification is crucial to strive in the volatile market, LECA also needs to take over small-scale construction projects. Sometimes, the simultaneous construction of many small-scale projects may yield higher revenues than a single revenue from a large-scale project. Moreover, the firm’s intentions to enter into large-scale contracts may lead to losing tender invitations for small-scale projects in the market.
The centralized resource allocation needs to be organized and controlled appropriately. Outsourcing resources without a detailed study of the capability and availability of the in-house resources may affect the profit margin. Moreover, idle resources must be utilized for the production works at the factory. At the same time, LECA needs to exercise the harness deployment strategy to retain the high-skilled workforce. On the other hand, a change management plan to transform from the conservative method to the remote working method will be initiated. Moreover, remote working practice needs to be promoted among the staff.
LECA needs to adopt a broad strategy to achieve the set-out goals and develop a strategic business plan for the capital investment on the sophisticated plant, instrument, and equipment that fulfils the business requirements. The new construction technologies’ dynamic developments often allow upgrading with the latest equipment to perform effective and efficient construction works. Therefore the business firms need to allocate sufficient funds for the up-gradation, and the depreciation values for the outdated plants and equipment need to account for in the asset ledger.
In this part of the world, terminating contracts at any time at the client’s convenience is a common practice. Therefore, LECA must be conscious of entering into a contract with leading and well-reputed clients. Moreover, the negotiation and bargaining power of familiar clients for the prices are minimal compared with a new ordinary client. Therefore, it can reduce the risk of extreme competition in the industry and secure future projects.
5 Recommendation
Based on the above-discussed strategic analysis, potential opportunities for the construction sector during this pandemic situation, and the identified improvements, it is crucial for the company management to adopt changes. The company’s nature of strictly following the defined strategies is much appreciated; however, in some instances, this nature needs to adapt to changes tailored to the current market conditions.
In view of the comprehensive analysis, it is recommended that this contracting organization create an action plan to develop strategy formulation and execution as a first step to update the goals to thrive in this volatile market. To illustrate the recommendation in detail, this IRTOO table can be followed.
Table 3.1: IRTOO Table for Recommendation.
| Issues | Recommendation | Timeline | Output | Outcome |
| Unavailable strategic plan for revenue diversification | The management board team needs to develop a comprehensive strategic plan for the new business division for infrastructure projects | Short term with a few months | The available strategic plan indicates the direction to develop the planning process | Management of the company implements the action plan, takes the initiatives to operate a new division, and runs the business |
| Loss of control in outsourcing resources | A centralized effective control system needs to be implemented, transparent to all divisional managers | Immediately | Management will obtain precise information about deployed and idle resource details | Integrated histogram can lead to taking the next step to outsource or manage with in-house resources |
| Inadequate attention to executing the business plan for capital investment | The company’s business plan for capital investment is to be updated to comply with the changes in the current market | Intermediate-term | The updated business plan will provide the level of investment and associated potential risks in investment | Implemented investment plan allows initiating the long-term investment with minimal risk that results in operating the business without any obstacles |
| Business development and client care-related issues | Initiate a systematic market survey and an analysis of past experiences with clients | Short term with a few months | The sorted list of leading clients as per ranking | Pricing risks in the tender proposals shall be minimized by adequately allocating contingencies as per the ranking |
| Delays in digital infrastructure development | Assign an IT team for system integration and development | Short term | Accessible cloud-based digital platform | Well-established remote working culture |