The Development of a strategic plan for a company in the dust suppression industry (TPD1202021)

The data collected from the participants were collected personally via interviews and a strategic planning questionnaire and recorded electronically by the Statistical Consultation Services at the North-West University and the data were analyzed by means of the  Statistical Package for Social Sciences (SPSS V18). In addition to the structured questionnaires, management was also interviewed to assess their views on the strategic planning at the company.

The results and findings indicated that there was some strategic planning actions lacking  and that formal strategic planning that defines objectives and assessment of the various situations within the company, are not  properly performed.  The author was  however able  to evaluate and determine where the company is going over the next three  years.  The  study draws a number of conclusions and makes recommendations  with  regard  to  strategic planning, one of which is that the company should follow a more structured and formalized approach.

Key terms: Strategic planning, vision, mission, objectives, dust suppression, growth, strategy.

ACKNOWLEDGEMENTS

I would like to thank the Lord for affording me the opportunity to  undertake and complete  this study.

I would also like to express my sincere appreciation to the following individuals and institutions:

• A huge thank you to my family (Louis, Magda and Francois), directors, work colleagues, and friends for all their moral support and prayers.

• Thank you specifically to my two group members, Yolandie Jansen Van Vuuren and Anthea Bossert, without whose support and encouragement this would have been a long three years.

• Thank you to my supervisor, Prof. Christo Bisschoff, for his patience and guidance.

• My appreciation and thanks to the personnel of the Potchefstroom Business School for all their assistance, support and motivation over the past three years.

• Thank you to Antoinette Bisschoff, for undertaking the language and typographic editing of the dissertation.

CHAPTER 1

NATURE AND SCOPE OF THE STUDY

1.1         INTRODUCTION

Under South African law dust is defined as small airborne particulates with a diameter smaller than 100 micrometers. Small particles directly emitted from a carbonaceous combustion are specifically excluded from this definition.

The first areas of activity to come under legislative control were below surface mining. The small confined spaces with high concentrations of machines and people working in them gave rise to serious health problems for the miners. Disease names like  thythis  and  silicosis entered the common lexicon. These were  serious  diseases,  appreciably shortening the lives of miners and ruining their quality of life. Workplace healthcare legislation needed time to evolve, firstly for the diseases to manifest, secondly to pinpoint  the cause and lastly to enact the laws. The conditions and legislations forced mining companies to install huge ventilation systems. This was mandated by law, but it was only a matter of time before mining companies would not have been able to find workers willing to mine in such conditions.

The situation above ground was viewed as less serious. It was not confined, the dust blew away and clean air seemed to be in endless supply. Only workers working in factories with noxious gases and substances received protection.

There are various measures of air quality as a result of dust. Dust is defined as particles larger than smoke but smaller than grit, as such the particle size for dust range from 0.1µm to 100µm. Dust particles have a small volume to surface ratio, this leads to extended  periods of atmospheric suspension, should the particle gain elevation, by whatever means. This property leads to dust being easily distributed to surrounding areas. The most dangerous particle size and thus the size one which the regulations focus most on is respirable dust, dust particles smaller  than  10 µm. These can enter the alveoli region  of  the lungs.

The legislation taken as a whole creates a void for entrepreneurial  activity to help persons  or companies fulfil their lawful and conscientious obligations. It is in this area of entrepreneurial activity that companies such as this company help add value  to organizations and people’s lives.

Dust control has gone in lockstep with environmental legislation in recent years. It remains an aspect of business that has to be managed. As such the demands on companies are increasingly onerous but are to the advantage of companies that provides these services  like this company. Environmental legislation also tends to be  stricter  in  developed  countries than developing countries.

1.2         COMPETITION IN THE DUST SUPPRESSION INDUSTRY

A lot of the companies in dust control tend to be similar to this company in culture and structure. They are young entrepreneurial companies, as such financial data tend not to be readily available and it is difficult to rate them according to revenue.

1.2.1     International competitors

International competitors include, but are not limited to:

• Polymer Innovations, Australia. They manufacture a wide range of polymers for interacting with water. One of their products is Watersave DS, which according to company literature is a polymer that penetrates the earth and tend to bind water particles, thereby reducing the amount of water spray needed to wet the road area and control dust release.
• Reynolds Soil Technology, Australia or RST focuses on developing complete dust solutions, from identifying through implementation to monitoring. One of  their  slogans is pit 2 ports, emphasizing their focus on providing  a complete solution.  They can be seen as more of a product company than a service.
• Du Pont dust suppression, Du Pont is a giant chemical company and ranks as the  84^th biggest company in the USA according to Fortune magazine (Cacace 2010:F 5). Though an extremely small part of the Du Pont organization, the resources of Du Pont make it a serious competitor. It is also worth noting that Du Pont focuses on    the Australian market. Du Pont markets Dusgon which is a water soluble polymer  with low environmental impact. Du Pont also emphasizes both the service and product side of dust suppression.
• Soilworks LLC is an American firm specializing in dust suppression. It also manufactures a water soluble polymer that penetrates the gravel or substrate and forms a hard translucent bond between particles. It is given as environmentally friendly. The economical version of the product is marketed under the colorful  name of Gorilla-snot®. This product is used extensively by the US Army in Iraq and other areas of operation where dust is a problem.

From the customer research done by the company under review, there is only one product specific complaint and that is that product cost is perceived to be expensive mainly due to the ever increasing cost of crude oil and thus the bitumen raw material.

The value added benefit of the company’s technology and management offering far outweighs the cost of  the product as all petroleum  products increase with the crude oil as   is the case for the company’s bitumen emulsion product price. Diesel, being one of the greatest cost material to the mining industry, constitutes an increased saving, from the company road management program.

1.2.2     The value proposition

In the mining environment and especially in opencast mining roads  are used to transport  raw material and machinery from the pit to the processing plants. In most cases these transport roads are dirt roads and must be wide enough for large machinery to pass each other in different directions. The distance from the slopes to the processing plants can sometimes be several kilometers. Except for continuous maintenance that has to be done  on the roads to keep it in an operational condition, dust must be controlled.

This was historically done by continuously spraying water on the roads. The company has however created an environmental friendly heavy duty bonding agent that is mixed with water and sprayed on the roads but does not leach out once bonding has occurred. The crushing and handling of the raw material create large quantities of dust which has to be controlled.

Legislation around dust management is becoming more strict and combined with the advantages of the company product offerings it assists mines to focus on their core  business, which is extracting minerals from the ground.

This is done by firstly helping mines to meet the health and safety regulations concerning dust management (with regard to bitumen and non-bitumen products) as well as providing advantages like enhancing a safe production and working environment, visibility and clarity which decreases possibility of safety incidences, all-weather product which allows for  hauling in wet and dry weather conditions, more than 5% of fuel saving, water saving more than 90%, more than 8% improvement in tyre life expectancy and a reduction in rolling resistance.

1.4         RESEARCH OBJECTIVES

The research objectives are divided into primary and secondary objectives.

1.4.1     Primary objective

The primary objective of this research is to provide formal structure within the company through the formulation of a winning strategic plan.

1.4.2     Secondary objectives

The secondary objectives of this research are:

• Analyzing the current company vision statement, mission statement and company values;
• Conducting    an    environmental    scan    by    doing    a    PEST    analysis;    (macro environment)
• Conducting a SWOT analysis and competitive capabilities; (micro environment)
• Analyzing the current strategy by assessing the competitive  advantage  and  ways of adding value;
• Analyzing the company  strategic objectives;
• Analyzing the company  financial objectives;
• Conducting an internal organizational assessment;

1.5         RESEARCH METHOD

This research, pertaining to the specific objectives, consists of two phases, namely a literature review and an empirical study.

1.5.1     Phase 1: Literature review

In phase 1 a complete review is given regarding the topic of the study, which in this case is strategic planning. Before starting with the literature search the author defined the parameters of the search to limit the search to:

• Language of publication – (English)
• Subject  area – (Strategic planning)
• Business sector – (mining  industry)
• Publication period – (2000 – 2010)

Various articles, handbooks and other literature documentation were used to provide a definition and overview of the strategic planning process. Steps in the strategic planning process, as defined by various authors are evaluated within this company context.

The first step in the strategic planning process is to  address the  questions  “Where are  we?” and “What do we have to work with?” Here the author looks at recent history and changing contexts (both internal and external) of the company to assess  its  current  position.

The second step in the process is answering “Where do we want to be?” As  the vision  stems from the values of those involved in the process, it is essential  that  this  step  involves all of those who have a stake in the achieving of the vision. The  vision  is  translated into a mission statement: a broad, comprehensive statement of  the purpose of  the agency or program. The third step in the planning process is the setting of goals that indicate the intended future direction of the organization.

After setting the vision and determining goals, means are addressed  for  reaching  the  goals. This step involves articulating strategies for achieving results. Strategies reflect the strengths and weaknesses of the departments engaged in the planning. Addressing goal measurement involves articulation of objectives, indicators, and benchmarks. Benchmarks are target levels of performance expressed in measurable terms  and  specified  time  frames, against which actual achievement is measured.

List of topics addressed:

1. Company core values, purpose and visionary goals.
2. The calculation of market share and ways to increase  this  as  well  as evaluating the marketing mix (product, place, price and promotion)
3. Conduct    a    PEST    analysis    of   macro    environmental    factors   –    social, technological, economic and political.
4. Conduct a SWOT analysis of the company internally – strengths, weaknesses, opportunity and threats.
5. Evaluate Porter’s five forces model for industry analysis – supplier  power,  threat of substitutes, degree of rivalry, buyer power and barriers to entry.
6. Determine if the company possesses competitive advantage over rival companies.

1.5.2     Phase 2: Empirical study

The empirical study consists of the research design,  participants,  measuring instrument, and statistical analysis.

1.5.2.1                Research Design

The aim of the research design involves the strategic plan for a research  project  or  research program, setting out the broad outline and key features of the work to be undertaken, including the methods of data collection and analysis to be employed, and showing how the research strategy addresses the specific aims and  objectives  of  the study, and whether the research issues are theoretical or policy-oriented  (Encyclopedia.Com, 2010).

Descriptive research – is used to obtain information concerning the current status of the phenomena to describe “what exists” with respect to variables or conditions in a situation. Descriptive research methods include case studies, observational-, survey- and archival research (MBA knol, 2010).

1.5.2.2                Advantages of survey research

The following can serve as advantages of conducting survey (structured interviews)  research (Creswell, 2009:48):

• the method can be applied to a great number of people;
• the data provided is about the current levels of thinking and anticipation of the participants; and
• it can be a useful method for discovering new insight.

1.5.2.3                Participants

According to Saunders (2007:52) the population of a study refers to the “complete set of cases or group members.”

With regards to this specific study in completing the strategic planning process self- assessment questionnaires, the population was South African individuals with specific reference to 45 junior- , middle- and senior level managers in the company. These job categories are described as:

• supervisors/site managers of the people on a specific site and shift; and
• area-, business- and operations/departmental managers whose main responsibilities are the smooth functioning of their  regions  and/or departments, ensuring that tasks are completed timely and within budgets   and people managed effectively. These 45 participants are male and female, from different ethnic groups, and different  ages,  educational  qualifications and experience.

Regarding the use of structured interviews the 10 department heads consist out of 7 white males and 3 females. The ages of all the department heads vary between 32 – 53 years of age, with different educational qualifications and experience.

This chapter is dedicated to a literature analysis where the focus is specifically on the field   of strategic planning. Within this field, the basic building blocks of strategic planning is identified and discussed.

Chapter 3: Research methodology and  results.

A comprehensive description of the research methodology and the empirical research is provided in this chapter. It firstly describes the research paradigm chosen. Secondly,  it  gives attention to the specific inquiry of strategy, the design of the sample, the data  collection process and the statistical analysis of such data. The chapter also describes the results obtained from the data collection process and the specific inferences drawn from it. The focus is thus to test the hypotheses identified.

Chapter 4: Conclusions and Recommendations.

The final chapter of the research study serves as  a method for integrating the various  results and presents the conclusions, possible comparisons as well as deviations from the normative model. Possible limitations as well as future proposals related to the study are  also addressed in this chapter.

1.7         CHAPTER SUMMARY

The main aim of the first chapter is to summarize the essential  components  of  the  research study. Consequently, the focus was on the background leading to the study, the problem as identified by the researcher, the main and specific  aims of  the research  and  the literature available. Furthermore, it addressed the research methodology of the study, including the design, data collection and analysis.

The core motivation for the study is based on the lacking formal strategic planning that defines objectives and assesses various situations within the company to be able to  evaluate and determine where the company is going over the next three years.

THE DEVELOPMENT OF A NORMATIVE MODEL

2.1         INTRODUCTION

This chapter focuses on normative models for strategic management (‘how it should be). In general, normative has two related meanings:

1. a prescriptive meaning (for example, the  rules specified in a  standard  or guideline), and
2. a descriptive meaning.

A company’s strategy is a set of action plans for conducting operations and running  the business, in order to enhance the transition from the present status quo to the envisioned successful company. It encompasses competitive moves and business approaches to ensure growth of the business and to outcompete rivals.

A winning strategy is the key to building a sustainable competitive advantage which leads to superior performance and financial results. This strategy is well suited to the future demands and characteristics of the organization’s macro and operating environment. It is fast, friendly, focused and flexible.

The building blocks of a winning strategy results in a learning organization where knowledge is transferred and employees empowered. A company’s strategy as discussed in chapter 1 is the “game plan” management has for positioning the company in its chosen market arena, competing successfully,  pleasing  customers, and achieving good business performance.

2.2         THE FIVE TASKS OF STRATEGIC MANAGEMENT

According to Thompson, Strickland & Gamble (2010:24-48), the five tasks of management include:

What kind of objectives to set

Objectives are needed for each key result managers deem important to success. Two types of key result areas stand out: those relating to financial performance and those relating to strategic performance (Pearce & Robinson, 2000:241).

Financial objectives

• Growth in revenues
• Growth in earnings
• Higher dividends
• Wider profit margins
• Higher returns on invested capital
• Attractive EVA performance
• Strong bond and credit ratings
• Bigger cash flows
• A rising stock price
• Attractive and sustainable increased in market value added (MVA)
• A more diversified revenue base
• Stable earnings during periods of recession

Strategic objectives

“Strategic objectives relate to the target outcomes that indicate a company is strengthening its market standing, competitive vitality, and future business prospects” (Thompson et al., 2010:34). Such objectives are:

• A bigger market share
• Quicker design-to-market times than rivals
• Higher product quality than rivals
• Lower costs relative to key competitors
• Broader or more attractive product line than rivals
• A stronger reputation with customers than rivals
• Superior customer service
• Recognition as a leader in technology and/or product innovation
• Wider geographic coverage than rivals
• Higher levels of customer satisfaction than rivals

Crafting a strategy to achieve the desired outcomes. Strategy making is all about how? (Pearce & Robinson, 2000:246-252):

• How to achieve performance targets?
• How to outcompete rivals,
• How to achieve sustainable competitive advantage?
• How to strengthen the company’s long-term business position?
• How to make management’s strategic vision for the company reality?

Another strategy defining consideration is the firm’s competitive scope within the industry – how many stages of the industry’s production-distribution chain it operates  in (one, several, or all), what its geographic market coverage is, and the size and makeup of its customer base. The company’s functional strategies in production, marketing, finance, human resources, information technology, new  product  innovation, and so on further characterize company strategy.

The best quantitative evidence of how well a company’s strategy is working comes from studying the company’s recent strategic and financial performance and seeing what story the numbers tell about the results the strategy is producing. The two best empirical indicators of whether a company’s strategy is working well are:

1. Whether the company is achieving its stated financial and strategic objectives; and
2. Whether it is an above-average industry performer.

It is nearly always feasible to evaluate the performance of a company’s strategy by looking at:

• Whether the company’s market share ranking in the industry is rising, stable, or declining;
• Whether the company’s profit margins are increasing or decreasing  and  how  large they are relative to rival firms’ margins;
• Trends in the company’s net profits, return on investment, and economic value added and how these compare to the same trends in profitability for other companies in the industry;
• Whether the company’s overall financial strength and credit rating is improving or on the decline;
• Trends in the company’s stock price and whether the company’s strategy is resulting in satisfactory gains in shareholder value;
• Whether the company’s sales are growing faster or slower than the market as a whole;
• The company’s image and reputation with its customers; and
• Whether the company is regarded as a leader in technology, product innovation, product quality, customer service, or other relevant factor on which buyers base their choice of brand.

A weakness is defined as what a company lacks or does poorly (in comparison to others) or a condition that puts it at a disadvantage. A company’s  internal  weaknesses can relate to:

1. Deficiencies in competitively important skills or expertise,
2. A lack of competitively important physical, human, organizational, or intangible assets, or
3. Weak competitive capabilities in key areas.

Internal weaknesses are shortcomings in a company’s complements of resources. Managers cannot properly tailor strategy to the company’s situation without first identifying each company opportunity, appraising the growth and profit potential each one holds, and crafting strategic initiatives to capture the most promising of the company’s market opportunities. In appraising a company’s market opportunities and ranking their attractiveness, managers have to guard against viewing every industry opportunity as a company opportunity.

For a company to be successful competitively, its costs must be in line with those of close rivals.

2.2.2.4 How strong is the company’s competitive position relative to its rivals?

A broader assessment needs to be made of a company’s competitive position and competitive strength. Particular issues that merit examination include (1) whether the company’s market position can be expected to improve or deteriorate if the present strategy is continued, (2) how the company ranks relative to key rivals on  each industry key success factor and each relevant measure of competitive strength and resource capability, (3) whether the company enjoys  a competitive advantage over  key rivals or is currently at a disadvantage, and (4) the forces, competitive pressures, and the anticipated moves of rivals.

2.2.2.5  What strategic issues does the company face?

The final analytical task is to focus on the issues management needs to address in forming an effective strategic action plan. To pinpoint issues for the company’s strategic action agenda, managers ought to consider the following:

• Does the present strategy offer attractive defenses against  the  five  competitive forces – particularly those that are expected to intensify in  strength?
• Should the present strategy be adjusted to better respond to the driving forces at work in the industry?
• Is the present strategy closely matched to the industry’s future key success factors?
• Does the present strategy adequately capitalize on the company’s resource strengths?
• Which of the company’s opportunities merit top priority? Which should  be  given lowest priority? Which are best suited to the company’s resource strengths and capabilities?
• What does the company need to do to correct its resource weaknesses and to protect against external threats?
• To what extent is the company vulnerable to the competitive efforts of one or more rivals and what can be done to reduce this vulnerability?
• Does the company possess competitive advantage or must it work to offset competitive disadvantage?
• Where are the strong spots and weak spots in the present strategy?
• Are additional actions needed to improve the company’s cost position,  capitalize on emerging opportunities, and strengthen the company’s  competitive position?

Figure 2.1:    A normative model of strategic planning

2.3         THE  FIVE  GENERIC COMPETITIVE STRENGTHS

When one takes away the details to look at the real substance the biggest and most important differences among competitive strategies come down to (1) whether a company’s market target is broad or narrow and (2) whether it is pursuing a competitive advantage linked to low costs or product differentiation. Five distinct approaches stand out as discussed by Thompson et al. (2010:146-148):

• A low-cost leadership strategy – Appealing to a broad spectrum of customers based on being the overall low cost provider of a product or service.
• A broad differentiation strategy – Seeking to differentiate the company’s product offering from rivals’ in ways that will appeal to a broad spectrum of buyers.
• A best-cost provider strategy – Giving customers more value  for  the  money by combining an emphasis on low cost with an emphasis  on  upscale differentiation; the target is to have the best (lowest) costs and prices relative to producers of products with comparable quality and features.
• A focused or  market niche strategy based on lower cost – Concentrating   on a narrow buyer segment and outcompeting rivals by serving niche members at a lower cost than rivals.
• A focused or market niche strategy based on differentiation  –  Concentrating on a narrow buyer segment and outcompeting rivals by offering niche members a customized product or service that meets their tastes and requirements better than rivals’ offering.

2.3.1    Matching strategy to a company’s situation

The most important drivers shaping a company’s best strategic options fall into two broad categories:

• The nature of industry and competitive conditions; and
• The firm’s own resources and competitive capabilities,  market  position,  and best opportunities.

• Pruning the product line;
• More emphasis on process innovations;
• A stronger focus on cost reduction;
• Increasing sales to present customers;
• Purchasing rival firms at bargain prices;
• Expanding internationally; and
• Building new or more flexible capabilities.

Perhaps the greatest strategic mistake  a company can make  as an industry matures is to get caught by the strategic pitfall of steering a middle course between low cost, differentiation, and focusing. Such strategic compromises typically result in a firm ending up “stuck in the middle”. Other strategic pitfalls include being slow to adapt to changing customer expectations, concentrating more on short  term  profitability than on building or maintaining long-term competitive position, waiting too long to respond  to price cutting, getting caught with too much capacity  as  growth  slows,  overspending on marketing efforts to boost sales growth, and failing to pursue cost reduction soon enough and aggressively enough.

2.3.2.2  Strategies for competing in international markets

There are two fundamental strategies to compete in international markets, namely:

• Multi-country competition exists when competition in one national market is independent of competition in another national market – there is not “international market”, just a collection of self-contained country markets; and
• Global competition exists when competitive conditions  across  national  markets are linked strongly enough to form a true international market and  when leading competitors compete head to head in many different countries.

In multi-country competition, rival firms fight for national  market  leadership.  In  globally competitive industries, rival firms fight for worldwide leadership.

Companies can realize the most from a strategic alliance by observing the five guidelines:

1. Pick a compatible partner; take the time to build strong bridges or communication and trust, and don’t expect immediate payoffs
2. Choose an ally whose products and market strongholds complement rather than compete directly
3. Learn thoroughly and rapidly about a partner’s technology and management; transfer valuable ideas and practices into one’s own operations promptly
4. Don’t share competitively sensitive information with a partner
5. View the alliance as temporary (5 to 10 years); continue longer if it’s beneficial but don’t hesitate to terminate the alliance and  go  it  alone when the payoffs run out.

2.3.2.3  Strategies for industry leaders

The company is perceived as an industry leader and, therefore, three contrasting strategic positions are open to industry leaders and dominant companies:

1. Stay on the offensive strategy – The theme of a stay on the offensive strategy is relentless pursuit of continuous improvement and innovation.
2. Fortify and defend strategy – Make it harder for new firms to enter and for challengers to gain ground. This strategy suits firms that have already achieved industry dominance and don’t wish to risk antitrust  action. Specific defensive actions can include:

• Attempting to raise the competitive ante by increasing spending for advertising, higher levels of customer service, and bigger  R&D  outlays;
• Introducing more product versions or brands;
• Adding personalized services and other “extras” that boost customer loyalty;
• Keeping prices reasonable and quality attractive;
• Building new capacity ahead of market demand;
• Investing enough to remain cost competitive and technologically progressive;
• Patenting the feasible alternative technologies; and
• Signing exclusive contracts with the best suppliers, distributors, and dealers.

1. Follow the leader strategy – The leader uses its competitive muscle to encourage runner up firms to be content followers rather than aggressive challengers. The leader plays competitive hardball when smaller  rivals  rock  the boat with price cuts, using large promotional campaigns to counter challengers’ moves to gain market share, and offering better  deals  to  the major customers.

Figure 2.2:       Factors shaping a company’s strategy

2.4         BENEFITS OF STRATEGIC PLANNING

Since the founding of the company in 1989, it has experienced phenomenal growth     in various aspects of its business. Changes in the fields of dust suppression science have been dramatic and fundamental to the very way of doing  business.  The company recognizes that it can no longer merely react to issues as they emerge. If it   is to continue as a leader in improving the profession, it must begin to anticipate   future change rather than merely react to change. The company needs  to consider  this long-term future.

Drawing on the resources it has both human and financial, it needs to continue to  grow. These resources are limited, and careful thought is given to the allocation of such resources. To meet obligations, it is essential that the company and its departments use these resources in the most efficient manner by determining priority areas on which to concentrate.

Strategic planning will help build continuity in the company’s products, the people, quality measurement systems and the instrumentation for dust monitoring.

2.5.       BASIC OVERVIEW OF VARIOUS STRATEGIC MANAGEMENT MODELS

As discussed by McNamara (2010a) there is not one perfect strategic planning or management model for every company. Each company ends up developing its own model of strategic planning, often by selecting a model and modifying it as they go along in developing their own planning process. The below  mentioned  models  provide a range of alternatives from which companies might select an approach and begin to develop their own strategic planning process. It is also important to note that companies might choose to integrate the models.

The first five models listed below are discussed briefly as per McNamara’s (2010a) research and findings.

2.5.2    Model Two – Goal-Based Planning

Companies that begin with the “basic” planning approach described above, often evolve to using this more comprehensive and more effective type of planning.

1. External/internal assessment to identify “SWOT” (Strengths, Weaknesses, Opportunities and Threats).
2. Strategic analysis to identify and prioritize major goals.
3. Design major strategies (or programs) to address goals.
4. Design/update vision, mission and values.
5. Establish action plans (objectives, resources, roles and responsibilities for implementation).
6. Record issues, goals, strategies/programs, updated mission and vision, and action plans in a Strategic Plan document, and attach SWOT, etc.
7. Develop the annual Operating Plan document (from year one of the multi-year strategic plan)
8. Develop and authorize budgets for year  one.
9. Conduct  the company’s first  year operations.
10. Monitor/review/evaluate/update the Strategic Plan document.

2.5.3    Model Three – Alignment Model

The overall purpose of the model is to ensure strong alignment  among  the  company’s mission and its resources to effectively operate within the company. This model is useful for companies that need to fine-tune strategies.

Overall steps include:

1. The    planning    group    outlines    the    company’s    mission,    programs, resources, and needed support.
2. Identify what’s working well and what needs adjustment.
3. Identify how these adjustments should be made.
4. Include the adjustments as strategies in the strategic plan

William F. Glueck (2010) developed several models of strategic management based  on the general decision-making process. The phases of this model are as follows:

1. Strategic management elements: “to determine mission, goals,  and  values of the firm and the key decision makers.”
2. Analysis and diagnosis: “to search the environment and diagnose the impact of the threats and opportunities.”
3. Choice: “to consider various alternatives and assure that the appropriate strategy is chosen.”
4. Implementation: “… to match plans, policies, resources, structure, and administrative style with the strategy.”
5. Evaluation: “… to ensure strategy and implementation will meet objectives.”

As major contribution to the strategic management process, Glueck considered two elements: “enterprise objectives” (the mission and objectives of the enterprise,” and “enterprise strategists” (who are involved in the process). This model also treats leadership, policy, and organizational factors. However, the importance of medium- and short-range planning activities of strategy implementation is omitted.

Using this model for strategic planning provides both new direction  and new energy   to the company.

2.5.9    Schematic Model

This model was developed by Peter Wright, Charles Pringle and Mark Kroll (1994). It consists of six stages:

1. Analyze the environmental opportunities and threats.
2. Analyze the company’s internal strengths and weaknesses.
3. Establish the company direction: mission and goals.
4. Strategy formulation.
5. Strategy Implementation.
6. Strategic Control.

The model begins with an analysis of environmental opportunities and threats. The company is affected by environmental forces; but the company can also have an impact upon its environment.

The next area depicts the idea that strategy formulation sets strategy implementation  in motion. Specifically, strategy is implemented through the company’s structure, its leadership, and its culture.

Then, the final stage indicates that the actual strategic performance of the company    is evaluated.

The control stage is demonstrated by feedback that connects strategic control to the other parts of the model.

• Evaluating the company’s strategic and financial objectives: Performance against formulated strategic goals is measured in the process of evaluation. This leads to a number of challenges, namely:
  • The chosen company has been growing at a phenomenal rate. Various strategic decisions with regards to products, services and company  structure have placed it in a desirable position in the dust suppression industry.
  • Rapid growth can also be dangerous. Rapid company growth can become   a challenge on its own if the internal company structure and resources do not keep up with the increased demand for product and services.
  • The challenge is to find a balance in terms of building the company into a strong international company and the increased local demand for the product and services. While the current local strategy of being a complete dust control company is delivering great returns, it risks losing focus on the product and its competitive advantages if it actively pursues growing international market share too soon.

The next chapter thus addresses the research methodology and results obtained to analyze the strategic planning and management process.

The survey method used was twofold in terms of structured interviews with the ten department heads and stakeholders within the company as well as a strategic  planning process self-assessment questionnaire that was completed by 45 junior- middle- and senior management members.

The interviews were conducted with department  heads that  have a  direct  interest and execution of the company strategy and are also responsible for the setting of goals, budgets, business growth and communication of the afore-mentioned to all subordinates.

The structured interviews took the author three weeks to complete by scheduling interviews with the various department heads and spending approximately 4 hours personally interviewing each department head.

The 45 junior- , middle- and senior level managers in the company were all included:

• Supervisors and/or site managers are located on specific sites and shifts; and
• Area, business and operations/departmental managers whose main responsibilities are the smooth functioning of  their  regions  and/or departments, ensuring that tasks are completed timely and within budgets and people managed effectively.

These 45 participants are male and female, from different ethnic groups, and different ages, different educational qualifications and  experience,  and  situated in different provinces.

The author has also addressed the objectives as set out in Chapter 1, through the interview questionnaires, regarding the company’s internal and external resources to determine how feasible the strategy is.

As per table 3.2 the sample consisted of 48.9% respondents between the ages of 31-40. It is expected that the majority of the workforce will be between these ages.

Table 3.3:      Qualifications profile of sample

As per table 3.3 the sample consisted of 55.6% respondents with a matric  qualification, 17.8% with diplomas, 8.9% with degrees and only 4.4% with a post graduate qualification.

Table 3.4:      Ethnic group profile of sample

Ethnic Group

As per table 3.4 the sample consisted of 93.3% respondents being white, with the remainder 6.7% of the sample being Indian. The findings of the study may, therefore, only be applicable to the members of the particular ethnic group,  namely  white  males.

3.3.2    Summary of demographic profile

As indicated in tables 3.1 to 3.6 the sample consisted mainly of white, male  participants between the ages of 31 and 40 and who are site managers.  In addition  the sample mainly represented the Mpumalanga region and participants who have a Matric qualification. The findings of this study may, therefore, only be applicable to members from these demographic groups.

3.4         FEEDBACK FROM INTERVIEWS

As per the personal interviews as well as questionnaire conducted with the departmental heads and management regarding the internal company analysis the following was established:

3.4.1    Components of a strategic planning process

The first step in the strategic planning process was to address the questions “Where are we?” and “What do we have to work with?” Examination of recent history and changing contexts (both internal and external) of the company allowed participants to assess current positions.

The next step in the process was answering “Where do  we want  to be?” As  the  vision stems from the values of those involved in the process,  it  was essential that  this step involved all of  those who will have a stake in the achieving  of  the vision.  The vision is then translated into a mission statement: a broad, comprehensive statement of the purpose of the company.

3.4.2    Vision statement

The current vision statement of the company is:

“We will continuously improve stakeholder value by providing world class dust suppression solutions and services, maximizing the potential of our people and technologies in a safe and healthy environment.”

The mission is supposed to differentiate the company from rivals in the industry. Proposal includes considering including “multi-national total  dust  suppression”  into the mission statement to differentiate the company from rivals.

The new proposed mission statement is:

“We will continuously improve stakeholder value by providing world  class  multinational total dust suppression solutions and services,  maximizing the potential  of our people and technologies in a safe and healthy environment.”

3.4.4    Organizational values

Table 3.7: Company values

• The current value chain involves delivering financial benefits to our customers based on the product, service and management we provide. This in turn ensures the growth, profitability of our company and its employees.
• Regular customer feedback meetings and additional quality measurement ensure that the customer’s value added benefits are being quantified. This in turn focuses the company on the ever increasing demand to perform better.
• The lack of skills, basic artisan as well as management skills has and will continue to challenge the value chain of the business. The continuous employment and training of personnel ensures that the company can deliver  the required quality standard on the customer site.
• Increasing the throughput capacity of the manufacturing facility has  reduced  the potential bottleneck of product supply.
• Allowing and encouraging our employees to further  their  education  assists with increasing the skills required to manage the more complex requirements  for the business.
• Specialized safety, auditing, certification courses are also important.
• A total product range was developed and proven, through documented case histories, during 2010. The company also invested in measurement tools such as a telemetric road scoring and planning software package together with continuous dust monitoring equipment that will allow the business to diversify and increase our offering to our customers. The mining trend is to use fewer suppliers to provide the required service. The company has developed the capability to provide more value added services through the expansion of our products and service offering.
• The above strategy will get more momentum and emphasis as all the technologies are implemented. More  technical  personnel  are  being transferred into the operations to increase the acumen of the  product  marketers and the ability for the operation unit to promote total dust control management.

Economy: The production of emulsion should be done more economically;  at  reduced cost. As mentioned under point number 1 the binding content  of  the  emulsion is checked continuously throughout the manufacturing process. Not only does this act ensure uniform quality of the final product but also translates into ensuring that not too much of the main ingredient bitumen is used. This aids economical production through the prevention of wasteful usage of ingredients.

Increased Bitumen storage capacity: Current bitumen storage capacity is  the limiting factor in the output of the manufacturing facility. The capacity is limited by the potential environmental risk of spillage pollution and thus governed by legislation.

Distribution channels utilized: The distribution channels delivering the products to the customers’ site are important. A strong product does little good if customers  are not able to easily and conveniently obtain it. Therefore, decisions regarding the following must be made to facilitate an effective and efficient distribution system:

• Arranging a reliable ordering system that allows customers to  place orders.
• Creating a delivery system for transporting the product to the customer.
• Establishing facilities for product storage.

A distribution transport company is contracted to transport the products to the customers’ site as well as transporting the bitumen from the  supplier  to  the company’s factory in specialized trucks. The benefits of outsourcing the transport of bitumen and the products are:

• Cost saving: The contractor’s core business is transportation. They are specialists in transportation and that qualifies the company to be able  to  handle the transport of the required bitumen and products at a lower cost and probably performs the overall transport better. By  outsourcing  the  transport the company can concentrate on their core business according to their  strategy.=
• Reduced Exchange Time: Not only is the contractor able to reduce the company’s distribution costs by being experienced at what they do, they are also able to perform their job more rapidly resulting in faster product delivery. With a direct transport system the emulsion reaches the intended customer’s site by distributing the product directly to the customer.

3.4.9    Competing effectively

The Porter five-force model of competition is an effective tool to identify principal competitive pressures in the market and assessing the strengths and importance of each, creating a competitive landscape (Pearce & Robinson, 2000:86-89).

3.4.9.1               Rivalry among competing sellers

The company uses bitumen as the base for their haul road application. Haul road applications provide for 95% of the revenues. Rival companies offer mainly water based dust control products (non-bitumen products), which compete with the remainder 5%  of the company’s  adjuvant products controlling dust from stockpiles,   or transfer points, or wetting the surface on non-sealed haul roads. Rivalry competition in haul road applications is low. (-)

Figure 3.1: Illustration: Porter’s Five Forces Model

3.4.9.5               Potential new entrants

Specialist knowledge is required to compete effectively. The company has trademark protection on its products, with brand recognition. Capital required for start-up as well as operating cost is high. Threat of new entry is low. (-)

3.4.9.6               Five-forces conclusion

The company has a sustainable competitive advantage in haul road sealing in the niche mining sector. Only supplier power poses a main threat.

3.4.10                 Strategic performance gaps

The strategic performance gaps were identified as:

• The company has the vision of being the number one global dust-control preferred supplier. Marketing efforts and financial investment need to be implemented in order to support the realization of favorable brand positioning and brand recognition.
• Communication lines should be improved to ensure aligned commitment and clear understanding of the company’s strategy.
• Establish S.M.A.R.T. (specific, measurable, attainable, realistic, time- based) objectives and performance goals with transparent reward and recognition for achievers.
• Underutilization of capacity should be eradicated.

In addition the participants felt that the company does not, based on  the strategic  plan, communicate strategic decisions, assign responsibility, set performance standards and manage these standards.

However as it was stipulated in the problem  statement the company currently does  not have a formal strategic plan. Consequently this finding serves as an indication for the need to develop a formal plan and to communicate this plan to all management levels.

The low scores on all categories of the questionnaire are indicative of the following:

• The company needs to conduct a strategic situational diagnosis including: the external and internal environment in which the company operates, the company’s market segment, competitors, pricing- and marketing strategy as well as operational and financial influences;
• Top management needs to identify, describe and communicate – orally and in writing – the company’s short and long-term objectives, as  well  as  the mission, vision and core values to all employees;
• Developing strategic action plans to accomplish the company objectives;
• Managing the implementation of the strategic plan including: assigning responsibilities to applicable management, developing performance standards and monitoring these standards; and
• Ensure optimization of board members and the engagement of relevant management members in strategic thinking processes.

Sound financial ratios indicate an ability to do far more than just provide total dust suppression systems in South Africa. With the declining “life of  mines”  in  South  Africa the management team of the company will have to set up a long-term plan to expand successfully outside the borders of South Africa.

The company management team seems to have made the right decisions up to now and it shows in the results and the position they placed themselves in.

With regards to the results of the abovementioned interviews held, questionnaires’ feedback as well as the high reliability of the statistics it is of the utmost importance that the company formally develops and executes their strategic plan, and communicate this to all stakeholders, management and employees.

The next chapter is the final chapter of the study. The chapter draws conclusions, makes recommendations and also highlights areas for future research.

4.2.1.1               Research and development

Outstanding chemical understanding/knowledge and continuing research and development regarding dust suppression.

4.2.1.2               Management

• Good knowledge of environmental laws that impact on the mining industry.
• Good knowledge/experience of the basic activities comprising different mining processes.
• Good industrial relations are important. Bad relations could lead to inability to provide the consistent service required as part of the contracts.

4.2.1.3               Total dust control service

• Maintenance programs are important and are a differentiating factor for the company in that it increases the competitive advantage of the company.
• Non bitumen products are important as they support the strategic aim of “total dust control”.

The company’s core area of competence is thus identified as:

• Outstanding chemical understanding/knowledge.
• Total dust control system including the non – bitumen products, the “train to apply option” and the maintenance program.

The combination of the two core competencies leads to  a  competitive advantage in the dust control industry. The company is the only known company in South Africa offering a haul road sealing solution for the mine industry with the added benefit of a maintenance program. This is a distinctive competence of the company  adding  unique value to mining companies.

Figure 4.1:     Company maintenance program

The heavy duty bonding agent that the company is using,  ensures  practically dust  and mud free surfaces after application. Bitumen is the main ingredient of the company’s emulsion used to treat haul roads and is referred to as a bitumen product, in contrast to the non-bitumen products applied to control dust on non-road surfaces, as well as water-based road applications. Bitumen emulsions are still under technological progress to ensure that it meets current and emerging engineering demands.

·        Economic conditions driving the mining sector

In the 2009 financial year, South African Mines employed almost one million people, (500 000 indirect), and contributed 8.8% directly to the GDP and 50%  to merchandise exports (Chamber of Mines, 2009). The complexity of mining activities requires attention to many variables which can affect effectiveness  and efficiency of operations. Meteorological conditions, such as wind and rain, should be taken into account, as well as geographical locations and the  geology of the surrounding area, to minimize the environmental impact. Most mining activities involve heavy load machinery which  damages  haul  roads. The mining industry has been under considerable pressure to meet Occupational Health and Safety standards, and environmental sustainability through reduced carbon emissions and water preservation.

·        Infrastructure

Since the company is internationally active, the infrastructure of the various countries plays a major role in operational efficiencies. Major factors to  consider in expanding the company internationally are:

• Cost effective sourcing of Bitumen and the production/supply of quality controlled anionic emulsion.
• Logistics in the transportation of product to remote mines within Africa, Australia and South America.
• Employment of necessary skilled personnel.
• Successful    skills    transfer    from   the    South    African   company    to international potential business opportunities.
• Language and cultural barriers.

·    Geographical area and climate

Geographical differences and high annual rainfall in various  operating countries, affect the way the company might have to apply and maintain roadways in the wet season.

·        Technology:

Eskom is the main supplier of electricity to operations of the company’s manufacturing site. This poses vulnerability, especially due to the inability of Eskom to provide sufficient supplies for the country.

·        Critical issues of the future operating environment of the company:

The company currently has only one static factory in South Africa where the emulsion is manufactured. Two mobile manufacturing units are kept on the factory premises and run once a month to ensure that all parts is kept in a working condition. Although much more electronically advanced, the mobile units each has an output of 15 000L per hour, equal to the static plant. The mobile units are currently kept for client sites that may be logistically very far from the factory. Profitability may then be maximized when the emulsion is manufactured on the particular site. Strategic satellite storage tanks on major delivery routes will assist with increased holding capacity. These mobile units should be utilized more actively, especially to increase capacity  and to  serve as a back-up during shut-downs and maintenance programs.

Objective 3: Conducting a SWOT analysis and competitive capabilities (micro environment).

“For a company’s strategy to be well-conceived, it must be matched to its resource strengths and weaknesses aimed at capturing its best market opportunities and erecting defenses against external threats to its well-being” (Thompson et al., 2010:111).

Core and distinctive competencies of the company: “A competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity” (Thompson et al., 2010:107). The company has developed core competencies in total dust control through experienced curve effects and knowledge, coupled with on-going research and development. The company thus has the distinctive competencies in providing an environmentally friendly, semi-permanent  haul road solution together with a unique maintenance service.

Summary of afore-mentioned internal company environment:

·        Personnel

The company has experienced and skilled personnel, capable of performing exceptionally well. Communication gaps do exist though and reward and recognition programs need attention. Motivation by visually exhibiting the company’s performance strategies and performance statistics will aid in  aligning commitment.

This can be done in addition to the already visually exhibited company vision and mission. Investment in personnel through continued training and skill development is essential in empowering people. Skilled and motivated people are highlighted in the company vision and mission and, therefore, the importance of placing the right people in the right jobs at the right  times with  the correct skills is crucial. The current skill level needs to be determined and developed to adhere to company requirements. Furthermore succession planning should be done in areas of scarce and crucial skills to allow the company to maintain a competitive advantage.

·        Finances

The company is in a good financial position and able to  grow at  a constant  rate due to general operational efficiencies and relative good cost control. Growth opportunities should be prioritized in budgets.

·        Machinery

Consider auditing suppliers of equipment with regards to machine availability per site and per machine type.

·        Market

The mining industry is growing rapidly worldwide although the potential nationalization of mines in South Africa poses a threat. Simultaneously environmental protection and awareness are enforced in legislation. The company has positioned itself excellently in both these areas essential  to  future sustainability.

2.           Dust Monitoring & Reporting System

DMR is a Dust Concentration Measurement system that makes use of  the  most modern technology available to measure dust concentrations along with wind speed and direction in real time.

A range of equipment with sophisticated data collection and analysis software can be supplied as part of  a dust concentration monitoring  network service  that the company will install and maintain on the client’s premises. These dust monitoring networks can range from basic systems monitoring dust concentrations in either PM2.5, PM10 or TSP to sophisticated systems measuring PM2.5, PM10 and TSP to US EPA certification (EQPM-0798-122) standards for automatic monitoring, recording and reporting. All  equipment used in these Dust Monitoring Networks is well proven,  robust and features  low cost operation, ease of use and minimal maintenance. The networks can consist of mobile units, fixed stations or a combination of both.  Mobile units   are self-contained and do not require any utility supply from the client, whilst  the fixed stations generally would require a power supply. All  monitoring  station can have various communications options installed, including radio networks, 3G (GSM), satellite or fixed line.

By making use of these dust monitoring networks, the client will be in a position to know in real time what the dust concentration levels are in and  around  their  operation, what the potential is for exceeding legal limitations and further be able to provide accurate real time reporting both internally and to external authorities when required.

Objective 4: Analyzing the current strategy by assessing the competitive advantage and ways of adding value;

The company has a sustainable competitive advantage in haul road sealing in the niche mining sector. Only supplier power poses a main threat.

The company’s strategic objectives for the period 2012-2014 include:

1.           Grow the business by targeting new customers

New customers are targeted on the continent or abroad.

• South Africa and the African continent:

Huge organic growth potential still exists in South Africa and the African continent. Expansions into Botswana, Mozambique, Zimbabwe, Tanzania and Angola promise tremendous opportunities due to the increasing mining  activities in these areas. Identifying similar opportunities should receive the highest priority.

• Intercontinental expansion:

Australia and South America is similar in size to the total African operations  with huge potential mainly due to labor  shortage  and  environmental pressure.

2.           Achieve lower overall cost by

Continuous research and development of the efficacy of bitumen emulsion, on the stabilization and binding of various aggregates, as well as the inclusion of other product technologies in the total dust control management offering.

Expanding the company’s total dust management strategy with quality control instrumentation and measurement by means of a web based road defect scoring matrix together with online dust measurement.

Lease equipment on mining sites instead of buying equipment to allow quick mobilization and flexibility in case of break-downs and expansion of the sites being worked on. Replacement equipment should be available quickly.

3.           Developing long-term supplier contracts and relationships

This will assist in ensuring continuous supply and cost efficiency. Main supplier contracts have been formed with key contractors. Having fixed contracts can achieve lower distribution cost. Ensure a back-up distributor when contractors should experience problems such as strikes or a shortage of available trucks is  recommended.

10.         Safety is a high priority

All employees should continuously be actively trained to obey safety regulations and practices of not only the company but also of the general mining industry.

11.         Prioritize ethical conduct

Ethical conduct can be prioritized by endorsing a Code of  Ethics.  Management  should be major role-players. Such a code should be openly supported by top management. All the levels of management should live the Code of Ethics.

12.         Continue environmental protection practices

13.         Societal impact

Add value to communities by continuing to use local employees on the local mining customers’ sites and undertake community uplifting projects such as funding or managing a vegetable planting project or providing a  local,  less  privileged  school with some lacking necessities, or feeding scheme. (The mining  companies  also  prefer to be associated with companies involved in community improvement).

14.         Focus on individual mine management buy-in

Strong resistance to change amongst new  mine  management  has  been encountered. It is strategically important to convince key leaders on mining sites  of  the fast payback and high return on their investment with the company.

Objective 6: Analyzing the company financial objectives

“Financial objectives relate to the financial performance targets management has established for the company to achieve” (Thompson et al., 2010:34).

Table 4.2:      Company’s financial ratios (March – February) (Continued)

LEVERAGE RATIO’S

ACTIVITY RATIO’S

4.5         RECOMMENDATIONS

Based on the findings, conclusions and limitations of this study, the following recommendations for further research are made:

Implementation of the strategic plan as well as various action plans could be determined and executed for the company including:

1. Actions plans for expanding on future local and international scope;
2. Aggressive action plans are needed to establish the company’s global footprint.
3. Specific action plans need to be compiled with regards to company strategic aims.
4. An action plan should be set up for the internal growth of the company. It  is important that the company sets out its internal infrastructure and resources in such a way that it is able to support expansion efforts either within the South African boundaries or in Africa or even elsewhere in the world.
5. Internal departmental action plans need to be established for all departments within the company.
6. Feasibility studies could be done regarding economic-, operational-, schedule-market-, resource-, cultural- and financial feasibility within the South African borders and abroad.

4.6         CHAPTER SUMMARY

This chapter discussed the conclusion, the limitation of the study, and made recommendations for management as well as for further research.  Herewith  the  study is concluded.

WRIGHT, P., PRINGLE, C. & KROLL, M. 1994. Schematic Model. Available from: http://www.introduction-to-management.24xls.com/en231 (Accessed 6 November 2010).

APPENDIX A:

STRATEGIC PLANNING PROCESS: SELF-ASSESSMENT QUESTIONNAIRE

APPENDIX C:

LETTER FROM LANGUAGE EDITOR