Download - j&j Strategic Analysis

7/31/2019 j&j Strategic Analysis

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Group 1

Spring 2010


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Industria en crecimientoRegulado por las ciudades y losestados

La innovacin tecnolgica moderadaCambio en el sector de lacontratacin, debido a la economa

Fragmentado


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RivalsJ & J, Buck Electric, Power

Plus!, Daniels ElectricalConstruction Co., McBride

Electric, and ChampionElectric, Inc.

NuevosCompetidores

Energiasalternativas

SustitutosContratistaselctricos nolicenciados

Compradoresindustria, edificios

comerciales,oficinas,instituciones

educativas, sector pblico y privado

ProveedoresMayoristaselctricos

Bargaining Power

Of buyers: High Of suppliers: Medium

Intensity of Rivalry

Very high

Threat of Substitutes

None

Barreras deentrada

Bajas

Poder deNegociacin

De compradores: AltoDe proveedores: Medio

Intensidad dela rivalidad

Muy alto

Amenaza deSustitutos

Ninguno


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SuccessFactors

Weight Rating Product

Management 15 0.7 10.5Financial

Strength

10 0.4 4.0

CustomerService

25 1.0 25.0

Brand Image 35 0.7 24.5

Marketing 20 0.5 10.0Totals 100 - 74.0


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Intense competition- Low barriers to entry- Many competitorsBasis of competition- Price [esp. public sector]- Quality

- Reputation


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A few very large national competitorsBut they go after large contracts

More direct competitors include BuckElectric, Power Plus!, DanielsElectrical Construction Co., McBrideElectric, and Champion ElectricBuck Electric specializes in solarphotovoltaic

Most competitors are doingresidential construction field,whereas J & J Electric is focusedmore on commercial and public sector[classrooms]


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The target market is allresidential, commercial, industrial,and public-sector electrical-contracting work in the InlandEmpire Price-sensitivity is high,especially in public-sector bidding

Growth rate was high in residential

construction in mid-2000s Current customer needs are: quality,price, on-time completion, initialinstallation, bringing publicbuildings up to code, and energyconservation incentives


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Declining of commercial and industrialconstruction, due to recession of early 2000sEnergy Policy Act of 2005 was passed and, asa result, State and local government

legislation increasingly addressed codeupdates for older buildingsPopulation growth was increasing, creatingmore potential jobsGreater affordability and demand foralternative-energy installations such assolar photovoltaic, fuel cells, andmicroturbine-power plantsGreater demand for networked installations

and security systems


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Safe Zone


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The company is in strong financialcondition, but NIAT is declining and ACP

is too high

In 2005

Revenues increased 2.62% Current ratio is 2.82good working capital Debt-to-equity ratio is 55%good financial

leverage Cash is $108Mgood for future investment

Z2-Score is 8.57well in the safe regionHowever NIAT declined 20% to $136.9K ACP is 63.3 days


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Strong reputation for integrity,responsibility, and reliabilityStrong working relationships in the privatesectorAdditional estimator/project manager enabledJ&J to bid on larger projectsMaster Builder software allowed for moreprecise biddingAhead in the experience curveRevenues increased 2.62%Cash is $108 MillionZ2-Score is 8.6


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Capability Is thiscapabilityvaluable?

Is thiscapability rare?

Is thiscapabilitycostlytoimitate?

Is thiscapabilitynon-substitutable?

Competitiveconsequences

Performanceimplications

MasterBuilderSoftware

Yes Yes Yes No Sustainablecompetitiveadvantage

Above-averagereturns

Public-SectorProjects

Yes No No No Competitiveparity

Averagereturns

CustomerService

Yes Yes No Yes Temporarycompetitiveadvantage

Above-averagereturns

Criteria for Sustainable CompetitiveAdvantage


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Not competitive with price wars in privatesectorLimited geographic expansion into differentmarkets

Low hit rate in public-sector bidding (1 in15)Declining NIATVery high ACP because of high A/R in public-

sector projectsHigh ratio (9:1) of public- to private-sectorprojectsNo technical expertise in low-voltageapplications, alternative-energy-sourceinstallations, or system wiring


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Low barriers to entryIncreased price of raw materials

Supply shortages


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How can J&J

expand into private projects?

expand into other sectors and othergeographic areas? keep up with its competitors?


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Should J&J reduce its ratio of public to

private projects?

pursue more community-college anduniversity bond projects? become a general contractor? broaden its services offered to

include home-audio or securitysystems, low-voltage installations,or installation of alternative-energy-power sources

expand into other high-growth areas


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1. Reduce ratio of public/private

jobs2. Expand geographically

3. Offer advanced technicalservices


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Become more selective in pursuing public projectsBut pursue the lucrative community-college anduniversity bond projects

Get more residential-remodeling and commercialworkDo more market research within the growth areasForm strategic alliances with corporatedevelopments

Hire a marketing consultant to help promote thecompanys name in the private sector

Continue working closely with other generalcontractorsContinue the companys culture of outstandingservice and ethical operationsContinue current programsIncrease market shareFinance through cash and debt


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Expand to other high growth areas in SouthernCaliforniaExpand into Northern CaliforniaIncrease market shareOpen new locationsone at a timein developingparts of the Inland EmpireAcquire small 13 person firms in the rightlocations that have the right skill setsContinue bidding on school and community-collegeprojectsbut now in an expanded areaImprove the hit ratio through better estimation offuture costsContinue the companys culture of outstandingservice and ethical operationsContinue current programsFinance through cash and debt


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Begin offering high-tech services such as home-audioor security systems, low-voltage installations, oralternative-energy-power sourcesIncrease market shareSeek and hire individuals (not all at once) with the

experience and expertise to install both systems andalternative-energy-power sourcesForm strategic alliances with manufacturers ofalternative-energy-power sources and telecom/networksystems

Cross-train employees in these new areasContinue current programsContinue the companys culture of outstanding serviceand ethical operationsFinance with cash and debt


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Increase revenues 15% and NIAT 10%Increase market shareAquire resources necessary to advancetechnology

Raw materials and operation equipmentHire individuals who are experienced inboth new and current systemsImplement training and developmentprogramsMarket to new and existing customersContinue the companys culture ofoutstanding service and ethical operations

Maintain customer loyalty


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If competition is severe in offeringnew advanced technical services,causing revenues to lag projectionsby 15%, then J&J should intensifyits marketing efforts


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Increase revenues 20%/yr and NIAT 15%/yrIncrease market shareOffer price incentives for first-timecustomersMaintain customer loyaltyForm strategic alliances with manufacturersof alternative-energy-power sources andtelecom/network systemsCross-train employees in these new areasStay current with the latest technologicaladvancesContinue the companys culture of outstandingservice and ethical operations


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If copper-wire costs increase, causingNIAT to lag projections by 15%, thenJ&J should use R. F. Romex wireinstead of electrical conduit


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