Introduction
In recent years, the belief that a firm’s internal elements are more critical to its growth and sustainability than external factors has gained momentum. Many researchers have resorted to concentrating on this concept, often referred to as a resource-based view of a firm’s business strategy in management, marketing, internalization, and human resource management, finance, and internal accounting aspects (Barney, 2007). Many studies suggest that internal threats in a firm can cause serious concerns as they are more likely to drive business success down the drain. Still many believe that internal threats create external threats, as the former is likely to drive customers away, opening up for competitors to exploit a firm’s weaknesses (Barney, 2007). In a study to establish factors that ignite employee performance, some of the issues that are likely to fuel internal threats were identified as; poor company culture that leads to internal politics, the unhappy employee who would badmouth the company as well as share the company’s weaknesses with other people including customers, the employee who does not have a sense of belonging within the company partly due to lack of motivation, insufficient skills, insufficient tools to do the work, lack of financial accountability, outdated technology, and management and interdepartmental conflicts (Drake, Gulman & Roberts, 2005, p.76).
Capital Land Limited, registered as “Capital Land” in Singapore, is considered one of the biggest real estate companies in Asia. Headquartered in Singapore, the company’s primary business is focused on real estate, the hospitality industry, and financial services (King, 2010). The company has concentrated its businesses in major cities in the Asian Pacific region, European countries, and countries within Gulf Cooperation Council. At present, the company’s real estate and hospitality business initiatives have spread in well over one hundred cities across the regions highlighted above. Notably, the company has managed to leverage its asset base, superiority in real estate as core business, established an edge in its finances, and broadens its network of markets as the real estate products are developed within Singapore and other regions of operations (King, 2010). However, recent years have seen the company’s profit margin face a downward trend, despite its heavy investments in the international market expansion initiative. This paper is based on the analysis of Capital Land Limited and its internal resources that have been attributed to the drop in profit margin over the last four financial years. The analysis specifically focuses on Capital Land’s human resource management and information system and technology management-related issues, as key areas that form critical aspects of the firm’s internal resources as the basis for key competencies and competitive advantage.
Capital Land’s Declining Profitability
Although it is one of the biggest real estate companies in Asia and that its core competencies have been rooted in its strong asset base, Capital Land has experienced a declining fortune in its profitability in recent years. In the 2008 financial year, the company recorded a profit of about $1,947 million, a significant drop of 27% from the 2007 financial year (Bharat Book Bureau, 2009). The group’s operating profit stood at $1,301 million in the 2008 financial year, a 20% drop from the 2007 financial year (Bharat Book Bureau, 2009). The biggest drop was in the net profit, which recorded $1,034 million in the 2008 financial year, a drop of 54% from the 2007 financial year (Bharat Book Bureau, 2009). The reduced profitability of Capital Land was attributed to the increased cost of operations from its expansion strategy initiatives during the last 4 years. However, various market trends have shown that a firm’s expansion strategy does not necessarily lead to reduced profitability as experienced by Capital Land. Instead, a firm should have a bigger profit margin from an expanded market reach. The success of a firm’s expansion initiatives is based on its ability to retain its core business initiatives through internal resource base as the areas of key competencies (Barney, 2007). This concept can be linked to Porter’s five forces framework.
Capital Land SWOT Analysis Overview
Capital Land Strength
The success of Capital Land is seen in its ability to spread its operations in more than 100 cities across Asia and Europe. With core business ventures in real estate, the hospitality industry, and real estate financial services, the company boasts of a wide network of operations that have seen it plunge heavy investment capital into the international expansion strategy (King, 2010). Capital Land’s global operations have enabled it to cater to its diversified customer base. Basing its expansion on focused research and development activities, Capital Land has managed to build a strong portfolio in the international market (King, 2010).
With its persistent corporate culture, the company has managed to expand its business across Asia and Europe with ease despite the varied business cultures across the nations. It is noted that Capital Land’s subsidiary, Capital Land China is highly endowed with a highly skilled management team, who have a lot of commitment and show a continuous sense of devotion to their work (King, 2010). Within its globalization strategy, the company has managed to localize its operations to the respective countries of operations to match the cultural diversity. They also developed strong working relationships with governments of the respective nations. However, intense competition in the industry has seen the company’s overall profit margin go down according to the recent financial reports.
Capital Land Weaknesses
Despite having a strong ability to spread its operations to the global market, Capital Land has not managed to develop a strategic human resource strategy. Significantly, its subsidiary company in China, Capital Land China is the only one that has surpassed the standards for strategic human resource management. This has subsequently seen Capital Land China contribute to 31% of the parent company’s profit, despite taking a mere 7% of the parent company’s total investments (King, 2010).
The other critical aspect that Capital Land has not exploited is to adopt strategic information systems and technology to increase its key competencies. The nature of the real estate industry requires that a company adopts an advanced technology that allows an automatic clearance of part of the company projects after some few operational years and even an automated way of returning capital stocks as well as profits to the shareholders across the globe (Mata, Fuerst & Barney, 2005). It must be noted that such a form of technology should be integrated with the operations of the entire business unit to leverage the key competencies and boost profit margin.
Capital Land Opportunity
Urbanization has presented a lot of opportunities for real estate companies. Of particular interest is the increased urbanization in the emerging economies of the world. This phenomenal trend comes with the increased need for housing in developing cities. Capital Land has a vast opportunity to expand its business activities to venture more into the global market, albeit strategically.
Threats
Capital Land faces threats in its inability to adapt and develop a strong strategic management information system for planning and implementation. Its application of information technology just as an interface between production and consumption hinders its initiatives as the company is more focused on cost reduction rather than value addition. The company seems to lack the ability to adopt various technological initiatives to help it further its expansion initiatives.
The other important aspect of development that seems to elude Capital Land is the application of strategic human resource strategies to its global market strategies. Although Capital Land China’s success in its human resource is laudable, the overall strategy of the company as concerns human resources has not been to the standards as far as employee satisfaction is concerned (King, 2010).
Strategic Information System Management and Technology for Planning
It will be important for Capital Land to adopt a strong information system to increase efficiency in their operations. The use of information technology in different industries to gain a competitive advantage has received consistent attention in the recent past. This is because information technology is considered one of the internal resources that can define a firm’s key competencies. Although in the past many businesses focused more on how they could initiate strategic information systems that would enable them to gain competitive advantage, recent development indicates that the trend is changing (Glor, 2007, p.721). That is, many firms have changed their focus towards ensuring an integrated approach to information system implementation that would enhance operational capabilities (Conner, 2001). This is due to the reinforced knowledge that internal resources can do more to a firm than external resources, a concept that led to the increased popularity of the resource-based view of a firm’s capabilities.
To effectively complete an analysis of the strategic information systems and technology, it would be important to highlight Ward & Griffiths’ (2000) information system three-era evolution model. The model identifies three distinct and overlapping information system eras. The first era of computers of the 1960s was characterized by standalone and remotely separated from their users. These computers were mainly focused on how a firm would reduce operational costs. The 1970s through to 80s saw the second era of management information systems. It focused on how to help firms do their distribution, interconnection, management service regulations, business support, and carry out user-driven initiatives. Lastly was the strategic information systems (SIS) era, which came in the 1980s and gained more prominence in the 1990s and 2000s. SIS era helps firms network and integrate systems, increase availability and support to users, directly related to the business strategies, and boost business-to-business collaborations (Ward & Griffiths, 2000).
For effective application of the overall data processing, management information systems, and strategic information systems, Capital Land should have plans and management initiatives that go together with the present and future contributions they present to the business strategy. The problem with the current application of some technologies at Capital Land is that they are based on how the IT systems relate to one another in terms of tasks being carried out rather than how it relates to business success. However, it is critical to observe that the contribution of IS/IT through resource-based perspective presently will build on the dimension of strategy, turnaround, and support. The strategy will help Capital Land focus its efforts towards the future through components and activities such as computer-integrated manufacturing, linking producers and suppliers; turnaround applications that are likely to be targeted for future strategic value such as e-mail, e-data sharing, and many more (Deming, 2006).
A resource-based approach to the introduction of information systems is seen as a strategic way of approaching information system planning and management. However, its introduction to the firm may present complex challenges to the traditional operations of a firm, hence the need to establish ways for mitigating these challenges (Ives, Olson & Baroudi, 2006). Many industry kinds of research have revealed that the strategic planning of information systems and technology implementation is the most serious challenge that faces information system managers today (Mata, Fuerst, & Barney, 2005).
Value Chain and Critical Success Analysis
Porter & Miller (1995, p.77) believe that “every firm is a collection of activities that are performed to design, produce, market, deliver, and support its products…all these activities can be presented using a value chain”. In this perspective information technology acts as one of the major supporting ingredients of the success factor (Porter & Millar, 1995, p.78). Put differently, if a firm is in a position to discover a more superior technology to enable it to perform specific critical activities more than its competitors, it is regarded to have acquired key competencies and distinctive capabilities. The alignment of the value chain is then applied, subsequently helping the senior management to rank the steps in order of importance.
In the end, they can establish which departments are most important for the overall achievements of the strategic goals and objectives of the organization (Porter & Millar, 1995). What if Capital Lands resorted to using value chain analysis through strategic information systems and technology? A value chain is important as it enables analysis to focus more on the value addition rather than cost reduction (Ives & Olson, 2006). The generated data in the chain analysis is concentrated on the internal aspects of the firm’s operations; hence creating more value through internal information-digging that eventually defines the company’s long time goal. Put to the context of Capital Land, such a process would significantly help in the identification of critical aspects of the interrelationship between departments and subsidiaries thus boots collaboration.
Similarly, the objectives and operational tactics of the firm can best be understood through the help of critical success factors analysis. The managers can analyze the organizations’ strategic planning information system and technology to help in the interpretation of a firm’s objectives as well as operations. If well applied, Capital Land would be able to reveal the present organizational status as well as develop a structure to outline the weaknesses. According to Earl (1999, p.274), critical success factors are those areas that once approved to be satisfactory, make the firm gain a competitive advantage. However, if Capital Land wants to implement this system, their critical success factors analysis should be related to the objectives of the firm’s units that are under review instantly, rather than generalization.
Strategic Management and Human Resource Management: Capital Land’s Approach
The modern strategic management theories demand that human resources be part and parcel of the management process and form the core of strategic planning and implementation process. Considered the “most priced asset” of a company in the modern business literature, human capital strategic management (training and deployment) forms the basis for its competitive advantage (Barney, 2007). Forming part of the organizations’ three clusters of internal resources (physical, human and organizational resources), human resource is a combination of employees, training, knowledge, skills, intelligence, abilities, and many more (Barney, 2007). These factors would contribute to the general continuity of the firm through continuous skills development and management. However, to a large extent, the process of implementing strategic human resource management has eluded many firms. It is realistic to note that many firms have not succeeded in strategic human resources, as far as the few success stories in the literature are concerned.
Capital Land is an internationally recognized company, has not successfully adopted strategic human resource strategies as would be expected. In recent years, the company executives have realized the need to change and analyze their human resource capability in line with their corporate strategy. The main goal of this strategy is to enhance the ability of the company’s employees to innovate while increasing the organizational success in its corporate ventures (Barney, 2007). To foster the culture of the organization within its employees, the company has adopted an internal recruitment process. In essence, this approach is critical in the continuous advancement of organizational strategies through its corporate mission.
However, it must be noted that strategic human resource management is more than a recruitment process (Drake, Gulman & Roberts, 2005; Conner, 2001). Strategic human resources have become a more collaborative concept like never before. In short, the process of recruitment aside, the human resource department should strive to educate itself in its approach to achieve its overall goals and mission achievement.
To achieve this noble goal, Capital Land should embrace strategic human resource management, where strategic alignment of human resource issues takes precedence. This means that the ability to integrate decisions is the goal of the organization. Studies have shown that organizations that have successfully aligned their human resource management with their mission end up accomplishing their set goals with ease. In other words, human resource management is integrated within the planning process of the organization, and most importantly, places a lot of emphasis on the support mission that helps build a strong interlink between human resources and the management process.
Conclusion
The development of a firm’s strategic management has proved to be a very critical aspect of business progress. More importantly, the recent business developments suggest that internal factors, characterized by the internal resources of a firm pose a more serious threat to the success of an organization than external threats. The resource that determines internal threats are known to be related to technology, human capital, a physical resource like pieces of machinery, and the organizational management structure. Although Capital Land Company adopted a strong approach to penetrating the international markets through observing all other external factors like government regulations, cultural adaptations, and business segmentation, they still experienced a substantial loss of profit margin and subsequent low-profit operation margin. It is therefore important to note that their areas of weaknesses in information systems and technology management, and their human resource, all being internal resources were the contributors to the losses. It is therefore worth concluding that internal strategies pose greater threats to a firm’s success than external threats.
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