Aveng Company: A Value Chain Analysis

Introduction

Aveng is a leading infrastructural development company in South Africa. The company consists of seven different groups that have amalgamated together to form one of the leading infrastructural development companies in the world. With the competitive advantage that the company has, Aveng has been a leader in various business sectors that it is involved in. These include construction, mining, water, steel, engineering, transportation, rail, and manufacturing industries (Aveng, 2011). The company has been in operation for several decades now. Due to the high quality of services that it offers, it has managed to meet the demands of its customers. This has, in turn, increased its profitability. This has enabled it to grow and expand its services into new markets such as Asia, Europe, Australia, and the USA.

The company has a clear set vision. According to Aveng (2011), the vision of the company is to be a leading infrastructure development company providing a diverse range of construction, infrastructure, and engineering products, services and solutions for customers, sustainable profitability for shareholders, and a great place to work for employees (p. 3). The mission of the company is to build a positive and lasting legacy that its stakeholders, their families, and future generations will be proud of (Aveng, 2011). To achieve this, the company has set specific goals and objectives that are aimed at maintaining its high standards and improving the quality of its services. These services are aimed at supporting the companys involvement in the construction of iconic structures such as roads, rail systems, bridges, buildings, dams, production and manufacturing plants, and securing natural resources such as water and minerals. These are the main factors that support the economy of developing countries. They play a critical role in ensuring the economic growth and development of these countries. To support these activities, the company has maintained a rich culture that is based on integrity, honesty, efficiency, and accountability (Aveng, 2011). It also has maintained a desirable relationship with its stakeholders. Finally, the company has a long-term goal for ensuring the social development and sustainability of developing countries. These are the driving factors that have made the company to be effective, sustainable, and profitable through the years.

The main aim of this paper is to induct a value chain analysis of the Aveng group. To achieve this, an internal analysis shall be conducted to ascertain the strategy of the company. Since the Aveng group comprises several companies, collective internal analysis of the seven groups shall be conducted. This shall be done with the use of the VRIO matrix. The overall results that shall be obtained will be used to describe the competitive advantage that the Aveng group has in the market.

A focus on the Aveng group

Aveng comprises seven different companies that have partnered up to achieve common goals and objectives as a team. They are:

1. Aveng Grinaker-LTA
2. McConnell Dowell
3. Aveng E+PC
4. Aveng Water
5. Aveng Manufacturing
6. Aveng Trident Steel
7. Aveng Moolmans

Aveng Grinaker-LTA is a multi-purpose company that is based in South Africa. It mainly deals with construction and engineering. The company is involved in several business sectors. These range from infrastructure and construction to mining, power generation, and transmission, and oil and gas mining. Aveng Grinaker is found in over 30 countries all across the globe. These countries are mainly in Africa, Asia, and Australia. The company has constructed iconic structures and landmarks all around the world.

McConnell Dowell is an Australian-based company. The company has a great influence on the countries that are found in the East. This includes countries that are found in Australia and Eastern Asia. Like Aveng Grinaker-LTA, McConnell Dowell is mainly involved in construction, engineering, mining, electrical, marine, and rail industries. The company has been subcontracted into many projects. Due to the effectiveness and efficiency of its services, McConnell Dowell has managed to be among the leading companies in the East that are involved in infrastructural development.

Aveng E+PC is an African-based company. It is an engineering and project development company which can be seen from its name. The company is involved in several activities. These include; engineering, designing, and project delivery programs. The company also offers the service of running and maintaining plants. Through its effective services, the company has offered remarkable results to its shareholders. They have managed to meet the needs and requirements of most of their customers and improved the social standards through community development and the empowerment of locals.

Moving water is also an African-based company. Its main focus is to bring effective water solutions to countries based in the southern part of Africa and Asia. To achieve this, the company has developed sophisticated methods and techniques. Through these innovative technologies, the company has ensured the sustainable harnessing and use of freshwater, a resource that is scarce in most parts of the world.

Aveng Manufacturing is one of the operating companies of the Aveng group. It is involved in the provision of services and products in the field of building and construction, engineering, manufacturing, and mining. The company operates in two ways: it supplies materials and offers related services to the fields that have been mentioned above. The company is also undertaking the same activities as an independent company. The company has manufacturing plants in South Africa that are responsible for the production of goods that are exported within the region, Australia, Asia, Europe, and the USA. Due to this fact, there is a high demand for the products that the company produces.

Aveng Trident Steel is also an affiliate of the Aveng group. The company produces and supplies a variety of steel products to companies based in South Africa. It also supplies the same products to overseas companies through its diversified steelyards that are situated in many countries abroad. The company has modern steel service centers that offer high-quality work in the processing of the product. The company is also involved in steel division and tube manufacturing.

Aveng Moolmans is the last company in the chain of the Aveng group. It is exclusively involved in mining and drilling activities mainly in Africa. Aveng Moolmans owns heavy mining machinery and equipment. It mainly undertakes surface mining projects within the continent. It undertakes short-term and medium planning projects, drilling, blasting, and removal of waste from specific areas. Through its hi-tech equipment, Aveng Moolmans is one of the renowned companies in the world in selective mining.

These are the bulk of companies that form the Aveng group. To understand their strategy, an internal analysis of all of these companies shall be conducted. This will be essential since it will determine the activities or processes that specific companies have over their competitors and those that it does not. The outcome of this analysis will be used to determine whether the company shall be able to implement its strategies with its available resources and capabilities (Aveng, 2011).

Internal Analysis

Value chain analysis aims to describe various activities that the business is undertaking, and the effect that these activities have in ensuring that the business stands at a competitive advantage over its rivals (Aveng, 2011). To achieve this, the operations of a business are divided into primary activities and supporting activities. Primary activities are those activities that mainly concentrate on the production of goods and services that the company is dealing with. This may include inbound logistics, outbound logistics, operations, sales and marketing, and other related services. These activities are essential in ensuring that an organization produces its goods and services in the most efficient manner possible. This ensures that a company stands at an advantage over its rivals since it produces goods at lesser costs, and it can meet the needs and requirements of its consumers. Supportive activities, on the other hand, are those services that are not linked to the direct production of goods and services that a company deals with but ensure that the company operates effectively and efficiently. These activities include procurement, human resources management, availability of infrastructure and research, and development. These activities ensure that the goods and services of an organization are produced at ease.

To determine whether the Aveng group will be able to implement its strategy, an internal analysis shall be conducted. To achieve this, its resources and capabilities will be analyzed. Resources and capabilities are key elements that are required to efficiently transform inputs to outputs. According to scholars, resources are the factors of production that a company possesses, and capabilities are the things that a company is capable of doing or achieving given its available resources. The Aveng group, for example, owns several resources. These include infrastructure, finance, materials, machinery and equipment, technology, brands, reputation, and organization culture. With these resources, the company is capable of achieving several goals and objectives. However, it is difficult for any organization to reach its full potential. This is because not all the resources can be in perfect working conditions. The utilization of some of these resources in a firm may be high while the utilization of other resources may be low in the same firm. A firm can have superior resources but inferior capabilities. The overall performance of such a firm in the market will thus be below. This, in turn, reduces the level of competitive advantage that such a firm may have.

It is, therefore, critical for a firm to identify a resource or a capability that boosts its performance in the market, hence making it stand at a competitive advantage over its competitors. A firm can only stand at a competitive advantage if its resources and capabilities fit the VRIO criteria. Such resources should therefore be valuable, rare, inimitable, and organized (Aveng, 2011).

For a resource to be valuable, it has to enable the firm to meet its external threats. At the same time, it must be able to exploit the internal opportunities that a firm has. Once a resource achieves all these, it poses as one of the strengths of the organization. An organization should therefore strive to have more strength so that it can stand at a competitive advantage over its rivals. If a company has a rare resource then it will have a competitive advantage over its rivals. A resource is rare if it is not widely owned by other competitors in the market. With this resource at hand, the company will be able to produce unique goods or be able to reduce the costs of production through its efficiency. An inimitable resource, on the other hand, is a resource that cannot be easily substituted in the market. Such resources are therefore difficult to be acquired or produced by other firms. At the same time, they make a firm that owns them or is capable of producing them to be unique in the industry. This hence increases the level of competitive advantage that a firm has. Finally, the organizational resources within a firm are very essential. A firm that is well organized has a high chance of exploiting its resources effectively and efficiently as compared to a firm that is not well organized.

VRIO is the main base on which internal analysis relies. For a firm to be sustainable in its market and have a competitive advantage, it needs to have a mix of strong resources and capabilities. A company like Aveng, for example, is a leader in the industry of infrastructural development. To get this title, this firm must have a strong base of resources and capabilities. That is why it can outcompete its rivals in the industry. Through the VRIO analysis that shall be conducted on Aveng, we will be able to understand why the organization is a leader in its industry.

Avengs Group Strategy

Although Aveng is made up of several companies, it has managed to come up with a group strategy. With this strategy, Aveng hopes to be a leader in infrastructural development in the long run. The strategy of Avengs group has several goals. They include:

1. Increase their profitability in the short run, as well as in the long run
2. Reinstate the leadership of the corporation in various sectors of the market in Africa
3. Expand its market share in Austrasia
4. Expanding its activities to the rest of the globe to enjoy the added advantages of value chain services

The strategies will enable the firm to achieve its short-term goals, medium-term, and long-term goals. The short-term goals of Aveng are:

1. Increase and expand its activities in the sector of water and power harnessing
2. Increase the annual profits earned by the company
3. Improve the efficiency of their services through the mergers and synergies that it is involved in

Avengs medium-term goals are:

1. Expand their services in Africa and the Middle East
2. Ensure the sustainability of their services, especially in the provision of power and water
3. Become a leading rail manufacturer in Africa and Asia

Finally, the long-term goals of Aveng are:

1. Ensure its geographic growth and expansion in the rest of the world
2. Consolidate the power, rail, and water business in the globe

To achieve its short-term and mid-term goals, Aveng has been engaged in massive acquisition programs. These programs are aimed at strengthening the base of its portfolio. As a result, the company will be diversified, and it will be able to easily meet its short-term and mid-term goals and objectives. To achieve this, Aveng has optimized and redesigned its business portfolio so that it can increase the value of its shareholders. Satisfying the needs and desires of its shareholders is one of the main objectives of Aveng. These shareholders include its employees, business partners, stakeholders, investors, management, and the local communities in areas in which it is operating. To ensure that this is achieved, Aveng has strived to ensure that all its portfolio companies are profitable and command a large market share in their respective fields. Aveng has also adopted a business-led capability ideology. With this ideology, Aveng has transformed its operation from a single-based business unit into an amalgamation of several companies that have a center-led group with a corporate team. It is the team that formulates the overall goals, objectives, and strategies of the company. This ensures the strategic growth of the company. As a mid-term and long-term goal, Aveng wishes to expand its activities to almost all the geographical regions of the world. Its main aim is to be a leader in infrastructural development in emerging markets. These are mainly the markets of developing countries found in Africa and Asia. To achieve this, the company will expand into these new markets while leveraging the strengths and capabilities that it has in its home markets. This is mainly the South African market. Finally, in its strategic program, Aveng wishes to expand into new markets. These are water and power generation markets. Aveng has discovered that for African states to ensure the sustainability of their economic development, they must have a consistent supply of water and power. With the hi-tech technology and labor that the company has, it wishes to venture into these two industries and become a leader.

To implement all these strategies, Aveng needs to use its available resources and capabilities. The operation and utilization of these resources and capabilities should be effective and efficient. To determine whether the resources and capabilities of the company can sustain its strategies, A VRIO analysis shall be conducted. This is an essential step to determine whether the company can achieve its short-term, mid-term, and long-term goals and objectives.

VRIO Analysis of Avengs Resources and Capabilities

To understand whether the resources and capabilities that Aveng has made it to stand at a competitive advantage, it is essential to conduct a VRIO analysis. In the process of internal analysis, VRIO analysis is an essential step to ensure whether the resources or capabilities that a company has can make it build a competitive advantage over its rivals in the same market. The VRIO analysis shall be conducted on the Aveng group as a whole and not the individual companies that make up the entire portfolio. This will ensure that the overall strengths, weaknesses, opportunities, and threats are generalized to the company as a whole. This will also analyze to be much easier given that the supply chain of the company is diverse.

Aveng as a group has several resources and capabilities. The following are the resources that the company has at its disposal:

1. Finance
2. Diverse geographical distribution
3. Latest technology
4. A strong organizational structure and culture

With these resources, the Aveng group can engage in mining services, engineering, construction, water and power harnessing, rail construction, steelworks, and so on. Through the effective and efficient utilization of its resources, the company has managed to capitalize on its capabilities. As a result, it has managed to have stood at a competitive advantage over its rivals hence commanding a larger market share in the various industries that it is involved in.

VRIO Financial Analysis

For the year 2011, the Aveng group had annual revenue of R 34, 324 Million (Aveng, 2011). The finance of the group has been increasing at a desirable rate for the last five years. In the year 2007, the company had annual revenue of R 22, 096 (Aveng, 2011). The difference in these two figures is a result of the increase in the efficiency of the services that the company offers. Most of the revenue earned by the company comes from Aveng Grinaker-LTA and McConnell Dowell which contribute 26% and 39% respectively (Aveng, 2011). The other companies also contribute a fair share of the revenue earned by the company. Aveng Water is the only company that is not reflected in the 2011 financial report. It will start to report from the year 2012. The gradual expansion of the companys activities into new geographical regions has also played a significant role in the increase of the annual revenue of the company. It has led to the stabilization of the companys headline earnings and share capital.

For Aveng, finance is a valuable resource. This is because it plays a critical role in meeting the external threats of the company and exploits the internal opportunities that are within the company. With financial capabilities, the company has managed to expand its services into new geographical regions in the world. It has also invested a lot into research and development. However, finance as a resource is not rare, but it will be difficult for other firms in the infrastructural development industry to match the financial base of Aveng. As a result, the resource may be difficult for other firms to imitate. Finally, the company has organized its finances in a manner to meet the firms’ priorities. Finance as a resource has, therefore, made the Aveng group have a competitive advantage over its competitors.

VRIO Analysis of Avengs Geographical Distribution

Location is an essential factor to determine the success of any business entity. A business entity that is located in a strategic place stands a high chance of having access to essential factors that tend to increase their profitability and sustainability in the short run and the long run. A strategic location may make it easy for a business entity to access raw materials, manpower, access the markets, and have easy interaction with its consumers. Most of the industries that make up the Aveng portfolio are located in areas where they have strategic leverage over their competitors. This may be easy access to markets, raw materials, or labor. Most of these industries are located either in South Africa or in Australia. Here, they have easy access to their target market that, in many cases, are developing countries. The companies that are located in South Africa have easy access to the African market while the companies that are located in Australia can easily access the Austrasia market. It is in these locations that many developing countries are located. Furthermore, Aveng has opened up subsidiary branches of their companies in almost every country in the world. They have branches all across Africa, Asia, Australia, Europe, the USA, and South America. This has increased the efficiency in which the company can acquire raw materials and transform them into finished products. In addition, it has made the company have easy access to the global market. Global expansion is one of the long-term goals of Aveng.

Having a global influence is, therefore, a valuable resource for the company. This is because it can easily access the factors of production, and have easy access to its target market. Having a global influence is also a key move in ensuring that the company has a greater global market share as compared to its competitors. This resource is not rare, as any of its competitors can easily adopt and implement the strategy. This resource cannot also be easily substituted although as stated earlier, it can be imitated. However, Aveng has a thoroughly planned geographical expansion strategy that many other companies cannot adopt and implement at ease. Due to all these factors, Avengs geographical distribution in many parts of the world gives it a competitive advantage over its rivals.

VRIO Analysis of Avengs Technology

In the course of operating a business, Aveng has realized that change is inevitable. That is why Aveng has embraced technology in its operations. First, Aveng has embraced IT in its operations. Sophisticated computerized systems and programs support most of the operations that are conducted by the company. This has reduced the bulk of work that employees in the firm had to undertake, and has increased the level of effectiveness and efficiency in its operations. The company, through its research and design programs, has come up with technological innovations that have made it perform its various activities at ease. Aveng Trident Steel, for example, has modern steel service centers that offer high-quality work in the processing of the product. Using hi-tech technology, the company can produce high-quality pipes and offer steel services that its rivals cannot match. As a result, the company has managed to meet the needs and desires of its customers. Aveng Moolmans, on the other hand, is involved in mining activities in Africa. The company possesses technology and skills that have enabled it to be the leader in surface mining expeditions in the continent. At the present moment, the company has been contracted to undertake various mining activities in Southern Africa and the rest of the country. The company is also involved in independent mining expeditions.

Technology is therefore a valuable resource for the Aveng group. Most of the companies that make up the Aveng portfolio have become leaders in their specific sectors due to the use of hi-tech technology. They are thus able to utilize their manpower and produce their high products at ease. Since it is the Aveng group that knows the technology that they are using, the resource can therefore be regarded as rare. Technology can be easily imitated or substituted. However, arriving at the exact or better results is difficult. Finally, the organization is an essential factor. Aveng is organized effectively and efficiently such that the application of its technology makes the firm have a competitive advantage over its rivals.

VRIO on Avengs Organization Structure and Culture

I n any enterprise, firm, or organization the role of the management is very critical in the long-run performance of the business. The effectiveness and efficiency of the management are what determine the survival chances of an organization in the market. The management thus needs to incorporate financial, communication, information, human resource, and material skills in the running of a business (McGinnis, 2008). Managers, therefore, need to have a mixture of technical and interpersonal skills. This ensures that there is a smooth flow of things in the organization (Gitman and McDaniel, 2008). Some of the interpersonal skills that a manager needs to have are leadership, motivation, communication, and team spirit. If these qualities are applied efficiently then the organization will develop good organizational behavior.

Organizational behavior is a wide portion of management that is involved in the role of people through their acts in management (Miner, 2007). Managers use a mix of theories and knowledge in organizational behavior to achieve effective running of operations within an organization. The early theories of management were more concerned with changing the work structure of employees and improvement of their pay rates and concentrated on describing what managers should do to improve their leadership roles and skills (Hannagnan, 2007). The theories that are being used currently are somewhat different. They mainly concentrate on improving human relations and motivation. These theories concentrate much on involving the running and management of the organization. Managers, who had been successful in their careers, advanced the early theories. Academicians, who put a lot of emphasis on research in the running and management of organizations, but the second set of theories forward. They realized that there was a need for improvement in employee motivation, interpersonal skills, leadership style, and efficient use of resources. The third and final sets of theories were advanced by social scientists. These theories were an improvement or advancement of the theories that were advanced by the academicians (Human Resources, 2011).

Organizational structure is a framework that an organization uses to run its operations (Human Resources, 2011). It entails the ways and means through which an organization arranges its authority lines, communication, roles, duties, and responsibilities of individuals and departments, and how all these parts are incorporated into a single unit. Different organizations choose different organizational structures. The choice of an organization’s structure depends on the goals and objectives which the organization wants to achieve in the short run and the long run. Generally, there are two forms of organizational structures. There is a centralized form of organization structure and a decentralized form of organization structure (Human Resources, 2011). In a centralized organizational structure, all the power of the organization is concentrated on the top managerial levels. Due to the amount of power they have, the top management level exercises tight control over the affair of all the divisions or the departments which constitute the organization. On the other hand, power in a decentralized organization structure is distributed among all the departments or divisions of the organization that works in unity to achieve the goals and objectives of the firm.

Aveng has adopted a centralized model of leadership. This form of leadership is essential to ensure that all the companies that make up the Aveng portfolio work to achieve a common goal. The operations of all these companies should therefore be performed in a manner that ensures that their goals and objectives are in line with their development strategies and those of the entire group. To achieve this, the Aveng group is led managed by a Chairman, Chief Executive Officer, and Board of Directors. These are the individuals who manage the operations and activities of the entire Aveng group. The management is also responsible for ensuring that a positive relationship is maintained between the employees, shareholders, and stakeholders. In addition, it is their role to ensure that all operations are conducted effectively and efficiently, employees have favorable working conditions, the code of conduct is maintained and most importantly, the business is working to achieve its goals and objectives. Under the management are various departments. These include the human resource department, finance department, research and design, transportation, and so on. These departments ensure that all the activities of the company are conducted according to the expected standards.

An organization needs to involve employees in its affairs (Human Resources, 2011). The best approach to do this is through the establishment of teams among the workers (Human Resources, 2011). Different teams perform different tasks in which the organization is involved. Through teamwork, these different groups work together to ensure that the goals and objectives, which have been set up by the organization, are achieved. This allows different teams to make decisions concerning their operations increasing their loyalty to the firm and, at the same time, it fosters ownership. Aveng is a company that embraces teamwork in its operations. The various companies that make up the Aveng portfolio work as a team. Due to this fact, we can state that Aveng is made up of seven different teams that have similar goals and objectives. The other firms in the field of infrastructural development work as individual companies. It will be difficult for such companies to compete with a team working company like Aveng. Furthermore, each company in the team is made up of different teams. All these teams have different goals and objectives that they have to achieve within a given period. These goals play a critical role in the achievement of the overall goals and objectives of the Aveng group. Working as a team also motivates employees and gives them exposure and experience. This is essential in ensuring the effectiveness and efficiency of the company. As a result, the company can exploit the market, command a huge market share and meet the needs of its customers. This is essential to ensure the sustainability of the company in the long run.

In management, organization culture is a set of the attitudes, beliefs, psychology, and behaviors that an organization believes are best suited to follow to accomplish its goals (Human Resources, 2011). It is through this culture that an organization develops methods and procedures that enable it to deal with its members of staff, stakeholders, and other interested parties in general (Human Resources, 2011). The organizational culture at Aveng has enabled it to maintain a desirable relationship with its employees, shareholders, and other stakeholders. This is because their organization’s culture aims at the meeting and satisfying the needs and desires of all the parties that have an interest in the organization. Through its department of human resources, the organization has managed to ensure that employees have a conducive working environment, adhere to the code of conduct, and work as per the expected standards of the company. The employees maintain a warm culture between themselves and the customers that they serve.

The organizational structure and culture of Aveng is valuable resource. This is because it ensures that the company operates effectively and efficiently, hence it can meet its goals and objective and, at the same, time meet the needs and desires of the customers and other stakeholders that it serves. It is difficult for other companies to imitate this culture since it is rare. Through its organization, the company has managed to focus on critical issues hence has become a leader in the field of infrastructural development in Africa.

At Aveng, managers from all the levels of the organization, from regional settings to the CEOs, can utilize the tools of this framework to derive their unit performance. This method has proved to be a powerful tool in the management and monitoring of the units strategy. Managers can therefore communicate the cause-effect relationship that delivers the preposition of the values of their units. This method thus develops both a template and a form of communication that can be used for decimating information involving the creation of value.

According to Kaplan and Norton (2006), it is through a mix of operational perspectives that a company can succeed in its operations currently in the world (p. 103). Financial, customer, process, and learning and growth perspectives do affect corporate strategy. From the financial perspective, companies can bring about enterprise value through the allocation of resources while using an effective method (Kaplan and Norton 2006, p. 103). The aims of resource allocation can range from corporate governance, merging and acquisition of new businesses, and negotiation with external stakeholders such as governments, other businesses, shareholders, and suppliers. If this activity is done in the best way possible, then a company will create strong financial synergies. By doing so a company will have a strong financial base that will enable it to grow and expand the size of its business (Kaplan and Norton, 2006).

From the consumer perspective companies, which produce the same goods or offer the same services can integrate their services to lower the prices of their products (Kaplan and Norton, 2006). These moves aim at making their services or products to be affordable to consumers. This move creates corporate synergies across multiple businesses in the market. In doing so the businesses consumers will have goods and services at better prices and at a greater convenience than what an individual competitor would have offered (Kaplan and Norton, 2006).

Conclusion

From the VRIO analysis that has been conducted on Aveng, the resources, and capabilities that the company has been responsible for the competitive advantage that the company is enjoying. If they are properly applied, these resources and capabilities will be successful in implementing the strategies of the company. As a result, the company will be able to attain its short-term, mid-term, and long-term goals. In the end, the company shall be a leader in the various business sectors that it is involved in.

References

1. Aveng (2011) Integrated Report 2011. Aveng. 
2. Gitman, L. and McDaniels, C. (2008) The Future of Business. Dallas: Cengage Learning.
3. Hannagnan, T. (2007) Management: Concepts and Practices. London: Prentice Hall.
4. Human Resources (2011) Team Building and Empowerment. Human Resources. Web. 
5. Kaplan, R.S. and Norton, D.P. (2006) How to Implement a New Strategy without Disrupting Your Organization. Harvard Business Review, 84 (3), 100-109.
6. McGinnis, S. (2008) Organization Behavior and Management Thinking: Key Topics in Organizational Behavior. New Jersey: Jones and Bartlett Publishers.
7. Miner, J. (2007) Organization Behavior: Theory and Practice. Kingston: M.E. Sharpe Publishers.