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In the volatile climate of post 2007 recession, corporate strategists face a number of problems when developing strategy for their companies (Robbin, 2015). They are; increasing low demand for goods and services, and negative psychology of fear and hesitation in the marketplace, which creates a negative feedback loop. In lieu of this, corporate strategists face the problem of how to be flexible in a way that gives their company what it needs, without exposing it to risks that seem hard to justify to management and investors (Swaim, 2010). Corporations do not want to commit to hiring permanent staff until a worldview of growth is clear (Robbin, 2015). This is especially true in construction, as the use of agency workers has dramatically increased (Netscher, 2014).

According to Drucker (1961), the three basic strategic approaches possible are; offensive or progressive, defensive or conservative, and Guerrilla or niche strategies.

2.20.1 Offensive or Progressive Strategy

An offensive strategy is basically a growth strategy (Robbin, 2015). It aims at overcoming the barriers to goal achievement by changing the systemic relationships creating them (Three Sigma, 2015; Swaim, 2010). According to Durant and Durant (2010), “nature loves competition and rewards successful offense” and therefore, successful offense in business are rewarded because business reflects the same dynamics as nature. Robbins (2015) states that launching an offensive strategy requires

60 boldness, which includes an element of risk. Therefore, the corporate strategist is vested with the responsibility of risk-reward analysis to determine the right strategy to adopt. An offense focuses on new products and/or services, new talent, new distributions channels and new customers, among other things (Chesley and Watson, 2010). Offensive strategy often requires significant capital investment and includes the following options:

 Changing or altering the competitive structure or environment in the industry the company is in (forward or backward integration, acquiring competitors, joint ventures, etc.).

 Anticipating industry competitive structural change and positioning your organization to exploit this change before others recognize it (developing substitute products, changing the mode of sale or distribution, etc.).

 Diversifying into more attractive markets (Three Sigma, 2015).

Drucker (1961) observed that in tough times, market leaders often gain market share at the expense of marginal players. This can only happen with an offensive strategy. Unfortunately sometimes the only defense is an offense. This is the case, for example, when competitors in a shrinking market can only grow, or perhaps even survive, by being offensive (Robbin, 2015).

According to Drucker (2004), Chesley and Watson (2010), and Robbin (2015), every company needs to begin its offense with an assessment of its strengths and weaknesses, as well as that of its competitors, related to the following components: cost structure, financial position, product/service niche, sourcing, customer focus, human capital, marketing and contracts. Once a company has this data, it will know its strength internally. It will also have an idea of its strength within its competitive market (Chesley and Watson, 2010). Only then will the company be able to take the next steps on analysing and planning. The company’s plan must play to these strengths in this market and in the future market.

Taking these strengths, a company must then make strategic decisions related to growth in existing markets and new markets with both current and new products and service developments (Chesley and Watson, 2010; Swaim, 2010). Growth, even in this market,

61 can be found in market share, product usage and new applications or products and services. Growth, with new and current products, services or markets, can be accomplished through joint ventures, acquisitions, mergers and restructuring (Chesley and Watson, 2010).

2.20.2 Defensive or Conservative strategy

A defensive strategy is basically accepting the industry competitive forces as a given and positioning your organization to best defend against them (Swaim, 2010). A good defense is a mandate at all times and involves managing financial risk, improving efficiencies and reducing costs. This could include harvesting and selling the business before competitive conditions cause its value to drop. Principles for managing financial risk include: reducing debt and restructuring, securing bank relationships and managing top line results and margin enhancements. Other principles include knowing the company’s daily cash position (cash on hand and credit availability), being strategic about payables and receivables so that the company pays cash later and receive it sooner, and managing the workforce more effectively and efficiently (Chesley and Watson, 2010).

According to Robbin (2015), a defensive strategy is basically one of two things: It’s either a cost-reduction strategy, where spending more won’t produce growth; or the protection of a vulnerable position. Strategies adopted for defending vulnerable positions are often designed to keep competitors out with reduced pricing to customers or increased product or service value, both of which usually require reduced costs for the company employing them (Chesley and Watson, 2010; Drucker, 1961; Swaim, 2010). In construction, reduced prices and service value may be in the form of below cost bidding or credit extension in the case of suppliers and subcontractors.

In addition, Chesley and Watson (2010), state that the company needs to ensure that it maintains its existing customer base. In other words, it is time to double down on the company’s best customers, particularly in light of the fact that new customers, in a recessionary economy, are hard to get. Finally, when it comes to reducing costs, companies need to reconfigure their inventory, they need to shed unprofitable assets and they need to maximize on their profitable assets. Reducing costs may also mean

62 divesting non-core business products and services, and rethinking pricing strategies, as well as reviewing and renegotiating existing contracts (Chesley and Watson, 2010).

2.20.3 Guerrilla or niche strategy

This strategy aims at minimizing or neutralizing barriers by reducing the size of the playing field and taking an offensive or defensive position in a smaller, more attractive market segment. Companies in serious recessionary times would adopt this strategy (Rowson, 2009).

Sometimes, during a turnaround, an offensive strategy isn’t available at all, or isn’t available with existing resources at an acceptable cost and risk. This can happen, for example, in an economic recession with fewer buyers of a high-priced product (Rowson, 2009). In this case, maybe there’s no alternative to a defensive strategy. Generally if opportunities for growth and market share exist with available resources with acceptable cost and risk, businesses favour an offensive strategy. If these aren’t available, then the defensive strategy is left by default (Robbin, 2015).

Which is the best strategy? Drucker (1961), states, "taking a defensive position can, at best, only limit losses. And we need gains." An offense focuses on new products and/or services, new talent, new distributions channels and new customers, among other things (Chesley and Watson, 2010). However, Drucker went on to say that it is impossible – theoretically as well as practically to predict in advance whether one strategy will succeed over another. Just as most medicines have side effects, so also most corporate solutions have side effect. Whatever strategy is chosen will have its distinct issues. The goal is to adopt the strategy that will handle the situation with minimal side effects.