XYZ Construction's international expansion and vertical integration strategy

XYZ Construction

Building Towards The Future

Colorado-based XYZ Construction has built some of the more prominent structures in the state. Anyone who flies into the state through Denver will touch down on tarmac constructed by the company. Those who drive over the North Canyon bridge -- which spans a half kilometer and makes traffic from Denver to Phoenix possible -- will pass over infrastructure created by XYZ.

For those who know, XYZ is the go-to company for civil projects in the state, and increasingly in the United States at large. Over the past 20 years, XYZ has expanded across the U.S., opening field offices across the country. Recently completing the MacArthur bridge in St. Louis and the most famously, the Chicago Underground express, XYZ is fast becoming the crown of U.S. civil engineering.

Even more recently, XYZ has looked into providing its service to clients both abroad and in the U.S. private sector. XYZ stands behind the philosophy that if someone does something well then this person (or company in this case) should do as much of that thing as possible. XYZ would like other countries and other entities to benefit from its top quality construction.

XYZ's construction expertise can easily be translated into an array of private sector undertakings, including:

- parking garages and parking lots

- storage facilities and distribution centers

- private roads and airfields

XYZ's medium size (2300 permanent employees) mean than the company has the cost-cutting economies of scale of a large company, but also the efficiency of a smaller company -- bureaucratic holdups have no place at XYZ.

COST CUTTING RECOMMENDATIONS

In order to cut costs, it may be advisable to shift to a vertical integration management model. Currently, XYZ employs subcontractors to provide the concrete material, the concrete flatwork, and steel reinforcement.

If XYZ were to acquire ABC Concrete (or a similar company), the cost of materials and labor could be significantly decreased.

This model could be expanded to other aspects of the field such as steel and metal working. The upcharges often associated with third party companies could be effectively eliminated.

Consequently, the end product (the parking garage, distribution center, etc.) can be provided to the client at a discount and competitors can be undercut.