Strategic business plan development and implementation

Strategic Business Growth Plan for:

For Fiscal Years 2002-2009

Green Forest, Arkansas 72638-1900

Mr. Clint Horton, Proprietor

Offering quality agricultural structures since1992

-1.0 Executive Summary

-2.0 Vision

-3.0 Market analysis

-4.0 Competitive analysis

-5.0 Strategy

-6.0 Products/services

-7.0 Marketing and sales

-8.0 Operations

Strategic Plan

-10.0 Financials

-11.0 Conclusion

Horton Contracting is a sole proprietorship licensed in the state of Arkansas as a general contractor. The company has been in business since 1992. Horton contracting began with the business of building agricultural buildings such as poultry houses, barns, and small shops. They began with a single shop in Arkansas and since their beginning, have expanded their business to Missouri and Oklahoma. They have expanded their products as well to include commercial buildings, residential homes, and concrete projects. They serve as a sub-contractor for other construction companies such as excavators and masons.

Currently Horton Contracting fluctuates between 10 and twenty employees, depending on work volume. Due to their success, Horton Contracting has been experiencing growing pains. Their business volume is currently expanding faster than their current facility and resources will allow. Inventory and Equipment continue to increase and at this time all tracking is done manually. As a result, minor supervisory problems are beginning to occur.

The company's most pressing need is that of its currently inadequate facility. The company's second most pressing issue is that the bookkeeping and office functions are currently located in the Horton's home. This is inconvenient for the Hortons and customers alike. Office functions need to be located in a different facility. The third issue is that inventory and bookkeeping needs to be computerized as the manual methods are too cumbersome with the increased volume. The company needs office equipment to continue to operate efficiently. The final situation, which needs addressed is that with an increasing number of employees and contracts to handle. Mr. Horton will no longer be able to handle shop supervisory tasks in addition to job bids and proposals for new work. It will be necessary to hire a shop manager to take over routine production tasks, freeing Mr. Horton to continue to expand the business.

2.0 Vision

It is the company's plan to continue to improve the operating efficiency of the current operations. The company will increase its profits by improving efficiency and by lowering costs associated with the current system. In the next seven years, Horton Contracting will open a retail division, providing metal building supply. This division would specialize in the specialty items needed for metal buildings. It would carry screw guns, other hand/power tools, various types of screws, closures, and trim. This will begin small and then work up to carrying the metal and other materials needed for the steel trusses and supports. They will explore the possibility of becoming a distributor for the larger companies, offering pre-fabricated buildings. Horton construction would offer assembly crews to build the building for the customer.

3.0 Market analysis

Currently, the non-residential construction industry is operating at a record volume, according to Jay Bryson, an economist with the North Carolina based First Union Corp. He feels that the non-residential construction sector should not be impacted by the recent economic slow-down, especially if the slow down is short-lived. Bryson expects a 5% decline in the beginning of 2002 compared to the beginning of 2001. He does not expect this decline to be severe. [Construction Writers Association, 2001]

According to the U.S. Census Bureau, an estimated $91.2 billion dollars was spent on non-residential construction in 1992. This excluded buildings of 1,000 square feet or less, and industrial, agricultural and buildings owned by the government or public utilities. [U.S. Census Bureau, 1999] In the 2001 Arkansas Economic Report issued by the Arkansas Department of Economic Development, overall construction in Arkansas is expected to increase 8.32% by 2005, 15.62% by 2010, and 22.35% by 2015. Non-residential construction accounts for 4% of the total construction in the state.

The target market for Horton's construction consists of small to medium businesses and residential customers. Most of the customers served by Horton's Contracting will depend on the buildings provided to help sustain their own business. Typical residential customers use the buildings primarily for storage.

Although price is important to Horton contracting customers, quality is more important to them than price. They want a durable building, which will be functional for their needs. The customers are willing to pay a slightly higher price for Horton's buildings compared to their competitors due to two factors. Horton's is the only supplier within two hours of their current location. Shipping materials for their product can be quite expensive. Horton's has a reputation for quality, and customers are willing to pay more for the perception that they are getting a better product and better service.

4.0 Competitive analysis

Horton's primary competitors are companies of the same size as themselves, but located more than two hours away. Horton's business has been built on the concept of concentrating on and attracting local business.

Several nationwide chains offer the same products. However, their prices are higher and they do not give the personal service and quality that is offered by Horton's. The major stores offering similar products are Lowe's Building Supply, HQ Home Improvement, and Builder's Square. These companies offer the supplies to build similar buildings to Horton's as well a building plans and some technical advice, but do not construct the buildings for the customer. This limits the major stores customers to people who have the skills, capability, and time to building the building themselves. Most people do not have the desire to building the building themselves as time is valuable to them and them like that confidence in the reputation in quality for which Horton's is known.

The only threats to Horton's business would be the threat of a new business moving into the area who was in direct competition. Even if a major chain moved into the area, Horton's could still retain a large portion of the market share. Its prices would be lower and they offer personal service and stand behind their work. People still prefer this type of service to mass marketing. A major chain would be a threat simply because of name recognition. Every marketer knows that people tend to go with the familiar over the unfamiliar most of the time. This could be overcome be an advertising campaign to get more name recognition by Horton's .

21.0-5.0 Strategy

22.0 Our key competitive advantage is their past reputation and the fact that there is no local competition. This gives them virtually unlimited access to the local market and has given them the ability to expand into similar locations in Missouri and Oklahoma.

23.0 Their key weakness is the current lack of material shortages and space issues. They need more space and a computerized office functions. They cannot expand business under the current situation. There is not enough room to expand.

Their strategy involves a long-term plan to expand the existing services that they currently offer. They also seek to increase profits by lowering our costs by increasing efficiency through the purchase of equipment, such as a computer, and by streamlining production processes. They will expand into a retail market through opening a metal building division.

24.0 Implementing this strategy will take place over a seven-year period. The issues with the company will be resolved in order of importance in this seven-year plan.

6.0 Products/services

Horton's primary products are agricultural buildings such as poultry houses, barns, and small shops, commercial buildings, residential homes, and concrete projects. They serve as a sub-contractor for other construction companies such as excavators and masons.

Their products are of similar quality as their competitors. However they gain an advantage over their competitor by backing up their product with excellent service. Horton's prices are slightly higher than their competitors. However, this is still lower than the shipping and transportation costs that their customers would have to pay if the bought the same products from competitors.

Future expansion into the metal building area will gives them a greater advantage, as it broadens their product offerings. Metal buildings would be bought by the same customers who purchase the buildings offered to their current customers.

25.0-7.0 Marketing and sales

Horton's Contracting will continue to use referrals to attract new business. This has been effective in the business-to business end of customers. An advertising plan will have to be implemented in the retail end to boost sales in that area.

When the time comes to expand the retail sales and introduce the new line of metal buildings, this will be advertised by a campaign which consists of running an ad in the local newspaper, They will also take out a large ad in the local phone directory. Occasionally they will run sales on our tools and metal buildings, which will be advertised via the local newspaper.

26.0-8.0 Operations

There will be major changes in the both the number of key personnel operating the business and their duties. The key personnel currently are Mr. Horton who oversees all phases of the operations hands on. He is used to bidding on jobs and working next to his employees to complete a contract. His time is now being needed for bidding jobs and materials pricing. There is no "chain of command" or intermediate supervisor to supervise the crews. Mr. Horton's time is not being used efficiently and he needs to be able to spend more time managing the financial aspects of the business. As the size and volume of the business increase this will continue this problem will only increase.

Horton Contracting currently has one work crew. As the volume of contracts increases additional work crews will have to be added. In addition they will have to add additional supervisors to supervise the new crews.

Currently Mrs. Horton, who is currently working at the First National Bank, is now performing office functions. She performs all work manually, which is time consuming and she is not able to adequately track inventory and equipment with this system. She will need to first, purchase a computer and system to able to automate daily tasks such as inventory, scheduling, payroll, bookkeeping, billing and submitting proposals. She is currently only able to devote part-time to the business. She will have to be able to retire from the bank and devote full time to Horton Contracting in order to meet the company's needs as the volume increases.

Horton Contracting estimates that due to the current volume and workload, they will be hiring a supervisor to manage the current crew. This will free Mr. Horton to use his time more effectively for the financial management of the company. This will allow Horton Contracting to increase their volume to meet current and future expansion needs.

Currently, the inadequacy of the current facilities to meet company needs is the most pressing problem. Horton currently rents a metal shop building to store inventory, tools, and equipment. The building is 2100 square feet. The building is located on Sanford Avenue off Highway 62. It is in the city of Green Forest, Arkansas. The building is owned by Powell Steel and is directly adjacent to the Powell Steel building and office. The location off the main highway is convenient for customers. However, sharing the facility with another business has considerable disadvantages.

The space is insufficient for the growing inventory and equipment. In addition, the current space is shared with another business. When either business is busy, the parking lot becomes so congested that delivery trucks are unable to make their deliveries. Being asked to move their vehicles to accommodate the delivery trucks inconveniences customers.

The lack of insufficient storage space has not allowed Mr. Horton to take advantage of volume discounts on supplies and materials. They also need to consider the seven-year plan to expand into the retailing of metal buildings. This will require a retail store and display area for models to be set up and shown to customers.

There are two possible solutions to solving this problem. First, we could expand the existing structure to meet our needs. Or we could move to a different facility that better meets our needs.

The first possibility of expanding the current facility to meet company needs has both advantages and disadvantages. The first advantage is that they like the convenience of their current location off of Highway 62. As stated before, this is convenient for both customers and employees. Renting another facility would be very costly. Expanding the current facility has several disadvantages in addition to the high cost. The first one is that it still does not solve the parking problem. Unless the existing building is moved, the parking lot cannot be expanded. Secondly, there is not sufficient additional space on the property to place a building of adequate size to meet long-term needs. Inevitably, the facility would have to be moved again before the end of the seven-year plan. A third issue in keeping the existing facility is that Powell Steel uses the existing space outdoors to store additional materials for themselves. It is unlikely that they would allow us to build in a way which inhibited their storage space, placing them in a similar position to the one being experienced by Horton now.

Building a separate building is the second choice. This option allows Horton to customize the building to meet both current needs and future plans for expansion. In addition, renting a facility gives Horton no tangible assets in the end and there is always the possibility that the current owner will terminate our contract or sell the facility, forcing us to move. If they purchase thier own land and build their own building, not only can they customize it to meet needs, it would be a tangible asset for the company. Future expansion projects could be more easily financed using the equity built by the ownership of the building and land.

In selecting the location for the future building, we will consider several factors. As our business depends on the steady supply of local traffic, they will try to find a tract of land close to the present facility. They would also like to find a tract of land, which is of sufficient size to allow for expansion, if needed beyond the first seven years, in order to avoid having to start this process again from the beginning.