Doc1 strategic plan by Workforce South Pacific

PART I STRATEGIC PLANNING WORKSHOP

XXXXXXXX STRATEGY FORMULATION AND IMPLEMENTATION PLAN November 2013

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Table of Contents PLANNING OVERVIEW ................................................................................................................................ 1 1.0 SELECTION OF MISSION AND GOALS ........................................................................................... 2 1.1 VISION/MISSION ANALYSIS ................................................................................................................................ 3 1.2 STRATEGIC GOALS ................................................................................................................................................ 4 2.0 EXTERNAL ENVIRONMENT ANALYSIS ........................................................................................ 5 2.1 INDUSTRY ENVIRONMENT ................................................................................................................................... 5 2.2 OPPORTUNITIES AND THREATS ......................................................................................................................... 7 3.0 INTERNAL ENVIRONMENT ANALYSIS ......................................................................................... 8 3.1 STRENGTHS AND WEAKNESSES ......................................................................................................................... 9 3.2 SWOT ASSESSMENTS ......................................................................................................................................... 10 4.0 STRATEGY FORMULATION/SELECTION .................................................................................. 16 4.1 STRATEGIC COMPONENTS ................................................................................................................................ 16 4.2 CORPORATE STRATEGY ............................................................................................................................ 17 4.3 BUSINESS STRATEGY .................................................................................................................................. 19 4.4 FUNCTIONAL STRATEGY ........................................................................................................................... 20 5.0 STRATEGY IMPLEMENTATION ................................................................................................... 22 5.1 ORGANISATIONAL STRUCTURE ............................................................................................................. 22 5.2 INTEGRATION ................................................................................................................................................ 23 6.0 STRATEGY EVALUATION ............................................................................................................... 24 6.1 STRATEGIC CONTROL FRAMEWORK ................................................................................................... 24 6.2 BUSINESS CONTROL FRAMEWORK ...................................................................................................... 25

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Planning Overview

The purpose of this workshop is to undertake a strategic planning exercise to assist XXXXXXXX identify sets of priority goals to grow the business and increase profits. Specifically this phase focuses on identifying those strategic goals/objectives that best match XXXXXXXX’s operating and internal environments including resources and capabilities. Ultimately this workshop aims to develop a match between XXXXXXXX strategic intent (mission statements/goals), its’ capabilities and strengths within its’ operating environments. Based on these sets of analysis the required competitive strategies (corporate, business and functional levels) will be developed to align XXXXXXXX with its declared business directions (strategic goals). To guide strategy implementation, this document will also provide XXXXXXXX with directions on managing the efforts towards its business goals over the short term (2014) and medium terms (2015-‐16). Lastly this planning document will provide the means for XXXXXXXX to ensure their progress towards declared goals are able to be measured/monitored and corrective action taken where required. Following from this strategic planning guide, a more detailed business plan will provide XXXXXXXX with advice and direction on the functional strategies to strengthen its internal environment, minimize the external impacts and best position the company for achieving its strategic goals over the short and medium terms. Included in the business plan document will be an assessment of organizational resources (including financial), marketing and action plans for how these goals are to achieved:

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Illustration: XXXXXXXX Strategic Planning Process

1.0 Selection of mission and goals This workshop component will now re-‐examine the mission statements (vision, mission and values), to confirm if this stills fits with XXXXXXXX’s strategic direction and to determine if the statements need to be changed. Specifically XXXXXXXX needs to decide if it’s mission statement only applies to it’s core business focus and therefore separate statements will now need to be developed for each additional business line it now engages/intends to engage in. XXXXXXXX has established its’ mission statement including vision and values and has publicly stated these on it’s web site (see below). These sets of statements act to inform all stakeholders about why the organization exists and what it should be doing. The mission statement makes clear the organization’s purpose, values and strategic directions. More specifically the XXXXXXXX mission should also indicate XXXXXXXX’s target customers and markets, main products and services, territories, its’ plans for growth and profits and public image.

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1.1

Vision/Mission Analysis

Please review in line with XXXXXXXX current and intended directions to see of these statements need changing or if separate mission statements are now needed for each new business direction. Then use the table below to make any changes or to develop new statements:

XXXXXXXX SERVICES Our Purpose: XXXXXXXX provides quality maintenance services to leading mining operators across the South Pacific and S.E.Asia regions, for Sag and Ball Mill relining and fixed plant maintenance. We are also pursuing additional growth opportunities using other current capabilities. Our Strategic Goals: To grow our Sag and Ball Mill relining market share in the South Pacific and S.E.Asia regions by 5% over the medium term to 2015. To increase our new business directions using our additional capabilities to grow additional revenue by X% by 2015, within our primary market Papua New Guinea. Our Vision: To be sought after by customers, suppliers and employees alike, as the leading mining reline and fixed plant maintenance provider in the South Pacific, for mutual benefits and success. Our Mission: To provide "best practice" and incomparable Sag Mill and Ball Mill Relining services to the mining industry with Safety and Innovation at the fore. To provide “best practice” and “incomparable” fixed plant maintenance services to the mining industry with Safety and Innovation at the fore. To provide quality services to additional industries through our highly experienced and cost effective workforce and through our safety culture. Our Values: Integrity: to act in a manner which brings about respect and mutual trust towards each other

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Commitment: to complete jobs on time, within budget, to our clients' satisfaction Safety: to ensure every day is a safe working day, without compromise Resourceful: to be initiative and provide innovative solutions to issues that may arise Committed: to be committed to "our vision", "our mission" and "our values" Table: XXXXXXXX Mission Statement Analysis

WHAT IS OUR PURPOSE?

Comments

List XXXXXXXX main services Relining Fixed Plant Maintenance Mines through PNG, Solomon’s & Laos Price, Flexibility, Response times

(Scope of Operations): What products and services do we deliver? (Resource Deployment): Where and when do we deliver our products and services? (Distinctive Competence): What is our competitive advantage?

List XXXXXXXX main customer groups Mines PNG

Which customer groups are our primary groups? Where are our primary customers?

Comments

WHAT ARE OUR VALUES? List XXXXXXXX main beliefs and ideals Flexibility, Service,

(Synergy): What tangible value do our products and services deliver to customers? What additional community and environmental benefits do we generate?

1.2

Strategic Goals

Ideally the setting of business directions as goals should be done after the XXXXXXXX internal and external operating environments have been assessed. However this workshop session acts to align these directions to assist in developing the mission statements. These goals will then be prioritized after an initial assessment of the internal/external environments (SWOT/Industry analysis), in the following sessions:

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Table: XXXXXXXX Mission Statement Analysis

WHAT IS OUR DIRECTION?

Comments

List XXXXXXXX short-‐term objectives (next (Strategic Goals): 12 months: 2014) (KISS -‐ keep it simple, Specify what XXXXXXXX aims to achieve short and specific-‐e.g. measurable, feasible during 2014 and time-‐limited) • To consolidate and increase our current clients within SE Asia and PNG • XXXXXXXX to have all internal policies and procedures in place • Have all vehicles gainfully employed

List XXXXXXXX medium-‐term objectives (next two-‐three years: 2015-‐16) (KISS -‐ keep it simple, short and specific-‐e.g. measurable, feasible and time-‐limited)

Specify what XXXXXXXX aims to achieve for 2015-‐16 • To be the leading reline and fixed plant maintenance company in the South Pacific • To have international and fixed plant maintenance contracts in place.

2.0 External environment analysis

This session now calls on XXXXXXXX to scan its’ external operating environment, to identify and make assessments on potential risks and commercial opportunities, as measured against XXXXXXXX strategic goals. Generally the environmental factors (macro) assessed include economic, financial, political, legal, social and competitive elements in the current and intended markets that XXXXXXXX identifies (SWOT). This session will also examine the effects of specific industry factors that XXXXXXXX currently serves and/or plans to engage, in the operation of its business activities (Five Forces).

2.1

Industry Environment

This form of analysis is to further understand for each XXXXXXXX strategic goal, how potential competitive factors that exist in each business market, will impact on levels of profits, market share and other key success indicators. This type of understanding will assist XXXXXXXX to develop some key tactics into any final set of strategies for pursuing its’ selected goals. Rating 1 indicates minimal factor for XXXXXXXX and rating 10

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indicates important factor for XXXXXXXX. Only complete categories for which the grading is easy to assess/understood. Table: XXXXXXXX Industry Analysis

INDUSTRY FORCE

Comment

Rating (1-‐10)

FORCE 1: Threat of new entrants Barriers to entry: Costs of entering (capital resources)

The ease of entry to the market

Comment

Minimal – as we have foothold. Main offices

Level of competition

Wantok system in PNG

XXXXXXXX/competitor Cheaper overheads, locations advantages Government policy Limitation of Work Visas, Can change to current needs FORCE 2: Rivalry The extent of competition among established companies Intensity of competitive Comment rivalry: Competitive structure • Reline competitors are on site within (diversity, costs etc.) PNG • Larger companies (JDA, Air Energy) are multi-‐international recruitment companies Current industry • Mining industry cost cutting – growth rates • Localized, smaller companies entering the market place

XXXXXXXX product/service difference

located in POM

• • • •

Local Diversity Expertise Mixed international/local work teams

7 6

Exit barriers

FORCE 3: Bargaining power of buyers Customer power:

Degree of customer power

Comment

Many suppliers/few buyers (customers)

More companies are competing for contracts • Buyers are locking in prices for long periods without allowing CPI adjustments Buyers are looking for cheaper options, Logistic costs and movements within PNG expensive

Suppliers cost/price Large number

•

8 9

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INDUSTRY FORCE competitors/few buyers Product/service substitutes FORCE 4: Bargaining power of suppliers Supplier power: Importance of supply to buyer Highly specialized supply Larger number of buyers/few suppliers Supplier profitability

Comment

Rating (1-‐10)

Degree of supplier power

Comment

• •

Ability to supply to supply local labour Flexibility in mobilization

FORCE 5: Substitute products Threat of substitute products or services: Price of rival product/service Level of compatibility

Extent that different industries offer substitute products Comment

Priced competitively

Level of product/service substitution

• •

Local suppliers providing cheaper rates Lower kina = higher wages for expats

8 8

2.2

Opportunities and Threats

Work through the following list and assess which factors could result in an opportunity or threat to each XXXXXXXX business goal. Note whether the factors will have little influence (rating 1) on the goal for XXXXXXXX or whether they will have a major effect (rating 10). Table: XXXXXXXX OT Analysis

EXTERNAL FACTORS OPPORTUNITY

THREAT

RATING (1-‐10)

Economic: Current/forecasted inflation Current/forecasted FX rates Current/forecasted interest rates Current/forecasted tax

Contract Prices locked in Higher costs for Expat labour

Cheaper costs for PNG labour Invest money for short term Currently stable – able

•

Lower Kina =

7 5 8

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EXTERNAL FACTORS OPPORTUNITY rates

to forecast

Current/forecasted industry outlook

THREAT

• •

Political: Current policies (e.g. work permits, FDI rules)

•

General stability Competitors: XXXXXXXX/competitors market share XXXXXXXX/competitors pricing

•

Change of laws to dual citizenship

Threats to change visa laws • Work Permit system very specific • No visa for casual expat employment Stability in government •

• •

XXXXXXXX/competitors growth

•

Social: General safety Family ties

Remoteness

Higher expat wages = means more tax paid Threat of mine closers Dropping commodity prices

Smaller companies growing too large

•

Use of sole local labour Cost of logistics – local and internationally from PNG More competitors = harder to gain market share

• • •

Family customs Inability to save money Cost and availability of transportation

RATING (1-‐10)

3 8 8

5 6

3.0 Internal environment analysis

This session now focuses on the internal factors for XXXXXXXX such as its distinctive competence (low cost, talented workforce etc.) that provides strengths to the business. Conversely this analysis will also examine XXXXXXXX’s weaknesses (lack of management

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controls, lack of skilled workforce etc.), that might impact of XXXXXXXX’s competitiveness. Ultimately this session provides the details to develop strategies to neutralize environmental threats and overcome organizational weaknesses.

3.1

Strengths and Weaknesses

The following is a self-‐assessment, the result should lead to a clear identification of XXXXXXXX existing strengths and weaknesses. Work through the list and indicate which factors are strengths and weaknesses (1 indicates a minimal factor and 10 indicates an extremely important factor for XXXXXXXX). Table XXXXXXXX SW Analysis

INTERNAL FACTORS STRENGTH Business performance: Current pricing

Profitability Market share/growth

Sales levels

Workforce: Experience/qualificati ons Training capacity

Motivational levels Professional advisors Physical resources: Sufficient Physical &

WEAKNESS

Comment • Local labour costs

Comment • Locked in • International prices in USD therefore cannot take advantage of weaker Kina to break into markets Instability of Kina • Local PNG Company • Lack of contracts • Centralized within • Logistics the region • Enthusiasm • Lack of knowledge of Competitors • Lack of knowledge of relevant laws, legislation, or Visa requirements locally and internationally Comment Comment • Skilled reline crews • Office staff lack of industry • Local skilled labour knowledge • Provide on-‐the-‐job • Staff disbursed training throughout PNG • Agreement with Ok-‐ Tedi • Dedicated team • Lack of respect whilst on the job Comment Comment Supplied by sites

RATING (1-‐10) 8

7 8

8 8

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INTERNAL FACTORS STRENGTH Environment assets Adequate facilities Access to suppliers Financial performance: Business information systems

Internal controls Cash-‐flows/debt collection

Comment • Computerized

Access to growth funds Financial status Other:

3.2

•

Invoices processed on time

•

No outstanding debt

WEAKNESS

RATING (1-‐10)

Comment • Not all processes currently in place • System not being used to potential • Invoices not being paid on time. • Ineffectual follow-‐ up • Expenditure can get out of control

8 8 7

8 8

SWOT assessments

This session will now incorporate all identified factors as measured in the preceding analysis (Internal/external environmental scans and known industry characteristics), to develop a summary business diagnostics for each identified XXXXXXXX strategic goal: Table: XXXXXXXX SWOT Analysis

Strengths (internal factors) • People • Skilled Labour force • • • Weaknesses (internal factors) • Communication • Internal sturcture not being followed (Chain of command) • Staff will only work to duty statments • Office working Environment (Will change when we move) •

Opportunities (external factors) • Media Coverage • Sponsorship • Mining sector development within region •

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• Threats (external factors) • Kina • Competitors • Wantok system • Geographical location • SWOT analysis and brainstorming How will XXXXXXXX strengths help to take advantage of identified opportunities?

•

Low cost, highly skilled and trained (Inc. safety) reline and fixed plant maintenance labor resources will provide competitive advantages (cost, efficiency, safety), to enable XXXXXXXX compete in its target S.E.Asia markets. XXXXXXXX extensive localized knowledge (in PNG mining reline and fixed plant maintenance services) will provide competitive advantage to protect against other new entrants to the South Pacific region.

How will XXXXXXXX strengths help reduce identified threats?

•

XXXXXXXX highly experienced and skilled (Inc. safety) reline and fixed plant maintenance labor resources, will provide competitive advantages over both “Customer Power” and “Competitive Rivalry” pressures (in the South Pacific regional markets). XXXXXXXX strong financial position with limited outstanding debt, will enable the firm to pursue its declared strategic goals over the medium term and will allow XXXXXXXX to withstand the current highly competitive operating environment.

How will XXXXXXXX weaknesses restrict the business from taking advantage of identified opportunities?

•

Lack of an adequate market and competitor intelligence systems weakens the capability of XXXXXXXX accessing contract opportunities in its strategic S.E.Asia markets and/or the ability to develop effective strategies to compete locally (in the South Pacific regional markets). Higher mobilization/logistics costs both within PNG/South Pacific and between PNG/S.E.Asia regional markets increases the contract costs for XXXXXXXX and acts to constrain the growth for XXXXXXXX through accessing new local, regional and international contract opportunities.

How will XXXXXXXX weaknesses expose the business to identified threats?

•

Lack of cost competitiveness (expat labor, logistics) will further threaten the market share for XXXXXXXX (PNG, South Pacific regions) and risk loss of current contracts to the increasing numbers of lower cost new entrants (in PNG especially).

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•

Exposure to weaker base operating currency (PGK) combined with inflation pressures and static contract prices (through mining industry) will further weaken the cost competitive and profitability positions of XXXXXXXX (in PNG/South Pacific regional markets).

Based on the self-‐assessments undertaken by XXXXXXXX, the summary charts below and ratings tables (see Attachment 1) present the key challenges identified, which will help determine suitable competitive strategies to be applied. The results also show some promising areas where XXXXXXXX believes it has strengths and which provides some degree of competitive advantages.

Industry Environment: Chart 1 below indicates for the general industry environment (PNG-‐ mining) that XXXXXXXX sees its main challenges in competitive pressures due mainly to the increasing number of new reline and fixed plant entrants who are competing on lower cost base. In addition these new entrants are gaining market share due to their closer location advantages to mine sites. This is further complicated by the cultural challenges of the “wantok” system advantages they have, making it difficult for XXXXXXXX to secure new contracts. When this is added to the limited market size (PNG mines), these industry forces have combined to present real challenges to XXXXXXXX’s growth and profitability. As noted above in the “SWOT” and as rated for their industry however, XXXXXXXX has confidence in its internal labor resource advantages (skilled, diverse, low rates, mobile). Chart 1: Industry Analysis WFSP%Average,Industry,Forces,Ra7ng:,, 9%

8.25%

8% 7%

6.25%

6.50%

6.00%

6.75%

5% 4% 3% 2% 1% 0%

FORCE%1:%Threat%of% new%entrants%

FORCE%2:%Rivalry% FORCE%3:%Bargaining% FORCE%4:%Bargaining% FORCE%5:%SubsKtute% among%established% power%of%buyers%% power%of%suppliers% products% companies%

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External Environment: The “Opportunities and Threats” analysis shown below in Chart 2 indicates the increasing challenges to XXXXXXXX’s market share and growth (for PNG mining relines). Lower cost local contractors, more new entrants as previously noted, present immediate threats to the reline business for XXXXXXXX. As mentioned previously the PNG “wantok” system acts to constrain the market growth for XXXXXXXX through inability to secure contracts (reline, labor hire, plant maintenance, truck hire), due to disadvantages faced over preferred local (PNG) competitors. The general political environment provides XXXXXXXX some advantages due to anticipated dual citizenship laws, which should provide some strength to the competitive standing of XXXXXXXX in relation to its localized competitors.

Chart 2: External Analysis WFSP%Average,OT,Ra0ng:,, 9.00%

8.00%

8.00% 7.00%

6.50%

6.00%

6.00% 5.25%

5.00% 4.00% 3.00% 2.00% 1.00% 0.00%

Economic:%

Poli6cal:%

Compe6tors:%

Internal Environment:

Social:%

As indicated below in Chart 3 the “Strengths and Weaknesses” analysis has identified further challenges to XXXXXXXX’s competitive and market growth due to key constraints. Pressures due to the operating currency (PGK) are placing XXXXXXXX at competitive disadvantages for its international labor crew costs and profitability. The higher labor costs for expat reline and trade personnel (see Attachment 1) are also adding to the loss of cost competitiveness in comparison to local (all PNG) competitors. Further lack of longer-‐term contract opportunities also constrains growth and hinders sustained (continued) operations. Lack of market and competitor intelligence is also a concern for XXXXXXXX, restricting the competitive tactics and strategies for WFPS. There is however a major advantage to XXXXXXXX (mining reline) operations in their

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reduced need for investments in operating assets (P&E, site facilities), as these are provided by the mining owners.

Chart 3: Internal Analysis

WFSP%Average,SW,Ra.ng:, 8.00$

7.00$

6.67$

6.50$

6.00$ 5.00$

4.00$

4.00$ 3.00$ 2.00$ 1.00$ 0.00$

Business$performance:$

Workforce:$

Physical$resources:$

Financial$performance:$

Presented in terms of the Value Chain, XXXXXXXX has indicated some challenges including its labor resources, HRM performance, business intelligence capabilities and logistics/travel performance, where it seeks competitive improvements. In particular XXXXXXXX has identified international reline crew logistics as an emerging threat to its cost competiveness along with its desire for improved organizational alignment amongst its team and the ability to have improved competitor and market assessment techniques. Illustration: XXXXXXXX Value Chain Analysis Primary'activities 1

WEAK

MID

STRONG

Administration'Support

Fixed'Plant'Maintenance

SAG/BALL'Relining

Workforce'Labor'Costs'(Expat'reline'labor) 1 Workforce''Labor'Resources'(contractorOskills,'experience)

Support'acTviTes'

3 Other'Resources'(assets,'facilities,'P&E) 3 HRM'(team'stengths) 2 Business'Support'Systems'(intelligence'capabilities) 2 Logistics'(internationalOtravel'costs)

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Illustration: Summary of XXXXXXXX Strategic Plan !!!!!!!!!!!!!!!!!!!!!WFSP!O!STRATEGIC!GOALS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Short!term!(2014)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •!To!consolidate!and!increase!our!current!clients!within! SE!Asia!and!PNG!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •!WFSP!to!have!all!internal!policies!and!procedures!in! place!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •!Have!all!vehicles!gainfully!employed!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Medium!term!(2015O16)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •!To!have!international!and!fixed!plant!maintenance! contracts!in!place.!To!be!the!leading!reline!and!fixed! plant!maintenance!company!in!the!South!Pacific!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •!To!have!international!and!fixed!plant!maintenance! contracts!in!place

!!DISTINCTIVE!COMPETENCIES!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Low!labor!cost!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Location!advantages!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Skilled!&!experienced!labor!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Strong!debt!mgt!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Established!market!leader!PNG!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! COMPETITIVE!CHALLENGES!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Industry!buyer!power!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Low!cost!entrants!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Weak!base!currency!(PGK)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Inflation!growth!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Int'el!logistics!costs

!!!!COMPETITIVE!STRATEGIES!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! CORPORATE:!Related!Diversification!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Reline!and!plant!maintenance!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Unrelated!Diversification!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Truck!and!labour!hire!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Strategic!Alliance/Vertical!Integration!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Regional!supply!chains!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! BUSINESS:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Strategic!Business!Units!(SBU's)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •LowOcost/!Differentiation!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! FUNCTIONAL:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •TQM/!Customer!Value!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Location!efficiencies

!!STRATEGIC!IMPLEMENTATION!!!!!!!!!!!!!!!!!!!!!!!!!!!! Design/Structure:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Matrix!structure!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •SBU's!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Flat!layers!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Integration:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Wide!control!spans!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Easier!decisonOmaking!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Free!flowing!communication

!!!!STRATEGIC!EVALUATION!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Strategic!Controls:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Align!withStrategic!Goals!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Responsibility!Centres!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Internal!systems.processes!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Business!controls:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Personnel!mgt!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Policies/procedures!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Business!systems!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! •Organisational!culture

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4.0 Strategy formulation/selection

This section outlines the proposed broad strategies to be adopted to enable XXXXXXXX achieve its declared short (2014) to medium term (2015-‐16) goals having regards to the detailed assessments undertaken of XXXXXXXX’s industry, internal and external operating environments (see preceding sections 1-‐3). This will align XXXXXXXX’s scope of operation with proposed methods for engagement, enhance distinctive competencies for each business unit and improve each operational area of the value chain. This will be further detailed in the business plan document to be developed.

4.1

Strategic Components

XXXXXXXX has now assessed its operating environments in the preceding workshop components and has identified the four key competitive ingredients that will shape the sets of strategies to reduce constraints and improve operational performance and profitability:

• • • • •

1. Distinctive Competence Price (PNG labor) • Flexibility Response times • Skilled reline crews Local skilled labor • Local labor costs Local PNG company • Centralized within the region Mixed international/local work teams • Flexibility in mobilization

2. Scope of Operations /3. Resource Deployment PNG RELINE/F.P. PNG RELINE/F.P. Maintenance – Maintenance –Current Longer term opportunities: contracts: o Woodlark (Kula Gold) o OK Tedi Mining o Freida River (Xstrata) o Porgera Joint o Yandera (Marengo) Venture (JV) o Wafi-‐Golpu (Newcrest/Harmony) o Lihir Gold Limited o Mt Kare (Indochine) o Hidden Valley Mine o Inwauna (PNG Gold) http://pngchamberminpet.com.pg/mining-‐in-‐png/ Joint Venture (HVMJV) PNG TRUCKING Contracts-‐ Short term (2014) opportunities: Gov’t cartage tenders NGO project contracts Construction industry opportunities SOUTH PACIFIC SOUTH PACIFIC RELINE/F.P. Maintenance – RELINE/F.P. Longer term opportunities: Maintenance – Current contracts: o Vanuatu (Mineral deposits -‐gold, manganese, bauxite and

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2. Scope of Operations /3. Resource Deployment copper -‐ currently 18 prospecting licenses are being issued o Solomon Islands -‐ on land) http://www.cbcglobal.org/images/uploads/docs/Pacific_Island_Investment_Guide.pdf Gold Ridge S.E. Asia RELINE/F.P. S.E. Asia RELINE/F.P. Maintenance – Maintenance – Longer term opportunities: Current contracts: o Myanmar & West Thailand (Chromite, Tin) o Laos -‐ Phu Bia Mining Limited o Indonesia – BatuHijau (Gold, Copper) (PBM) Sulawesi (Gold, Silver, Copper) Tembagapura (nikel) Gunung Rosa Project (gold, silver, and base metal) Batu Hijau mine (copper-‐gold mine) Grasberg mine (Gold and Copper) East Elang project (Gold and Copper) o Vietnam -‐ Sin Quyen (Copper. gold, silver and rare earth) Thai Nguyen Zinc Refinery (Zinc) Lao Cai Cast (Copper) Thach Khe (iron ore mine) Lam Dong and Daknong (bauxite alumina) Ban Phuc (Nikel) http://indonesien.ahk.de/uploads/media/Southeast_Asia_Mining_Summit_2013_-‐ _Delegate_-‐_EKONID.pdf

4. Synergy PNG RELINE contract services PNG F.P.M. contract services • Multi-‐skilled crews • Shared skilled crews-‐labor efficiencies • Location advantage – same mine sites • Shared location (logistics) costs • Mining owner provides operating • Shares resources reduces operating assets/facilities costs SOLOMON/IS. RELINE contract services SOLOMON/IS. F.P.M. contract services • Multi-‐skilled crews • Shares skilled crews-‐labor efficiencies • Location advantage – same mine sites • Shared location (logistics) costs • Mining owner provides operating • Shares resources reduces operating assets/facilities costs LAOS RELINE contract services LAOS F.P.M. contract services • Multi-‐skilled crews • Shares skilled crews-‐labor efficiencies • Location advantage – same mine sites • Shared location (logistics) costs • Mining owner provides operating • Shares resources reduces operating assets/facilities costs

4.2

CORPORATE STRATEGY

Broadly XXXXXXXX has focused on two growth directions for its reline and plant maintenance business both in PNG/South Pacific and S.E.Asia. Accordingly there are two proposed corporate level strategies, one set of options for growing XXXXXXXX’s domestic markets and another for competing internationally:

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PNG & SOUTH PACIFIC MARKETS XXXXXXXX has adopted the Related Diversification corporate strategy for its main market in PNG and its new market in the Solomon Islands, by providing complimentary maintenance services to the local mining industry for reline and fixed plant services. This allows XXXXXXXX to develop synergies (matches) between the two business directions by rationing (spreading) its labor, logistics and management costs. Therefore it is recommended that XXXXXXXX continue to adopt this broad corporate strategic approach to its short and medium term strategic goals. There are increasing domestic competitive pressures (low cost, ‘wantok’ system, logistics etc.) and this is mirrored in the assessments undertaken, suggesting that XXXXXXXX needs to consider adopting other corporate strategy options, as compliments to diversification. In particular there is a need to consider two options Strategic Alliances and Vertical Integration (both domestic and regional markets), as both options will provide XXXXXXXX with increased equity (stake) in the reline industry across all its chosen markets. Options to pursue alignment with industry leaders in reline manufacturing, supply and mining developers, will offer XXXXXXXX some competitive tactics on how to integrate to these global and regional supply chains and provide some protection from intensifying local competition. For example XXXXXXXX may consider a strategic alliance or vertical integration option with a leading reline supplier for Asia Pacific markets and in this way may consolidate its reline maintenance contracts through this partnership. This level of collaboration may place XXXXXXXX at the forefront of early mining planning/procurements taking place between suppliers and mining developers for the Asia Pacific regions: Illustration: XXXXXXXX Strategic Alliance/Vertical Integration Options

In addition XXXXXXXX has adopted Unrelated Diversification declaring another short-‐ term business direction to secure contract opportunities for its truck fleet in PNG. This has potential benefits to the current competitive risks facing XXXXXXXX’s reline maintenance business in providing additional revenue streams and does compliment its existing labor hire business direction.

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S.E.ASIAN MARKETS XXXXXXXX has also secured current reline and plant maintenance contracts in S.E.Asian markets including Laos (PBM) and has declared both short and medium term goals to grow this regional market base. This will require consideration of an additional competitive strategy to ensure growth (sustained) is achieved in this region and in particular it is proposed that a Transnational Strategy be adopted. This option will potentially provide XXXXXXXX with continued competitive advantages through their reline and plant maintenance capabilities (global learning, skills, safety and experience), to enable perception pricing (based on how much value customer sees) of services and further growth opportunities in this regional market. This strategy option allows XXXXXXXX to provide superior reline and plant maintenance services in these low cost markets where generally their services will be suited to the operating environments and their lower cost base should provide them competitive advantages (to charge higher prices) over other contractors. Transnational strategy will enable XXXXXXXX to spread more of its cost base (from other markets) to lower its cost in this regional market and therefore provides XXXXXXXX with added competitiveness. This approach will also allow flexibility for meeting local conditions and market requirements in S.E.Asian mining environments. Some S.E.Asian FDI policies may require creation of foreign subsidiaries in their countries and mandatory employment of local labor, which may also provide benefits to adopting Transnational strategy.

4.3

BUSINESS STRATEGY

It is further proposed that XXXXXXXX consider creating Strategic Business Units (SBU’s) within its organizational structure, in order to best integrate its distinctive competencies (reline skills, global learning, safety, lower costs) to gain competitive advantages. Through creation of separate SBU’s for its PNG/South Pacific reline and plant maintenance services and another for its S.E.Asian business direction, XXXXXXXX will be able to develop improved cost and service efficiencies for each SBU and to therefore grow each SBU in each regional market. XXXXXXXX faces different competitive pressures in PNG as from the S.E.Asian markets with PNG representing a highly competitive market with added cultural barriers (‘wantok’ system). S.E.Asia reline markets present different challenges such as cost barriers due to the lower base operating currency (PGK) XXXXXXXX uses in its main PNG

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market. Creating separate SBU’s will allow XXXXXXXX to focus on each respective operating challenge and develop appropriate measures. Illustration: XXXXXXXX-‐ Business Strategy Benefits BUSINESS'STRATEGY: Competitive)Strategy: Strategic)Business)Units)(SBU's) Low5cost Differentiation)Strategy:

SBU))1: PNG)&)South)Pacific)Regions Reline)&)F.P.Maint.)Services

Spread)fixed)costs)over larger)market)base

Target)superior)value (regional)supply)chains)

SBU))2: S.E.Asian)Regions Reline)&)F.P.Maint.)Services

Better)allocate)market5 specific)costs

Customer)value)pricing (skills,)experience)etc)

SBU))3: PNG)&)South)Pacific)Regions Other)Business)Directions

Price)value)of)services for)each)SBU

Accreditations (ISO)certifications,) industry)membership)

Further it is proposed that XXXXXXXX consider adoption of a combination Low-‐Cost and Differentiation strategy, that will provide a focus on creation of lower cost reline and plant maintenance services combined with identifying areas where it can add superior value to its services. Both these competitive strategies will allow XXXXXXXX to minimize industry and local competitive threats and provide the ability to increase its prices charged (based on customer value creations). Adopting differentiation will allow XXXXXXXX to leverage its higher skills and global leaning advantages to add greater customer value to justify increased prices, especially in new markets. This strategy will provide XXXXXXXX more options to increase the public image amongst both mining owners and other reline industry representatives. Differentiation could be leveraged also through ISO certification programs, nomination to peak reline industry bodies, engaging directly in partnerships with the reline supply chains and other measures. These steps will help to set apart the reline services for XXXXXXXX and assist growth and reduce competitor pressures.

4.4

FUNCTIONAL STRATEGY

The lowest level competitive strategy that needs consideration will be to adopt key advantages through applying XXXXXXXX’s distinctive competencies (low costs, higher skills, local labor etc.), to focus the value chain activities around. Specifically functional

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level strategy will enable XXXXXXXX to develop much required improvements to its costs, HRM, customer relationships and business intelligence capabilities (to name a few). This level strategy will form the basis for a more detailed business plan to follow this document, which sets out key components to enable XXXXXXXX to pursue its declared strategic goals. XXXXXXXX will be able to lower its costs through applying experience and global learning benefits to make its reline operations and fixed plant maintenance services more efficient. This may be through rationalizing (sharing) labor and other operating resources over a larger market base. This may also include doing complex tasks in a more simple (and safer) way to reduce inputs (labor, resources) and the aim will be to apply these gains to create competitive advantages. Another aspect will be to gain location advantages from planned market expansion to other lower cost regions like S.E.Asia, in order to create cost efficiencies through using lower cost labor in market (if possible). This will greatly benefit XXXXXXXX where their local reline labor costs are increasing in one market and there are opportunities to access (after training), lower cost labor in a new S.E.Asian or other South Pacific market. This allows XXXXXXXX to lower operating costs in these new markets (through spreading) and also to increase price through increasing customer pricing (value creation) with the benefit of lower costs (in the new markets).

Illustration-‐ XXXXXXXX Functional Strategy Components

TQM (customer relationships; staff improvements)

Improved tinancial, marketing, logistics etc

Business Improvements (better intell capabilities)

Location Economies (lower costs in growth markets)

Learning efticiencies (improved processes, lowered costs)

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Other value chain improvements focused on here will be to build more effective human resource capabilities through adopting Total Quality Management (TQM) processes. TQM may assist XXXXXXXX to improve its challenges in building commitment and cohesion through its organization, building better team relationships and gain a more flexible workforce. Customer relationships can also be targeted for improvements under TQM through closer monitoring and assessments of customer experiences, training for staff and better engagement between XXXXXXXX and its mining and other customers. Internal business processes including competitor and market analysis have been noted as needing improvements in the adoption of data gathering and analysis processes for assessing competitors and new market environments. This component will provide benefits to the capabilities of XXXXXXXX to assess their competitor landscape through structured tools and processes, develop competitive tactics and integrate these into their strategies. Other developed processes will enable XXXXXXXX to effectively assess new markets, develop competitive tactics and integrate these into strategy to grow markets and secure longer-‐term contracts over the short to medium terms.

5.0 Strategy implementation

Better strategy implementation = better bottom-‐line performance and profitability

XXXXXXXX now needs to consider the best options for implementing its strategic goals through those competitive strategies chosen (previous section 4). This is done in two parts by first looking at the best options to design its organization structure and then to consider how to integrate key activities and people:

5.1

ORGANISATIONAL STRUCTURE

The competitive assessments undertaken (sections 1-‐3) will influence the design of XXXXXXXX’s structure including challenges within the industry regionally, local PNG competitive pressures, the strengths of XXXXXXXX’s distinctive competencies (reline and plant maintenance) and the developing capabilities of the administration. Other

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factors include the current size of the company and the changing environments in which XXXXXXXX operates. Under these conditions XXXXXXXX needs to manage flows of information and make decisions to meet the demands of its customers (mining and other), suppliers (logistics and other) and government agencies. The design also needs to integrate jobs, teams and tasks so that XXXXXXXX’s strategic goals can best be achieved, through its chosen strategies. With this background it is proposed that XXXXXXXX consider the Matrix structure design as being able to meet its needs for integrating each SBU (refer-‐ Business strategy) with each functional area (admin, finance, logistics etc.) of XXXXXXXX’s operations and should help to develop improved team cohesions. Illustration: XXXXXXXX-‐ Organization Structure (Matrix) WFSP&Management&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& (Leadership,&co/ordination,&control&and&strategy&inc.business&development) WFSP%ORGANISATIONAL Reline&management Admin&management STRUCTURE%(Design) (Site/customer&&& (functional&services&& crews) support&activities)

BUSINESS%STRATEGY: Strategic&Business&Units&(SBU's)

Mgt:&oversight&on&reline &&other&strategic&goals

Mgt:&oversight&on&support services&&&tasks

SBU&&1: PNG&&&South&Pacific&Regions Reline&&&F.P.Maint.&Services

Site&mgt:&oversight&on client&contracts/crew

Admin:&Support&services

SBU&&2: S.E.Asian&Regions Reline&&&F.P.Maint.&Services

Site&mgt:&oversight&on client&contracts/crew

Admin:&Support&services

SBU&&3: PNG&&&South&Pacific&Regions Other&Business&Directions

Site&mgt:&oversight&on& labor/truck&contracts

Admin:&Support&services

5.2

INTEGRATION

XXXXXXXX will need to implement measures to coordinate strategy achievement through its structure, people and functions. Specifically there will be a requirement for managing the cooperation between different parts of the structure, so that information flows easier, functions and services are adequately delivered and decision-‐making is simplified:

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In line with current organizational trends (directions) the Matrix structure will purposefully provide XXXXXXXX management with a flat span of control over its SBU’s and team coordination capabilities. The smaller size and nature of XXXXXXXX’s business, means that decision making needs to be rapid, in line with the changing nature of their operating environments and this is suited to a flatter span of control. Proper reporting relationships for all SBU’s and functional units (see Matrix) also allows for better communications and coordination within the structure. In reality XXXXXXXX may have two separate degrees of integration with their reline and plant maintenance spans of control slightly ‘taller’ reflecting the ‘mechanistic’ nature of heavy industry maintenance operations. In this sense these SBU’s may require (if not already) multiple layers for management to coordinate through site management and customers and between site management and administration. XXXXXXXX’s other business SBU may only require flatter spans of control between management and customer and management and administration and therefore coordination will require less spans of control.

6.0 Strategy evaluation The last component to successful strategic management planning for XXXXXXXX will focus on control to ensure strategic goals and operations are monitored for progress:

6.1

STRATEGIC CONTROL FRAMEWORK

XXXXXXXX has initiated Strategic Control in this workshop and related documents and this is the first level control for delivering its obligations to company growth and competitiveness. This level control ensures that XXXXXXXX aligns its strategic goals to its operating environments through selection of best competitive strategies to reduce risks and facilitate growth and profitability. Of special importance at this level is financial control through effective accounting systems, in order to fund strategic goals and provide for normal operations. Another key area at this level is strategic alliances especially in the global environment that XXXXXXXX has targeted and as proposed in the corporate level strategy section.

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The next level consideration will be to implement effective Organizational Control to allow XXXXXXXX to better assess how each of its SBU’s is progressing towards strategic goals. This level management of SBU’s is ‘responsibility center control’ therefore this ensures alignment between XXXXXXXX’s business strategy, structure and control systems. Lastly XXXXXXXX will need to consider implementation of effective Operations Control to better manage its internal systems and processes and this level is at the functional level. As such this level control focuses on routine functional processes like accounts and payroll processes and provides the basis for management to implement proper business improvement processes like accounting and payroll software systems.

6.2

BUSINESS CONTROL FRAMEWORK

There will also be business level controls required including Personal Controls by XXXXXXXX management to coordinate individual and team effort toward strategic goals and in particular, daily and weekly job performance. This requires XXXXXXXX to also put in pace Bureaucratic Controls including internal policies and procedures (if not already) as further controls to coordinate organizational effort towards goals. Output Controls will be required to measure performance (metrics) through the setting of team and functional goals, so that progress can be easily measured and guidance provided. Lastly XXXXXXXX will also need to consider Cultural Controls in order to build required team development and commitment to goals.